Novavax Inc 8-K/A, filed Aug 10, 2020
Novavax Inc (NVAX)
About this 8-K/A
Novavax Inc filed this 8-K/A on August 10, 2020, reporting on events of May 27, 2020.
Items reported
- Item 2.01: Completed an acquisition or sale of assets
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event
reported):
(Exact name of registrant as specified in charter)
|
(State or Other Jurisdiction of Incorporation) |
(Commission File Number) |
(I.R.S. Employer Identification No.) |
(Address of Principal Executive Offices, including Zip Code)
(Registrant’s telephone number, including area code)
(Former name or former address, if changed since last report.)
________________________________________________________
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging
growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
| Item 2.01 | Completion of Acquisition or Disposition of Assets. |
On May 29, 2020, Novavax, Inc. (“Novavax,” and together with its wholly owned subsidiary, Novavax AB, the “Company”) filed a Current Report on Form 8-K reporting that, on May 27, 2020, the Company entered into a Share Purchase Agreement to acquire all the issued and outstanding shares of Praha Vaccines a.s., a vaccine manufacturing company, organized and existing under the laws of the Czech Republic (“Praha Vaccines”) from De Bilt Holdings B.V., Poonawalla Science Park B.V., and Bilthoven Biologicals B.V., each of which are companies organized and existing under the laws of the Kingdom of the Netherlands (collectively, the “Sellers”), and, solely as guarantor, Serum International B.V. a company organized and existing under the laws of the Kingdom of the Netherlands (“Serum”). This Amendment No. 1 amends the Current Report on Form 8-K filed on May 29, 2020 to provide the pro forma financial information required by Item 9.01 of Form 8-K, which was omitted from the initial filing in reliance on Items 9.01(a)(4) and 9.01(b)(2) of Form 8-K.
| Item 9.01 | Financial Statements and Exhibits. |
| (a) | Financial Statements of Business Acquired |
The audited annual financial statements of Praha Vaccines as of and for the years ended December 31, 2019 and 2018 are filed as Exhibit 99.1 to this amendment and incorporated herein by reference.
| (b) | Pro Forma Financial Information. |
The unaudited pro forma condensed combined financial statements of the Company with respect to the transaction described in Item 2.01 are filed as Exhibit 99.2 to this amendment and incorporated herein by reference.
| (c) | Exhibits: |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
|
Novavax, Inc. | ||
|
(Registrant) | ||
| By: | /s/ John J. Trizzino | |
| Name: | John J. Trizzino | |
| Title: | Executive Vice President, Chief Business Officer, Chief Financial Officer and Treasurer | |
Date: August 10, 2020
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (Nos. 333-237094, 333-235761, and 333-222365) and Form S-8 (Nos. 333-233133, 333-226498, 333-219829, 333-213069, 333-206354, 333-198121, 333-190600, 333-190599, 333-183113, 333-145298, 333-130990, 333-110401, 333-97931, 333-46000, 333-77611, 333-03384, 33-80279, and 33-80277) of Novavax, Inc. of our report dated August 6, 2020 relating to the financial statements of Praha Vaccines a.s., which appears in this Current Report on Form 8-K/A.
/s/ PricewaterhouseCoopers Audit, s.r.o.
Prague, Czech Republic
August 10, 2020
Exhibit 99.1
Praha Vaccines a.s.
Financial statements
Years ended
December 31, 2019 and 2018
Report of Independent Auditors
To the Management of Praha Vaccines a.s.
We have audited the accompanying financial statements of Praha Vaccines a.s., which comprise the balance sheets as of December 31, 2019 and December 31, 2018 and the related statements of operations, changes in stockholders’ equity and cash flows for the years then ended.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on the financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Company’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Praha Vaccines a.s. as of December 31, 2019 and December 31, 2018, and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.
/s/ PricewaterhouseCoopers Audit s.r.o.
Prague, Czech Republic
August 6, 2020
| Praha Vaccines a.s. | ||||||||
| Balance Sheets | ||||||||
| December 31, | ||||||||
| 2019 | 2018 | |||||||
| (in thousands CZK, except share and per share information) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash | 422,396 | 51,428 | ||||||
| Inventories | 48,686 | 58,793 | ||||||
| Other current assets | 18,126 | 9,042 | ||||||
| Total current assets | 489,208 | 119,263 | ||||||
| Property, plant and equipment, net | 2,350,456 | 1,374,197 | ||||||
| Goodwill | 79,268 | 79,268 | ||||||
| Other non-current assets | 12,081 | 4,982 | ||||||
| Total assets | 2,931,013 | 1,577,710 | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | 57,124 | 122,429 | ||||||
| Accrued expenses | 33,281 | 31,445 | ||||||
| Total current liabilities | 90,405 | 153,874 | ||||||
| Long-term debt, net of unamortized deferred financing costs (see Note 8) | 1,626,184 | 582,946 | ||||||
| Other non-current liabilities | 26,639 | 3,204 | ||||||
| Total liabilities | 1,743,228 | 740,024 | ||||||
| Commitments and contingencies | ||||||||
| Stockholders’ equity | ||||||||
| Common stock, CZK100 par value, 20 shares authorized and issued at December 31, 2019 and 2018 | 2,000 | 2,000 | ||||||
| Additional paid-in capital | 1,731,766 | 1,193,051 | ||||||
| Accumulated deficit | (545,981 | ) | (357,365 | ) | ||||
| Total stockholders’ equity | 1,187,785 | 837,686 | ||||||
| Total liabilities and stockholders’ equity | 2,931,013 | 1,577,710 | ||||||
The accompanying notes are an integral part of these financial statements.
1
| Praha Vaccines a.s. | ||||||||
| Statements of Operations | ||||||||
| Year ended December 31, | ||||||||
| 2019 | 2018 | |||||||
| (in thousands CZK) | ||||||||
| Revenue | — | — | ||||||
| Expenses: | ||||||||
| Research and development | 91,228 | 184,777 | ||||||
| General and administrative | 94,541 | 88,647 | ||||||
| Total expenses | 185,769 | 273,424 | ||||||
| Loss from operations | (185,769 | ) | (273,424 | ) | ||||
| Other expense, net | (2,135 | ) | (10,965 | ) | ||||
| Loss before income taxes | (187,904 | ) | (284,389 | ) | ||||
| Income taxes | (712 | ) | (712 | ) | ||||
| Net loss | (188,616 | ) | (285,101 | ) | ||||
The accompanying notes are an integral part of these financial statements.
2
| Praha Vaccines a.s. | ||||||||||||||||||||
| Statements of Changes in Stockholders’ Equity | ||||||||||||||||||||
| Common Stock | Additional | Accumulated | Total Stockholders’ | |||||||||||||||||
| Shares | Amount | Paid-in-Capital | Deficit | Equity | ||||||||||||||||
| (in thousands CZK, except share information) | ||||||||||||||||||||
| Balance at December 31, 2017 | 20 | 2,000 | 1,086,596 | (72,264 | ) | 1,016,332 | ||||||||||||||
| Stockholder contributions | — | — | 106,455 | — | 106,455 | |||||||||||||||
| Net loss | — | — | — | (285,101 | ) | (285,101 | ) | |||||||||||||
| Balance at December 31, 2018 | 20 | 2,000 | 1,193,051 | (357,365 | ) | 837,686 | ||||||||||||||
| Stockholder contributions | — | — | 538,715 | — | 538,715 | |||||||||||||||
| Net loss | — | — | — | (188,616 | ) | (188,616 | ) | |||||||||||||
| Balance at December 31, 2019 | 20 | 2,000 | 1,731,766 | (545,981 | ) | 1,187,785 | ||||||||||||||
The accompanying notes are an integral part of these financial statements.
3
| Praha Vaccines a.s. | ||||||||
| Statements of Cash Flows | ||||||||
| Year ended December 31, | ||||||||
| 2019 | 2018 | |||||||
| (in thousands CZK) | ||||||||
| Operating Activities: | ||||||||
| Net loss | (188,616 | ) | (285,101 | ) | ||||
| Reconciliation of net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | 9,791 | 8,700 | ||||||
| Change in inventory reserves and fixed asset impairments | 10,497 | 43,248 | ||||||
| Loss on disposal of fixed assets | — | 82,787 | ||||||
| Losses from foreign currency transactions | 1,323 | 10,929 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Inventories | (528 | ) | 2,491 | |||||
| Other current assets | (9,085 | ) | 507 | |||||
| Accounts payable and accrued expenses | (39,637 | ) | 130,289 | |||||
| Net cash used in operating activities | (216,255 | ) | (6,150 | ) | ||||
| Investing activities: | ||||||||
| Capital expenditures | (993,010 | ) | (653,384 | ) | ||||
| Net cash used in investing activities | (993,010 | ) | (653,384 | ) | ||||
| Financing activities: | ||||||||
| Net proceeds from borrowings | 1,064,464 | 583,341 | ||||||
| Stockholder contributions | 538,715 | 106,455 | ||||||
| Net cash provided by financing activities | 1,603,179 | 689,796 | ||||||
| Net increase in cash | 393,914 | 30,262 | ||||||
| Effect of foreign exchange rate on changes in cash | (22,946 | ) | (7,308 | ) | ||||
| Cash at beginning of year | 51,428 | 28,474 | ||||||
| Cash at end of year | 422,396 | 51,428 | ||||||
| Supplemental disclosure of non-cash activities: | ||||||||
| Capital expenditures included in accounts payable and accrued expenses | 89,287 | 137,532 | ||||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash interest payments | 14,098 | 42,624 | ||||||
The accompanying notes are an integral part of these financial statements.
4
Praha Vaccines a.s.
Notes to financial statements for the years ended December 31, 2019 and 2018
| 1. | General Information |
Praha Vaccines a.s. (“the Company”) is a global life sciences company focused on providing vaccine manufacturing services. The Company was incorporated on April 7, 2017 by the Municipal Court in Prague, Section B, Insert 22392, in connection with the acquisition of an influenza vaccine business, by the Municipal Court in Prague, Section B, Insert 22392 and has its registered office at Bohumil 138, 281 66 Jevany. As of December 31, 2019, the Company was part of the Cyrus Poonawalla Group (“CPG”), the parent company of multiple wholly owned affiliates, including Serum Institute of India Pvt. Ltd., (“SII” or “the Owners”), a number of which CPG affiliates are the stockholders of the Company. The Company is currently preparing to launch its vaccine production facility in late 2020.
The Company does not have any subsidiaries or investments in other entities.
| 2. | Accounting Policies |
Basis of Preparation
The financial statements reflect the historical results of operations, financial position, cash flows, and stockholders’ equity of the Company in accordance with accounting principles generally accepted in the United States (“US GAAP”) and are stated in Czech Koruna (“CZK”).
Use of Estimates
The preparation of the financial statements in conformity with US 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 financial statements as well as the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
Cash
Cash represents short-term liquid investments, which are readily convertible for a known amount of cash with original maturities of three months or less.
Inventories
Inventories are stated at the lower of cost or net realizable value. Cost includes all costs related with its acquisition (mainly transport costs, customs duty, etc.), and is determined using the average cost method and “first in - first out” (“FIFO”) method.
Property, Plant and Equipment
Property, plant and equipment are initially recorded at cost, except when acquired as part of a business combination, in which case they are measured at fair value as of the business combination date.
Property, plant and equipment are depreciated using the straight-line method over their estimated useful lives, generally 5 to 15 years and 50 years for some buildings.
Long-lived assets, including property, plant and equipment, 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 the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 360, “Property, Plant and Equipment”. Impairment losses are recognized when the sum of expected undiscounted future cash flows is less than the assets’ (group’s) carrying value.
Repairs and maintenance expenditures for property, plant and equipment are expensed as incurred.
5
Praha Vaccines a.s.
Notes to financial statements for the years ended December 31, 2019 and 2018
Goodwill
Goodwill represents the excess of the purchase price over the fair value of assets acquired and liabilities assumed as part of a business combination.
Goodwill is subject to impairment tests annually, or more frequently, should indicators of impairment arise, in accordance with ASU 2017-04, Intangibles-Goodwill and Other (Topic 350) (“ASU 2017-04”), which the Company adopted during 2019. The Company utilizes the income approach to determine if it has an impairment of goodwill. Goodwill impairment may exist if the carrying value of a reporting unit exceeds it estimated fair value. The Company operates as a single segment and has one reporting unit. 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.
Research and Development Expenses
Research and development expenses include salaries, laboratory supplies, consultants and subcontractors, and other expenses associated with the Company’s process development, manufacturing, regulatory, and quality assurance activities. 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.
Foreign Currency
Transactions denominated in a foreign currency are converted to CZK and recorded at a daily exchange rate prevailing on the last day of the previous calendar month.
Asset and liability balances denominated in foreign currencies have been remeasured at the exchange rate as of the balance sheet date. All exchange gains and losses are recorded as other expense, net in the income statement.
The Company treats advances paid for the acquisition of fixed assets or inventories as part of these assets and therefore these assets are not remeasured at the balance sheet date because related future cash flows are not subject to foreign exchange rate risk.
Interest Expense
Interest expense related to financing the cost of construction of property, plant and equipment is capitalized during the period under construction. Long-term payables are not discounted.
Deferred Tax
The Company accounts for income taxes in accordance with the liability method, pursuant to which, deferred tax assets and liabilities are recognized on all temporary differences between the carrying amount of an asset or liability in the balance sheet and its tax basis that are measured using the enacted tax rate that will be in effect when such temporary differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance if, based on management’s understanding of available evidence, it is more likely than not that some portion or all of the deferred asset will not be realized.
The Company uses the recognition and measurement provisions of ASC 740, Income Taxes, to account for the uncertainty in income taxes recognized in a company’s financial statements. This guidance provides for a two-step approach to recognize and measure uncertain tax positions when the realization of the benefits is uncertain. The first step is to determine whether the benefit is to be recognized; the second step is to determine the amount to be recognized. Income tax benefits should be recognized when, based on the technical merits of a tax position, the entity believes that if a dispute arose with the taxing authority and it is more likely than not (i.e., a probability of greater than 50%) that the tax position would be sustained as filed. If a position is determined to be more likely than not of being sustained, the reporting enterprise should recognize the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate settlement with the taxing authority. The Company’s policy is to recognize interest and penalties related to income tax matters in income tax expense.
6
Praha Vaccines a.s.
Notes to financial statements for the years ended December 31, 2019 and 2018
| 3. | Goodwill |
In 2017, the Company acquired the influenza vaccine business of Nanotherapeutics Bohumil s.r.o. for a purchase price of CZK 893.7 million. The transaction has been accounted for using the acquisition method of accounting, and accordingly, assets acquired and liabilities assumed were recorded at their fair values as of the acquisition date. The excess of the purchase price over fair value of the identifiable assets acquired was recorded as goodwill. Goodwill is subject to impairment tests annually, or more frequently, should indicators of impairment arise. Based on the Company’s goodwill impairment tests as of December 31, 2019 and 2018, the Company concluded that the goodwill was not impaired.
| 4. | Property, Plant and Equipment, net |
Property, plant and equipment, net include the following:
| December 31, | ||||||||
| (CZK'000) | 2019 | 2018 | ||||||
| Land | 100,030 | 100,030 | ||||||
| Buildings | 101,817 | 101,817 | ||||||
| Equipment | 47,669 | 38,161 | ||||||
| Construction in progress | 2,123,274 | 1,146,978 | ||||||
| 2,372,790 | 1,386,986 | |||||||
| Less: accumulated depreciation | (20,196 | ) | (10,514 | ) | ||||
| Impairment | (2,138 | ) | (2,275 | ) | ||||
| Property, plant and equipment, net | 2,350,456 | 1,374,197 | ||||||
Depreciation expense was approximately CZK 9.7 million and CZK 8.6 million for the years ended December 31, 2019 and 2018, respectively.
The Company also capitalized the interest and borrowing costs in connection with assets under construction of CZK 33.2 million and CZK 15.9 million for the years ended December 31, 2019 and 2018, respectively.
| 5. | Inventories |
Inventories include the following:
| December 31, | ||||||||
| (CZK'000) | 2019 | 2018 | ||||||
| Spare parts | 48,686 | 45,708 | ||||||
| Raw materials | — | 13,085 | ||||||
| Inventories | 48,686 | 58,793 | ||||||
| 6. | Other Current Assets |
Other current assets include the following:
| December 31, | ||||||||
| (CZK'000) | 2019 | 2018 | ||||||
| VAT receivable | 11,125 | 5,960 | ||||||
| Related party receivable | 5,100 | 879 | ||||||
| Other | 1,901 | 2,203 | ||||||
| Other current assets | 18,126 | 9,042 | ||||||
The Company did not record a provision for doubtful accounts for the periods presented.
7
Praha Vaccines a.s.
Notes to financial statements for the years ended December 31, 2019 and 2018
| 7. | Accounts Payable |
Accounts payable include the following:
| December 31, | ||||||||
| (CZK'000) | 2019 | 2018 | ||||||
| Accounts payable | 43,502 | 110,853 | ||||||
| Employee related liabilities | 13,622 | 11,576 | ||||||
| Accounts payable | 57,124 | 122,429 | ||||||
| 8. | Long-Term Debt, net |
Long-term debt, net includes the following:
| December 31, | ||||||||||||
| (CZK '000) | Interest rate (%) | Currency | 2019 | 2018 | ||||||||
| AXIS BANK LIMITED, DIFC Branch | EURIBOR + 1.1% | EUR | 1,651,650 | 617,400 | ||||||||
| Less: Deferred financing costs, net of amortization | (25,466 | ) | (34,454 | ) | ||||||||
| Long-Term Debt, net | 1,626,184 | 582,946 | ||||||||||
On January 29, 2018, the Company entered into a credit agreement with AXIS BANK LIMITED, DIFC Branch for an available commitment of CZK 1,905.8 million (the “Credit Facility”). As of December 31, 2019, CZK 1,651.7 million had been borrowed under the Credit Facility.
Payments of principal on amounts borrowed under the Credit Facility were to commence on July 29, 2021 and were to be made semi-annually through January 29, 2024. Maturities of amounts borrowed under the Credit Facility as of December 31, 2019 were as follows:
| (CZK'000) | ||||
| 2020 | — | |||
| 2021 | 275,275 | |||
| 2022 | 550,550 | |||
| 2023 | 550,550 | |||
| 2024 | 275,275 | |||
| Total | 1,651,650 | |||
Borrowings under the facility were secured by the business of the Company.
The interest rate for each interest period was the percentage rate per annum which was the aggregate of the applicable margin and EURIBOR. The effective interest rate was 1.1% at December 31, 2019.
A commitment fee at the rate of 30% of the Margin on the Lender’s Available Commitment in respect of the Credit Facility was accrued on a daily basis. Other related fees include an arrangement fee, agency fee, and security agency fee. Upfront financing fees are deferred and classified as a reduction of long-term debt and amortized to interest over the weighted-average life of the Credit Facility, which reflects the reduction in the available credit commencing in 2021.
The Credit Facility required the Company to be in compliance with certain financial covenants beginning on December 31, 2020. As of December 31, 2019, the Company was in compliance with all applicable covenants.
As part of the sale of the Company (see Note 13. Subsequent Events) in May 2020, the Credit Facility was terminated and all outstanding borrowings were repaid.
| 9. | Equity |
The share capital of the Company consists of 20 ordinary shares with nominal value of CZK 100,000. Shares are fully subscribed and paid.
The Owners made additional cash capital contributions, classified within additional paid-in capital, in the amounts of CZK 538.7 million and CZK 106.5 million during the years ended December 31, 2019 and 2018, respectively.
8
Praha Vaccines a.s.
Notes to financial statements for the years ended December 31, 2019 and 2018
| 10. | Related Party Transactions |
The Company conducted business with subsidiaries of the Owners that included Bilthoven Biologicals, Serum Institute of India Private Lim and Serum International B.V. The Company’s related party transactions include the following:
| December 31, | ||||||||
| (CZK'000) | 2019 | 2018 | ||||||
| Other income | ||||||||
| Sales of material to Serum Institute of India Private Lim | — | 120 | ||||||
| Sales of services to Serum International B.V. | 1,164 | 879 | ||||||
| Total | 1,164 | 999 | ||||||
| Costs and purchases | ||||||||
| Purchase of services connected with the acquisition of fixed assets from Serum Institute of Private Lim | 709 | 1,134 | ||||||
| Purchase of long-term assets from Bilthoven Biologicals | 1,700 | — | ||||||
| Total | 2,409 | 1,134 | ||||||
| December 31, | ||||||||
| (CZK'000) | 2019 | 2018 | ||||||
| Receivables | ||||||||
| Receivables from Serum International B.V. | 2,042 | 879 | ||||||
| Receivables from Serum Institute of India Private Lim | 3,058 | — | ||||||
| Total | 5,100 | 879 | ||||||
| Costs and purchases | ||||||||
| Payables to Serum Institute of India Private Lim | 320 | 117 | ||||||
| Payables to Bilthoven Biologicals | 1,700 | — | ||||||
| Total | 2,020 | 117 | ||||||
| 11. | Income Tax |
The Company’s provision for income taxes of CZK 0.7 million for each of the years ended December 31, 2019 and 2018 is entirely related to deferred taxes outside of the United States.
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.
The components of the Company’s deferred income taxes include the following:
| December 31, | ||||||||
| (CZK'000) | 2019 | 2018 | ||||||
| Deferred tax assets arising from: | ||||||||
| Difference between accounting and tax net book value of fixed assets | 3,071 | 1,391 | ||||||
| Provisions for accounting not currently recognized for tax purposes | 10,212 | 8,217 | ||||||
| Start-up costs | 16,868 | 7,973 | ||||||
| Tax losses carried forward | 75,296 | 52,759 | ||||||
| Gross deferred tax assets, before valuation allowance | 105,447 | 70,340 | ||||||
| Valuation allowance | (105,447 | ) | (70,340 | ) | ||||
| Total deferred tax assets, net of valuation allowance | — | — | ||||||
| Deferred tax liabilities arising from: | ||||||||
| Difference between accounting and tax net book value of goodwill | (1,838 | ) | (1,127 | ) | ||||
| Total deferred tax liabilities | (1,838 | ) | (1,127 | ) | ||||
| Net deferred tax liabilities | (1,838 | ) | (1,127 | ) | ||||
9
Praha Vaccines a.s.
Notes to financial statements for the years ended December 31, 2019 and 2018
The Company has tax losses as of December 31, 2019 and 2018 of CZK 396.3 million and CZK 277.7 million, respectively, which can be utilized through 2024. The Company has recorded a valuation allowance for these historical losses after determining that it will more likely than not be able to realize these net operating loss carryforwards prior to their expiration.
A potential net deferred tax asset of CZK 105.4 million as of December 31, 2019 (as of December 31, 2018: CZK 70.3 million), has not been recognized because it is more likely than not that the deferred tax asset will not be realized. The statutory corporate income tax rate of 19% has been used to calculate the gross deferred tax asset as of December 31, 2019 and 2018.
As of December 31, 2019, the valuation allowance increased by CZK 35.1 million due to the additional losses incurred during the year which are not more likely than not to be realized. The noncurrent deferred tax liability as of December 31, 2019 in the amount of CZK 1.8 million primarily relates to goodwill associated with a prior acquisition.
The Company does not have any uncertain tax provisions for which a liability has been recorded as of December 31, 2019. The Company’s statute of limitations remains open until July 2028 and 2027 for 2019 and 2018, respectively.
The Ministry of Industry and Trade of the Czech Republic granted the investment incentives in the form of a tax relief as of October 16, 2017. The Company has not utilized any tax relief yet.
| 12. | Other Expense, net |
Other expense, net includes the following:
| December 31, | ||||||||
| (CZK'000) | 2019 | 2018 | ||||||
| Foreign currency losses, net | 1,323 | 10,929 | ||||||
| Other, net | 812 | 36 | ||||||
| Other expense, net | 2,135 | 10,965 | ||||||
| 13. | Subsequent Events |
In May 2020, the Company was sold to Novavax, Inc., a late-stage biotechnology company committed to delivering novel vaccine products to prevent a broad range of infectious diseases. The Company’s manufacturing facility is intended to be used for this purpose. In connection with the sale of the Company, the Credit Facility was terminated and all outstanding borrowings were repaid.
The Company has evaluated subsequent events for recording or disclosure in these financial statements through August 6, 2020, the date the financial statements were available to be issued.
No other events have occurred subsequent to year-end that would have a material impact on the financial statements as of December 31, 2019.
10
Exhibit 99.2
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
DESCRIPTION OF TRANSACTION
On May 27, 2020 (the “Acquisition Date”), Novavax, Inc. (“Novavax,” or the “Company”) entered into a Share Purchase Agreement (the “Deed”) by and among Novavax AB, the Company’s wholly-owned Swedish subsidiary (the “Buyer”), and De Bilt Holdings B.V., Poonawalla Science Park B.V., and Bilthoven Biologicals B.V. (collectively, the “Sellers”) and, solely as guarantors, each of Serum International B.V. and the Company. Pursuant to the terms and conditions of the Deed, the Buyer acquired all the issued and outstanding shares of Praha Vaccines a.s., a vaccine manufacturing company, organized and existing under the laws of the Czech Republic (“Praha Vaccines”), from the Sellers for approximately €151.7 million (approximately $167.3 million) in cash (the “Purchase Price”), subject to customary working capital adjustments (collectively, the “Acquisition”), which have not been finalized. The assets of Praha Vaccines acquired as part of the Acquisition include a biologics manufacturing facility and associated assets in Bohumil, Czech Republic and will be used by the Company to expand its manufacturing capacity.
The Purchase Price includes €10.0 million (approximately $11.1 million) which has been placed in an escrow account until September 30, 2020, less any amounts to settle claims made by the Buyer against the Seller under the Deed or other ancillary agreements. The Deed and ancillary agreements contain customary warranties and post-completion covenants, as well as indemnities by each of the parties thereto.
The following unaudited pro forma condensed combined financial information presents the historical consolidated statements of operations of Novavax, Inc. and the historical statements of operations of Praha Vaccines adjusted to reflect the Acquisition. The historical financial statements were prepared in accordance with US GAAP. The unaudited pro forma condensed combined financial information is presented in accordance with the rules specified by Article 11 of Regulation S-X promulgated by the Securities and Exchange Commission (“SEC”), and has been prepared using the assumptions described in the notes thereto. The following unaudited pro forma condensed combined statements of operations are provided for informational purposes only. The unaudited pro forma condensed combined statements of operations are not intended to be a complete presentation of Novavax’ results of operations had the Acquisition occurred as of January 1, 2019. The unaudited pro forma condensed combined statements of operations are not necessarily indicative of Novavax’ historical or future results of operations or financial condition had the Acquisition been completed on the date indicated. In addition, the unaudited pro forma condensed combined statements of operations do not purport to project the future financial position or operating results of the combined company.
The following unaudited pro forma condensed combined financial information is presented:
| · | Unaudited pro forma condensed combined statement of operations for the six months ended June 30, 2020 |
| · | Unaudited pro forma condensed combined statement of operations for the year ended December 31, 2019 |
A pro forma combined balance sheet reflecting the acquisition of Praha Vaccines is not required as the Acquisition is included in the Company’s consolidated balance sheet included in its Quarterly Report on Form 10-Q for the quarter ended June 30, 2020, filed with the SEC on August 10, 2020.
The unaudited pro forma condensed combined financial information should be read in conjunction with:
| (i) | Novavax’ audited consolidated financial statements, the accompanying notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in Novavax’ Annual Report on Form 10-K for the year ended December 31, 2019; |
| (ii) | Novavax’ unaudited consolidated condensed financial statements, the accompanying notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in Novavax’ Quarterly Reports on Form 10-Q for the three and six months ended June 30, 2020; and |
| (iii) | Praha Vaccines’ audited annual financial statements as of and for the years ended December 31, 2019 and 2018 included as Exhibit 99.1 to this amended Current Report on Form 8-K. |
1
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2020
(in thousands, except per share information)
| Historical | ||||||||||||||||||||||
| Novavax | Praha Vaccines | |||||||||||||||||||||
Six months ended | January 1, 2020 through | Pro Forma | Pro Forma | |||||||||||||||||||
| June 30, 2020 | May 26, 2020 | Adjustments | Notes | Combined | ||||||||||||||||||
| (In USD) | (In CZK) | (In USD) (a) | (In USD) | (In USD) | ||||||||||||||||||
| Revenue: | ||||||||||||||||||||||
| Grant and other | $ | 38,915 | Kč | — | $ | — | $ | — | $ | 38,915 | ||||||||||||
| Total revenue | 38,915 | — | — | — | 38,915 | |||||||||||||||||
| Expenses: | ||||||||||||||||||||||
| Research and development | 51,741 | 22,135 | 934 | 227 | (b) | 52,902 | ||||||||||||||||
| General and administrative | 27,098 | 49,397 | 2,084 | (1,932 | ) | (c) | 27,250 | |||||||||||||||
| Total expenses | 78,839 | 71,532 | 3,018 | (1,705 | ) | 80,152 | ||||||||||||||||
| Loss from operations | (39,924 | ) | (71,532 | ) | (3,018 | ) | 1,705 | (41,237 | ) | |||||||||||||
| Other income (expense): | ||||||||||||||||||||||
| Investment income | 732 | — | — | (516 | ) | (d) | 216 | |||||||||||||||
| Interest expense | (6,806 | ) | — | — | — | (6,806 | ) | |||||||||||||||
| Other income (expense) | 2,613 | (123,640 | ) | (5,217 | ) | 4,623 | (e) | 2,019 | ||||||||||||||
| Loss before income tax provision | (43,385 | ) | (195,172 | ) | (8,235 | ) | 5,812 | (45,808 | ) | |||||||||||||
| Income tax provision | — | (297 | ) | (13 | ) | — | (13 | ) | ||||||||||||||
| Net loss | $ | (43,385 | ) | Kč | (195,469 | ) | $ | (8,248 | ) | $ | 5,812 | $ | (45,821 | ) | ||||||||
| Basic and diluted net loss per share | $ | (0.84 | ) | $ | (0.83 | ) | ||||||||||||||||
| Basic and diluted weighted average number of common shares outstanding | 51,401 | 4,125 | (f) | 55,526 | ||||||||||||||||||
See the accompanying Notes to the unaudited pro forma condensed combined statements of operations.
2
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2019
(in thousands, except per share information)
| Historical | Pro Forma | Pro Forma | ||||||||||||||||||||
| Novavax | Praha Vaccines | Adjustments | Notes | Combined | ||||||||||||||||||
| (In USD) | (In CZK) | (In USD) (a) | (In USD) | (In USD) | ||||||||||||||||||
| Revenue: | ||||||||||||||||||||||
| Government contract | $ | 7,500 | Kč | — | $ | — | $ | — | $ | 7,500 | ||||||||||||
| Grant and other | 11,162 | — | — | — | 11,162 | |||||||||||||||||
| Total revenue | 18,662 | — | — | — | 18,662 | |||||||||||||||||
| Expenses: | ||||||||||||||||||||||
| Research and development | 113,842 | 91,228 | 3,979 | 365 | (b) | 118,186 | ||||||||||||||||
| Gain on Catalent transaction | (9,016 | ) | — | — | — | (9,016 | ) | |||||||||||||||
| General and administrative | 34,417 | 94,541 | 4,123 | — | 38,540 | |||||||||||||||||
| Total expenses | 139,243 | 185,769 | 8,102 | 365 | 147,710 | |||||||||||||||||
| Loss from operations | (120,581 | ) | (185,769 | ) | (8,102 | ) | (365 | ) | (129,048 | ) | ||||||||||||
| Other income (expense): | ||||||||||||||||||||||
| Investment income | 1,512 | — | — | — | 1,512 | |||||||||||||||||
| Interest expense | (13,612 | ) | — | — | — | (13,612 | ) | |||||||||||||||
| Other expense | (13 | ) | (2,135 | ) | (93 | ) | (925 | ) | (e) | (1,031 | ) | |||||||||||
| Loss before income tax provision | (132,694 | ) | (187,904 | ) | (8,195 | ) | (1,290 | ) | (142,179 | ) | ||||||||||||
| Income tax provision | — | (712 | ) | (31 | ) | — | (31 | ) | ||||||||||||||
| Net loss | (132,694 | ) | Kč | (188,616 | ) | $ | (8,226 | ) | $ | (1,290 | ) | (142,210 | ) | |||||||||
| Basic and diluted net loss per share | $ | (5.51 | ) | $ | (3.22 | ) | ||||||||||||||||
| Basic and diluted weighted average number of common shares outstanding | 24,100 | 20,001 | (f) | 44,101 | ||||||||||||||||||
See the accompanying Notes to the unaudited pro forma condensed combined statements of operations.
3
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
NOTE 1. DESCRIPTION OF TRANSACTION
On May 27, 2020 (the “Acquisition Date”), Novavax, Inc. (“Novavax,” or the “Company”) entered into a Share Purchase Agreement (the “Deed”) by and among Novavax AB, the Company’s wholly-owned Swedish subsidiary (the “Buyer”), and De Bilt Holdings B.V., Poonawalla Science Park B.V., and Bilthoven Biologicals B.V. (collectively, the “Sellers”) and, solely as guarantors, each of Serum International B.V. and the Company. Pursuant to the terms and conditions of the Deed, the Buyer acquired all the issued and outstanding shares of Praha Vaccines a.s., a vaccine manufacturing company, organized and existing under the laws of the Czech Republic (“Praha Vaccines”), from the Sellers for approximately €151.7 million (approximately $167.3 million) in cash (the “Purchase Price”), subject to customary working capital adjustments (collectively, the “Acquisition”), which have not been finalized. The assets of Praha Vaccines acquired as part of the Acquisition include a biologics manufacturing facility and associated assets in Bohumil, Czech Republic and will be used by the Company to expand its manufacturing capacity.
The Purchase Price includes €10.0 million (approximately $11.1 million) which has been placed in an escrow account until September 30, 2020, less any amounts to settle claims made by the Buyer against the Seller under the Deed or other ancillary agreements. The Deed and ancillary agreements contain customary warranties and post-completion covenants, as well as indemnities by each of the parties thereto.
NOTE 2. BASIS OF PRO FORMA PRESENTATION
The unaudited pro forma condensed combined statements of operations and related notes were prepared using the acquisition method of accounting with Novavax treated as the acquirer. The results of operations from Praha Vaccines have been included in the consolidated financial statements of Novavax since the Acquisition Date. The historical consolidated financial information has been adjusted to give effect to the impact of the consideration paid in connection with the Acquisition. The total estimated purchase price has been allocated on a preliminary basis to assets acquired and liabilities assumed in connection with the Acquisition based on their estimated fair values as of the completion of the Acquisition. Definitive allocations will be performed and finalized based upon certain valuations and other studies that will be performed by Novavax with the assistance, in some cases, of outside valuation specialists. Accordingly, the purchase allocation pro forma adjustments are preliminary and have been made solely for the purpose of providing unaudited pro forma condensed combined financial information and are subject to revision based on a final determination of the purchase price allocation.
The unaudited pro forma condensed combined statements of operations include certain acquisition accounting adjustments, including items expected to have a continuing impact on the combined results, such as increased depreciation expense on acquired tangible assets. The unaudited pro forma condensed combined statements of operations do not include the impacts of any revenue, cost or other operating synergies that may result from the Acquisition.
The unaudited pro forma condensed combined statements of operations do not reflect nonrecurring charges resulting from the Acquisition which do not have a continuing impact. The nonrecurring charges include transaction costs incurred by the Company.
NOTE 3. PURCHASE PRICE ALLOCATION
The following table summarizes the preliminary allocation of the Purchase Price based upon the fair values of assets acquired and liabilities assumed at the Acquisition Date. The preliminary allocation is based upon information that was available to management and is subject to change prior to completion of the measurement period ($ in thousands):
4
| As of May 26, 2020 | ||||
| Prepaid expenses and other current assets | $ | 326 | ||
| Property and equipment | 96,739 | |||
| Goodwill | 70,468 | |||
| Accounts payable | (1,193 | ) | ||
| Accrued expenses | (205 | ) | ||
| Other non-current liabilities | (813 | ) | ||
| Purchase Price, net of cash acquired | $ | 165,322 | ||
The fair value of the assets acquired, and liabilities assumed were preliminarily determined using cost valuation methodologies. The fair value measurements are based on significant unobservable inputs that were developed by the Company using publicly available information, market participant assumptions, and cost and development assumptions. Because of the use of significant unobservable inputs, the fair value measurements represent a Level 3 measurement as defined in ASC 820, Fair Value Measurements and Disclosures. The market approach is a valuation technique that uses prices and other relevant information generated by market transactions involving identical or comparable assets, liabilities, or a group of assets or liabilities. The cost approach estimates value by determining the current cost of replacing an asset with another of equivalent utility. The cost to replace a given asset reflects the estimated reproduction or replacement cost for the property, less an allowance for loss in value due to depreciation.
The cost approach was the primary approach used to value fixed assets, including the real property. Fixed assets are depreciated on a straight-line basis over their expected remaining useful lives, ranging from 4 to 25 years. The carrying value and expected lives of the fixed assets may change upon finalizing the purchase price allocation as valuation and engineering reports are finalized.
The Company recorded $70.5 million in goodwill related to the Acquisition representing the Purchase Price that was in excess of the fair value of the assets acquired and liabilities assumed. The goodwill generated from the Acquisition is not expected to be deductible for U.S. federal income tax purposes. The goodwill recognized is attributable to intangible assets that do not qualify for separate recognition, such as the assembled workforce of Praha Vaccines.
Current assets and current liabilities were recorded at their contractual or historical acquisition amounts which approximate their fair value.
Determining the fair value of assets acquired and liabilities assumed requires the exercise of significant professional judgment. Use of different estimates and judgments could yield different results.
NOTE 4. PRO FORMA ADJUSTMENTS
Pro forma adjustments in the unaudited pro forma condensed combined statements of operations are as follows:
| (a) | The historical financial information of Praha Vaccines was prepared in accordance with US GAAP and presented in Czech Koruna (“CZK”). The historical financial information was translated from CZK to U.S. dollars (“USD”) using the following historical exchange rates: |
| CZK:USD | ||||
| Average exchange rate for the period from January 1, 2020 through May 26, 2020 | 0.0422 | |||
| Average exchange rate for the year ended December 31, 2019 | 0.0436 | |||
| (b) | Adjustment reflecting a net increase in depreciation expense of $0.2 million and $0.4 million for the period January 1, 2020 through May 26, 2020 and the year ended December 31, 2019, respectively, reflecting the net impact of the fair value adjustments to property and equipment and modifications of the remaining useful lives of those assets. |
| (c) | Adjustment to remove total combined transaction costs of $1.9 million incurred by both Novavax and Praha Vaccines during the six months ended June 30, 2020. No transaction costs were incurred during the year ended December 31, 2019. |
| (d) | Adjustment to reflect a decrease in investment income of $0.5 million in the period from January 1, 2020 through May 26, 2020 relating to funds raised from the issuance of common stock in the first quarter of 2020 that are assumed to have been raised and used as funding for the Acquisition as of January 1, 2019. There is no corresponding adjustment in 2019 as there was no investment income earned on such stock issuances for the year ended December 31, 2019. |
| (e) | Adjustment to eliminate the foreign currency transaction (losses)/gains of ($4.6) million and $0.9 million for the period January 1, 2020 through May 26, 2020 and the year ended December 31, 2019, respectively, relating to the pre-acquisition Euro denominated debt owed by Praha Vaccines, which was repaid at the closing of the Acquisition and has been assumed to be repaid on January 1, 2019 for purposes of the pro forma adjustments. |
5
| (f) | Adjustment reflecting the increase of 4.1 million and 20.0 million in basic and diluted weighted average number of common shares assumed to be outstanding for the six months ended June 30, 2020 and the year ended December 31, 2019, respectively, resulting from the assumption that the common stock issuances used to finance the Acquisition occurred as of January 1, 2019. |
NOTE 5. FORWARD-LOOKING STATEMENTS
These unaudited pro forma condensed combined statements of operations are forward-looking and involve a number of risks and uncertainties. There are a number of important factors that could cause actual events to differ materially from those suggested or indicated by such forward-looking statements and you should not place undue reliance on any such forward-looking statements. These factors include risks and uncertainties related to, among other things: the possibility that the expected synergies and production capabilities from the Acquisition will not be realized, or will not be realized within the expected time period; the risk that the businesses will not be integrated successfully; the possibility that disruption from the Acquisition may make it more difficult to maintain business and operational relationships; difficulty in integrating personnel, operations and financial and other controls and systems, and retaining key employees; risk related to Novavax’ ability to accurately predict future market conditions; the risk that Novavax will not require additional manufacturing capacity if its vaccine candidates are not successful; the risk of new and changing regulation and public policy in the U.S. and internationally; and the exposure to litigation and/or regulatory actions or sanctions resulting from activities of Novavax prior to the Acquisition. Applicable risks also include those listed under the heading “Risk Factors” and elsewhere in Novavax’ Annual Report on Form 10-K for the year ended December 31, 2019, in addition to the risk factors that are listed from time to time in Novavax’ Quarterly Reports on Form 10-Q and any subsequent filings with the Securities and Exchange Commission. Novavax undertakes no obligation to update these forward-looking statements to reflect events or circumstances occurring after this Current Report on Form 8-K. Except as otherwise noted, these forward-looking statements speak only as of the date of this Current Report on Form 8-K. All forward-looking statements are qualified in their entirety by this cautionary statement.
6