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UNITED STATES

ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d)

For the Fiscal Year Ended December 31, 2001

Commission File No. 0-26770

NOVAVAX, INC.

Registrant’s telephone number, including area code: (301) 854-3900

Securities registered pursuant to Section 12(b) of the Act: NONE

Securities registered pursuant to Section 12(g) of the Act:

      Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  x  No o

      Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

      The aggregate market value of 20,973,202 shares of the registrant’s Common Stock, par value $.01 per share, held by non-affiliates of the registrant at March 8, 2002, as computed by reference to the closing price of such stock, was approximately $221,057,549.

      The number of shares of the registrant’s Common Stock, par value $.01 per share, outstanding at March 8, 2002 was 23,915,343 shares.

Documents Incorporated By Reference

     Portions of the Registrant’s Proxy Statement to be filed not later than 120 days after December 31, 2001, in connection with the Registrant’s 2002 Annual Meeting of Stockholders, referred to herein as the “Proxy Statement,” are incorporated by reference into Part III of this Form 10-K. Certain exhibits filed with the Registrant’s prior registration statements and periodic reports under the Securities Exchange Act of 1934 are incorporated herein by reference into Part IV of this Report.

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PART I

Item 1.  Business

Overview

      Novavax is a fully-integrated specialty pharmaceutical company focused on the research, development and commercialization of products utilizing our proprietary drug delivery and vaccine technologies for large and growing markets, concentrating on the areas of women’s healthcare and infectious diseases. Our lead product candidate, ESTRASORB™, is the first transdermal lotion for estrogen replacement therapy for which a New Drug Application has been accepted for filing by the Food and Drug Administration. The New Drug Application for ESTRASORB was submitted in June 2001 and was accepted for filing in August 2001. We are seeking FDA approval of ESTRASORB for the reduction of hot flashes in menopausal women and, if approved, we believe ESTRASORB will be competitively positioned to address the $1.8 billion estrogen replacement therapy market in the United States. In our Phase II and III clinical trials, women using ESTRASORB experienced a statistically significant reduction in the number of hot flashes, the primary endpoint of our study, with many women reporting a total elimination of hot flashes while using the product. We also believe that ESTRASORB offers additional advantages over other estrogen replacement therapies, including ease of use, more rapid onset of estrogen therapy and a lower incidence of skin irritation and nausea.

      Our drug delivery technologies involve the use of our patented oil and water emulsions which we believe can be used as vehicles for the transdermal and injectable delivery of a wide variety of drugs and other therapeutic products, including hormones, anti-bacterial and anti-viral products and vaccine adjuvants, which are substances added to vaccines to enhance their effectiveness. We believe that our technologies represent the first time that alcohol soluble hormones, such as estrogen and testosterone, have been encapsulated and delivered through the skin. In addition to ESTRASORB, our product candidates using these technologies include ANDROSORB™, a transdermal testosterone lotion that is in Phase II clinical trials, ANDRO-JECT™, a long-acting subcutaneous injectable formulation of testosterone that is in preclinical development, and a transdermal progestin lotion that is also in preclinical development. We also conduct research and development on preventative and therapeutic vaccines for a variety of infectious diseases.

      During 2001, we signed a co-promotion agreement with King Pharmaceuticals, Inc. (“King”) for the promotion and marketing of ESTRASORB and ANDROSORB within the United States and licensed to King the right to sell these products outside the United States. This relationship with King has the potential to provide us with deeper women’s healthcare market penetration for ESTRASORB and ANDROSORB. We will record all revenues from the sales of ESTRASORB and ANDROSORB in the United States and will pay to King 50% of these revenues less 50% of manufacturing and approved marketing costs, subject to certain modifications. We received licensing fees of $3.0 million and milestone payments totaling $5.0 million from King upon the submission to the FDA and acceptance for filing of the ESTRASORB New Drug Application. We also received from King $20.0 million in December 2000 and $10.0 million in September 2001 in the form of convertible note financings.

      We currently market, sell and distribute a line of prescription pharmaceuticals and prenatal vitamins through our 85 person sales force including national accounts team, which has extensive experience selling to obstetricians, gynecologists, managed care organizations, wholesalers and retail pharmacies throughout the United States. In 2001, these products produced revenues of $17.3 million. If we receive marketing approval from the FDA, we expect to sell ESTRASORB both through our sales force and through King’s salesforce. We intend to manufacture ESTRASORB for commercial sale in a dedicated 20,000 square foot facility, which is currently being built to our requirements.

Our Strategy

      The primary elements of our strategy include:

	•	Maximize the commercial impact of ESTRASORB. We are currently developing commercialization and manufacturing infrastructures, programs and systems in anticipation of approval of our ESTRASORB New

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		Drug Application by the FDA in 2002. We believe that our marketing plan, together with the significant expertise of our management team in new product launches, will enable ESTRASORB to rapidly penetrate the $1.8 billion estrogen replacement therapy market in the U.S. We expect that the introduction of ESTRASORB, if approved, will increase our presence in the women’s healthcare market, thereby enabling us to more effectively commercialize future products which we develop or acquire. Our co-promotion agreement with King should provide us with additional marketing and selling expertise which will assist us in achieving deeper market penetration for ESTRASORB.
	•	Leverage our unique drug delivery technology platforms to commercialize additional pharmaceutical products. A key component of our growth strategy is the introduction of new products based on our proprietary drug delivery technologies. In addition to ESTRASORB, we have three hormone replacement therapy candidates in various stages of clinical and preclinical development. We will continue to focus on developing improvements to existing therapies. We intend to target large markets where our products can be differentiated through increased efficacy and improved delivery technique.
	•	Continue to develop our capabilities as a fully-integrated specialty pharmaceutical company. We intend to continue to enhance our internal capabilities in the developing, testing, manufacturing and marketing of our product candidates. We believe that this fully-integrated platform differentiates us from many specialty pharmaceutical companies and enhances our ability to successfully introduce new products such as ESTRASORB and to grow our existing line of women’s healthcare products. We plan to continue to focus our research and development efforts on advancing our existing product candidates towards commercialization and on identifying and commercializing new therapies using our unique drug delivery techniques. We perform many components of the ESTRASORB manufacturing process, and we are increasing our manufacturing capabilities in anticipation of the commercial launch of ESTRASORB in 2002. We have an 85 person sales force including national accounts team with experience in the area of women’s health, and intend to continue to build that sales team as we are able to commercialize or acquire new products.
	•	Continue to expand our product lines through acquisition of new products and technologies. We believe we can continue to grow through the acquisition of product lines, individual products or additional technologies. We believe numerous opportunities exist to acquire such products and technologies as large pharmaceutical companies seek to divest many non-core product areas. We regularly evaluate opportunities to acquire products in markets we currently serve, as well as potential new markets where our management team has expertise, such as oncology. Our fully-integrated capabilities assist us in identifying, acquiring and successfully implementing new product and company acquisitions.

We have demonstrated our ability to successfully acquire and integrate products and research capabilities. For example, we acquired Fielding Pharmaceutical Company in December 2000, which enabled us to expand our women’s healthcare product line and gave us an established national sales force with experience calling on obstetricians and gynecologists throughout the United States. In January 2001, we purchased the AVC™ Cream product line from King to provide us with additional products to sell through our sales force. In August 1999, we acquired a vaccine research and development group from DynCorp, which has enabled us to develop advanced vaccine product candidates.

	•	Exploit our expertise in vaccine technology to develop products for a large and underserved market. We currently have several vaccine candidates in clinical and preclinical development. In particular, we are pursuing an inactivated smallpox vaccine and a human papillomavirus vaccine that we believe could address large and underserved markets if approved. In order to pursue a number of vaccine development programs, we intend to collaborate with private companies and governmental agencies, including the National Institutes of Health, with which we have several ongoing projects.

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Our Products and Product Candidates

      We are focused on the successful introduction of new product candidates and the continued sales growth of the products we currently market. The table below provides a summary of our marketed products and product candidates, which are discussed elsewhere in further detail:

     Our Lead Product Candidate — ESTRASORB

      ESTRASORB is our lead product candidate and employs our patented micellar nanoparticle technology to deliver estrogen, in the form of 17ß estradiol, through the skin when applied topically in the form of a lotion. We submitted a New Drug Application for ESATRASORB to the FDA in June 2001, which was accepted for filing in August 2001. We are seeking FDA approval of ESTRASORB for the reduction of hot flashes in menopausal women. In clinical trials, participants using ESTRASORB experienced a statistically significant reduction in the number of hot flashes, the primary endpoint of the studies, with many reporting the complete elimination of hot flashes during the trial period. We believe that ESTRASORB offers advantages over competing therapies in the $1.8 billion estrogen replacement market in the United States. ESTRASORB is easy to use and lowers the incidence of skin irritation and stomach upset associated with other estrogen replacement products. Our marketing studies indicate that ESTRASORB’s method of topical application will differentiate ESTRASORB from other estrogen replacement therapies.

      Market Overview. As a woman approaches menopause, ovulation becomes less frequent and the production of estrogen decreases. Eventually, the estrogen produced is insufficient to bring about menstruation. Menopause is typically diagnosed when there has been an absence of menstruation for at least one year accompanied by the presence of hot flashes. Women are entering menopause at the rate of approximately 4,000 per day. An estimated 10.0 million women are currently on estrogen replacement therapy. This number is forecast to increase to 12.8 million in 2004 as diagnosis and medication efficacy increase and side effects associated with therapy decrease. The demographic expansion of the “baby boomer” generation will cause an increase in the estrogen replacement therapy market as more women reach the ages associated with menopause and seek medical attention for their symptoms.

      Estrogen replacement therapy is currently used worldwide by menopausal women to treat the symptoms of menopause, such as hot flashes, and by post-menopausal women to prevent osteoporosis and other adverse health conditions. Current estrogen replacement products include oral tablets and, more recently, transdermal patches. Users of oral estrogen tablets may sometimes experience the side effect of nausea. Transdermal patches for estrogen replacement were developed in large part to eliminate this side effect of nausea and first became commercially available in the mid 1980’s. Patches generally use alcohol to drive the estrogen through the skin to achieve therapeutic blood levels. These patches may cause skin irritation and the inconvenience to the patient associated with wearing and changing an external patch. As shown by the chart below, in the

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      Clinical Trials of ESTRASORB. We have completed several preclinical and human safety and efficacy studies for ESTRASORB. A Phase II study completed in the first quarter of 1999 involved a 35-day dosing protocol and included 120 patients at six clinical sites in the United States. This study indicated that ESTRASORB, administered daily to menopausal women, significantly reduced the number of hot flashes per day. In the first quarter of 2001, we completed a pivotal Phase III study at 21 centers in the U.S. designed to determine the efficacy of ESTRASORB in reducing the frequency of hot flashes in menopausal women. The Phase III study was a randomized, double-blind, placebo-controlled, parallel-group study involving approximately 200 participants. During this study, a 3.0-gram daily dose of either ESTRASORB or placebo lotion was administered to the thigh and calf of each participant, with approximately 100 participants receiving ESTRASORB and the remainder receiving the placebo lotion. The results indicated that at weeks 3 through 12, ESTRASORB was statistically significantly superior to the placebo lotion in reducing the mean daily number of hot flashes. The Phase III study further demonstrated that ESTRASORB had no clinically relevant adverse effect on laboratory safety parameters, vital signs or dermal assessments. In June 2001, we submitted a New Drug Application to the FDA, which was accepted for filing in August 2001, for approval to market ESTRASORB for the treatment of hot flashes in menopausal women.

      Marketing of ESTRASORB. The U.S. marketplace for estrogen replacement therapy is heavily saturated by competitors. In response, we have prepared an aggressive launch and marketing strategy for ESTRASORB. Our marketing efforts will target the high-volume prescribers and early adopters of women’s healthcare products. Our public relations plan will focus on the ways in which ESTRASORB’s topical method of application will assist in counteracting the poor compliance rate currently associated with estrogen replacement therapy. We have also established a Physician Advisory Board to advise us with respect to our goal of early adoption of ESTRASORB by targeted physicians. These efforts will be further supplemented by a publications strategy aimed toward the inclusion in specialty medical publications of in-depth clinical information regarding ESTRASORB.

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     Currently Marketed Products

      Our acquisition of Fielding in 2000 enabled us to expand our women’s healthcare product line and provided us with an established national sales force having extensive experience in selling to obstetricians and gynecologists throughout the United States. The acquisition included the Nestabs® product line and Gynodiol™, described below, and a sales force of 59 people. We believe that the expertise gained through the marketing of these products positions us for a successful launch of ESTRASORB, if approved by the FDA. We currently market the following four women’s healthcare prescription products:

      Nestabs®. Nestabs is a complete line of prenatal multivitamins for use before, during and after pregnancy. The product line includes Nestabs® Rx, Nestabs® CBF and Nestabs® FA. The Nestabs products are designed to prevent and control iron deficiency through low-dose iron supplementation. Nestabs provides a convenient once-a-day dosing regimen and a patient-friendly small, easy to swallow tablet. The Nestabs product line generated $11.3 million in sales in 2001.

      Gynodiol™. Gynodiol is a safe, effective and economical option for women who require an oral estrogen replacement therapy, and is available in four dosage strengths. Gynodiol is indicated for the relief of moderate to severe vasomotor symptoms associated with menopause, the treatment of vulval and vaginal atrophy, the treatment of hypoestrogenism and the prevention of osteoporosis. Gynodiol is the only estradiol product available in a 1.5 mg strength, allowing for more precise titration. The total sales for Gynodiol in 2001 were $2.2 million.

      AVC™ Cream and Suppositories. AVC cream and suppositories are an established line of women’s hygiene products effective for the treatment of vaginal bacterial infection. AVC is designed to block certain metabolic processes essential for the growth of susceptible bacteria. We acquired the AVC product line from King for $3.3 million in 2001 and we believe there is opportunity for sales growth because AVC is the only sulfanilamide, in either a cream or suppository, on the market. The AVC product line generated $3.5 million in sales in 2001.

      Nordette®. Nordette is an oral contraceptive owned by King. In partnership with King, we co-promote this product to obstetricians and gynecologists nationwide. The revenues are booked by King and we receive a payment from King which reflects 50% of these revenues above an established quarterly baseline, less related manufacturing and approved marketing expenses, subject to certain baseline modifications.

     Other Hormone Replacement Therapy Product Candidates

      We are using our innovative drug delivery technologies to expand our product pipeline through the development of new product candidates, including a testosterone replacement therapy product for women. Our hormone replacement therapy program includes the following products:

      ANDROSORB™. ANDROSORB employs our patented micellar nanoparticle technology to deliver testosterone through the skin, when applied topically in lotion form. Although generally associated with men, testosterone is also a naturally occurring hormone in women. As a woman ages, she may experience a variety of symptoms of testosterone deficiency, including poor libido or sexual responsiveness, depression and cardiovascular, musculoskeletal and urological problems. ANDROSORB may be useful to treat the symptoms of testosterone deficiency, a condition that is increasingly prevalent in our aging population.

      To date, there have been no approved testosterone therapy products for women in the U.S. other than a product which combines estrogen and testosterone. Current testosterone replacement therapy products for men include deep intramuscular injections, transdermal patches and gels. The injections require frequent visits to a physician and may be associated with pain at the injection site and abscess. The transdermal patches may cause skin irritation and patient inconvenience associated with wearing and changing external patches. We believe that ANDROSORB may offer several advantages over these current therapies. ANDROSORB is a lotion that may be applied to the skin, thus eliminating the need for intramuscular injections. In addition, ANDROSORB does not contain materials that may cause the skin irritation associated with transdermal patches. We completed a Phase II dose ranging study in testosterone deficient women in the fourth quarter of 2000 and expect to begin additional Phase II trials in the first quarter of 2002.

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      ANDRO-JECT™. We also have in preclinical development ANDRO-JECT, a depot delivery system for testosterone. ANDRO-JECT represents our initial application for our Sterisome technology, a new oil-free, cholesterol-free depot drug delivery system. ANDRO-JECT is delivered subcutaneously with a small, 25 gauge needle and potentially has long-lasting effects. In animal studies, therapeutic levels of testosterone were maintained for two weeks after one subcutaneous injection. We expect to file an Investigational New Drug application for ANDRO-JECT in the first half of 2002.

      Progestin Lotion. We are also currently undertaking preclinical development of a transdermal progestin lotion. We expect to file an Investigational New Drug application for this product in the second half of 2002. The use of progestins in combination with estrogen is becoming standard therapy for menopausal women who take estrogen replacement therapy and have an intact uterus. The use of ESTRASORB in combination with our progestin lotion would compete with estrogen/progestin combination products.

     Infectious Diseases

      We develop and produce live virus suspensions and vaccines for governmental, commercial and academic clients. Our capabilities include experimental vaccine development, vaccine safety testing, production and testing of tissue culture systems and repository management, including the storage, tracking and shipment of thousands of biological specimens. In addition, we have one of the few locations in the world that produces experimental live viral vaccines for Phase I and II clinical trials. We also develop recombinant virus-like particles for use as vaccines against infectious diseases.

      Our vaccine product candidates include the following:

      HPV 16 Vaccine. Our human papillomavirus type 16 virus-like particle vaccine product, a single protein vaccine, is being developed with sponsorship by the National Cancer Institute. Expected to begin lengthy Phase III trials in Costa Rica in 2002, the vaccine is being tested for the prevention of human papillomavirus infection, which has been implicated in a majority of cases of cervical cancer. We are also developing a multi-protein human papillomavirus vaccine which will be tested for the treatment and prevention of human papillomavirus infection. This multi-protein vaccine, which also uses our virus-like particle technology, is currently in pre-clinical development.

      Inactivated Smallpox Vaccine. Based upon the potential threat of a smallpox outbreak due to terrorist activity, there is an urgent need for a safe and effective smallpox vaccine which can be administered to the entire U.S. population. The current live virus smallpox vaccine cannot safely be given to all persons. There are a significant number of people, up to 20% of the total population by some estimates, who may experience severe reactions to a live vaccine due to weakened immune systems. For example, people with HIV/ AIDS, the elderly, transplant recipients and people on chemotherapy may have compromised immune systems. We have in pre-clinical development an inactivated smallpox vaccine which may have a better safety profile than that of the existing live virus vaccine. Initial animal studies indicate that our inactivated smallpox vaccine achieved an immune response comparable to that of the live smallpox vaccine. We are currently in discussions with the NIH regarding the further development of this vaccine and we believe that Phase I trials could be initiated in 2002.

     Collaborative Agreements

      We have significant involvement in collaborations, sponsored research agreements and preclinical and clinical testing agreements with academic institutions and with U.S. government agencies in connection with the development of our pharmaceutical product candidates and our vaccine adjuvants. For example, we have executed a Cooperative Research and Development Agreement with the NIH under which we are working, in cooperation with the National Institute of Allergy and Infectious Diseases branch of the NIH, to make and evaluate a malaria vaccine candidate. Current efforts under this agreement are focused on producing a vaccine based on an antigen present in the malaria parasite responsible for the greatest mortality from this disease worldwide. We have also executed a Cooperative Research and Development Agreement with the NIH which is directed towards our work with the Stroke Branch of the National Institute of Neurological Disorders department of the NIH. The principal goal of this agreement is to evaluate the safety of therapeutics for the

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Our Platform Technologies

      Our product development efforts are focused on the research and development of proprietary transdermal, oral and injectable drug delivery and vaccine technologies and the applications of those technologies. Our technology platforms involve the use of proprietary microscopic lipid structures as vehicles for the delivery of a wide variety of drugs and other therapeutic products, including hormones, anti-bacterial and anti-viral products and vaccine adjuvants. In addition, our vaccine technology can be utilized for the development of prophylactic and therapeutic vaccines. We believe our innovative technologies may allow for a more cost-effective and stable delivery of a wider variety of drugs and other therapeutics than commercially available phospholipid liposomes and other delivery vehicles. Our technologies may also be preferred over other available transdermal delivery systems because they are easy to use, provide rapid onset of therapy and may reduce side effects such as skin irritation. In addition, future applications of our transdermal delivery systems may show advantages over injectable delivery technologies, which are invasive, inconvenient and sometimes painful.

      Micellar Nanoparticle Emulsions. Micellar nanoparticle emulsions are proprietary, submicron-sized, water miscible, lipid structures derived from amphiphilic molecules. We believe that our micellar nanoparticle emulsions are the first substances able to encapsulate alcohol soluble materials for delivery through the skin. The micellar nanoparticle emulsion formulations we use for the transdermal delivery of drugs have properties similar to creams and lotions. Micellar nanoparticle emulsions are the fundamental technology platform for our hormone replacement therapies, including our ESTRASORB and ANDROSORB product candidates. We believe that our patent on this technology lasts until 2015.

      Novasome Non-Phospholipid Vesicles. In addition to our micellar nanoparticle emulsion technology, we have developed Novasome non-phospholipid liposomes. Novasomes are proprietary liposomes in which drugs or other materials can be encapsulated for delivery into the body orally or by injection. They are made using our patented manufacturing processes from a variety of readily available chemicals called amphiphiles. We believe that our Novasome technology may provide effective and safe adjuvant carrier systems for a variety of vaccines. Our initial use of this technology will be in the development of vaccines for smallpox and other infectious diseases.

      Virus-Like Particles. We also develop recombinant virus-like particles for use as vaccines against infectious diseases. Virus-like particles are self assembling protein structures which resemble viruses. These are non-infectious particles which can generate immune responses when administered as vaccines. We have several ongoing development programs involving virus-like particles, including human papillomavirus vaccines, melanoma vaccines, malaria vaccines, influenza vaccines and anti-stroke therapeutics.

      Sterisomes. Sterisomes are our proprietary drug delivery system comprised of 80% water, 15% drug and 5% lipid. Sterisomes can be used as a depot delivery system for certain steroidal hormones. We currently have

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Manufacturing

      The development and manufacture of our products are subject to good laboratory practices and good manufacturing practices prescribed by the FDA and to other standards prescribed by the appropriate regulatory agencies in other countries. We currently utilize third party contract manufacturers to manufacture our existing product line, but we do have the ability to produce limited quantities of products needed to support our current research and development program and clinical trials. We currently manufacture ESTRASORB in 100 liter-size vessels at a pilot facility owned by Packaging Coordinators, Inc., a division of Cardinal Health, Inc. We recently entered into an agreement with Packaging Coordinators to lease a 20,000 square foot facility at this same location and are in the process of building out the facility to our requirements and installing manufacturing equipment to accommodate larger-scale clinical trials and commercial production of ESTRASORB. This manufacturing facility may also provide us with sufficient capacity for the commercial production of other new products. Products at this facility will be manufactured using our machinery and employees. Packaging Coordinators will perform the final fill and packaging of these products on a dedicated line and we are in the process of selecting a third party logistics company to distribute the products. In addition, we have entered into an agreement with Parkedale Pharmaceuticals, Inc., a subsidiary of King, which allows us to use manufacturing facilities at Parkedale to manufacture HPV16 vaccines for Phase III clinical trials. Despite the addition of these new facilities, we may also need to rely on collaborators, licensees or direct access to other manufacturing facilities for future later-stage clinical trials and commercial production efforts. There can be no assurance that we will be able to enter into such relationships or obtain needed facilities to manufacture products in a timely manner at acceptable quality and prices, or that we or our suppliers will be able to comply with good laboratory practices or good manufacturing practices, as applicable, or manufacture an adequate supply of product.

Competition

      The specialty pharmaceutical industry is intensely competitive and is characterized by rapid technological progress. We compete with specialized biopharmaceutical firms and large pharmaceutical companies, in the United States, Europe and elsewhere, that are engaged in the discovery, development and marketing of hormone replacement therapies, vaccine products and other products that do or could compete with our currently marketed products and our product candidates. These companies, as well as academic institutions, governmental agencies and private research organizations, also compete with us in recruiting and retaining highly qualified scientific personnel and consultants.

      Many large companies currently produce and sell estrogen products for clinical indications identical to those that we seek for ESTRASORB. In the oral product segment of the estrogen replacement therapy market, which accounts for approximately 78% of the market, the Wyeth-Ayerst division of American Home Products Corporation commits significant resources to the sale and marketing of its product, Premarin®, in order to maintain its market leadership position. Warner-Chillcot also competes in the branded oral product segment with its product, Estrace®. ESTRASORB, if approved, will also compete with products produced and sold by generic manufacturers in the oral product segment of the market, such as Watson Pharmaceutical, Inc., with its generic product, Estropipate®, and Apothecon, Inc., with its generic product, Estradiol.

      In the transdermal patch segment of the estrogen replacement therapy market, which accounts for approximately 14% of the market, several companies sell transdermal estrogen patches with which ESTRASORB will compete, if approved. For example, Novartis Pharma AG currently markets and sells its Vivelle® and Estraderm® transdermal products and Berlex Laboratories, Inc. and Forest Laboratories, Inc. co-promote the Climara® transdermal patch.

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      Several companies currently market estrogen gels, which deliver estrogen transdermally, outside the U.S. We are also aware of at least one U.S. company with a gel-based estrogen replacement product in clinical trials.

      Our currently marketed products also face significant competition. The prenatal vitamin market, for example, is very fragmented with many competitors. A number of companies that are larger than us, and have greater resources than we do, sell prenatal vitamins that compete with Nestabs, including Warner-Chillcot, Solvay Pharmaceuticals, Mead Johnson and many generic manufacturers. The competition to develop new FDA-approved prenatal vitamins is also intense. In addition, Gynodiol, our oral estrogen replacement therapy product, competes with the estrogen replacement therapy products described above.

      In general, competition among pharmaceutical products will be based in part on product efficacy, safety, reliability, availability, price and patent position. An important factor will be the relative timing of market introduction of our products and our competitors’ products. Accordingly, the speed with which we can develop products, complete the clinical trials and approval processes and supply commercial quantities of the products to the market, is expected to be an important competitive factor. Our competitive position will also depend upon our ability to attract and retain qualified personnel, to obtain patent protection or otherwise develop proprietary products or processes and to secure sufficient capital resources for the often substantial period between technological conception and commercial sale.

Patents and Proprietary Information

      We currently have 54 U.S. patents and approximately 150 foreign patents and patent applications covering our technologies. We have three pending U.S. patent applications covering the composition, manufacture and use of our organized lipid structures and related technologies. We recently filed 15 new patent applications directed towards innovative discoveries made in the field of human vaccines.

      A current U.S. patent issued in 1997 covers our micellar nanoparticle technology and methods of their production. Micellar nanoparticles are the structures which allow for ESTRASORB’s unique transdermal delivery of estradiol.

      The Federal Technology Transfer Act of 1986 is designed to encourage the dissemination of science and technology innovation and provide sharing of technology that has commercial potential. Consistent with statutory guidelines issued under the Act, the Company’s collaborative research efforts with the government or with other private entities receiving federal funding may provide that developments and results will be freely published, that information or materials supplied by us will not be treated as confidential and that we will be required to negotiate a license to any such developments and results in order to commercialize products. There can be no assurance that we will be able to successfully obtain any such license at a reasonable cost or that such developments and results will not be made available to our competitors on an exclusive or nonexclusive basis.

Government Regulation

      Our research and development activities are subject to regulation for safety, efficacy and quality by numerous governmental authorities in the United States and other countries. In the United States, the development, manufacturing and marketing of human pharmaceuticals are subject to regulation for safety and efficacy by the FDA in accordance with the Food, Drug and Cosmetic Act.

      The steps required before new products for use in humans may be marketed in the United States include (i) preclinical tests, (ii) submission to the FDA of an Investigational New Drug application, which must be approved before human clinical trials commence, (iii) adequate and well-controlled human clinical trials to establish the safety and efficacy of the product, (iv) submission of a New Drug Application for a new drug or a Product License Application for a new biologic to the FDA and (v) FDA approval of the New Drug Application or Product License Application prior to any commercial sale or shipment of the product. Preclinical tests include laboratory evaluation of product formulation and animal studies (if an appropriate animal model is available) to assess the potential safety and efficacy of the product. Formulations must be

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      The results of the preclinical tests are submitted to the FDA as part of an Investigational New Drug application and are reviewed by the FDA prior to the commencement of human clinical trials. There can be no assurance that submission of an Investigational New Drug application will result in FDA authorization to commence clinical trials. The FDA may deny a New Drug Application or Product License Application if applicable regulatory criteria are not satisfied, may require additional testing or information, or may require post-marketing testing and surveillance to monitor the safety of the applicable products.

      In addition to obtaining FDA approval for each Product License Application, an Establishment License Application must be filed and approved by the FDA for the manufacturing facilities of a biologic product before commercial marketing of the biologic product is permitted. This regulatory process may take many years and requires the expenditure of substantial resources.

      In addition to regulations enforced by the FDA, we are also subject to regulation under the Occupational Safety and Health Act, the Environmental Protection Act, the Toxic Substances Control Act, the Resource Conservation and Recovery Act and other present and potential future federal, state or local regulations. Our research and development involves the controlled use of hazardous materials, chemicals and viruses. Although we believe that our safety procedures for handling and disposing of such materials comply with the standards prescribed by state and federal regulations, the risk of accidental contamination or injury from these materials cannot be completely eliminated. In the event of such an accident, we could be held liable for any damages that result, and any such liability could exceed our resources.

      There have been a number of federal and state proposals during the last few years to subject the pricing of pharmaceuticals to government control and to make other changes to the medical care system of the United States. It is uncertain what legislative proposals will be adopted or what actions federal, state or private payors for medical goods and services may take in response to any medical reform proposals or legislation. We cannot predict the effect medical reforms may have on our business, and no assurance can be given that any such reforms will not have a material adverse effect.

Employees

      We currently have 173 full-time employees, of whom 38 are in research and development. Of those 38 employees in research and development, eight have earned PhD degrees and one is a medical doctor. We have no collective bargaining agreement with our employees and believe that our employee relations are good.

Risks and Uncertainties

      You should carefully read the following risk factors in evaluating our business. Some of the following risks relate principally to our business and the industry in which we operate. Other risks relate principally to the securities market and ownership of our common stock. If any of the following risks occur, our business, financial condition or operating results could be adversely affected. You should also consider the other information described in this report.

  Our success is heavily dependent on FDA approval and market acceptance of ESTRASORB

      Our New Drug Application for ESTRASORB was accepted for filing by the FDA in August 2001. There is no guarantee that the FDA will approve our application and allow us to begin selling ESTRASORB in the United States. If we do not receive FDA approval of our application, our inability to sell ESTRASORB in the United States would have a significant negative effect on our business and results of operations. Even if ESTRASORB is approved by the FDA, there is no guarantee that we and King our marketing partner for ESTRASORB, will be able to successfully commercialize ESTRASORB. Many factors could negatively affect our ability to successfully commercialize ESTRASORB, including:

	•	a failure or delay in ESTRASORB gaining a meaningful share of the estrogen replacement therapy market, which currently is dominated by Premarin®, an oral estrogen tablet, sold by a division of

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		American Home Products Corporation, and estrogen patches sold by several companies including Novartis Pharma AG, Berlex Laboratories, Inc. and Forest Pharmaceuticals, Inc.;
	•	our inability to effectively promote and sell ESTRASORB with King in the United States, or King’s inability to do so in the rest of the world;
	•	delays in the manufacture of ESTRASORB in commercial quantities; and
	•	the inability to obtain coverage and favorable reimbursement rates for ESTRASORB from insurers and other third party payors.

  We will face substantial competition in connection with the sale of ESTRASORB and our other product candidates

      We compete with numerous other companies worldwide that have developed or are developing products that compete or may compete with our product candidates. These competitors include both large and small pharmaceutical companies, biotechnology firms, universities and other research institutions. We may not succeed in developing technologies and products that are more effective than those being developed by our competitors.

      Many large companies currently produce and sell estrogen products for clinical indications identical to those that we seek for ESTRASORB. In the oral product segment of the estrogen replacement therapy market, which accounts for approximately 78% of the market, Wyeth-Ayerst Laboratories, a division of American Home Products Corporation, commits significant resources to the sale and marketing of its product, Premarin®, in order to maintain its market leadership position. Warner-Chillcot also competes in the branded oral product segment with its product, Estrace®. In addition, ESTRASORB will also compete with products produced and sold by generic manufacturers in the oral product segment of the market, such as Watson Pharmaceutical, Inc., with its generic product, Estropipate®, and Apothecon, Inc., with its generic product, Estradiol. In the patch segment of the market, which accounts for approximately 14% of the estrogen replacement therapy market, several companies market transdermal estrogen patches with which ESTRASORB will compete, if approved. For example, Novartis Pharma AG currently markets and sells its Vivelle® and Estraderm® patches and Berlex Laboratories, Inc. and Forest Pharmaceuticals Inc. co-promote the Climara® transdermal patch. Several companies also currently market alcohol-based estrogen gels and ointments outside the United States. For example, Schering Canada sells its estrogen gel, Estrogel®, in Canada. These and other products sold by our competitors have all been approved for sale and have achieved some degree of market penetration. If ESTRASORB is approved for sale in the Untied States, it will compete for market share with these products and we cannot guarantee that together with King, we will be able to effectively promote ESTRASORB against these competitive products. In order to effectively compete, we may make substantial investments in sales and marketing. Many of these products are sold by companies with greater resources than we have and there is no assurance that we will be successful in gaining significant market share for ESTRASORB or in earning a return on that investment.

      Our technologies and products may be rendered obsolete or noncompetitive as a result of products introduced by competitors. Most of our competitors have substantially greater financial and technical resources, production and marketing capabilities, and related experience than us. The greater resources, capabilities and experience of our competitors may enable them to develop, manufacture and market their products more successfully and at a lower cost than we can. In addition, many of our competitors have significantly greater experience than us in conducting preclinical testing and clinical trials of human pharmaceuticals and obtaining regulatory approvals to market such products. Accordingly, our competitors may succeed in obtaining FDA approval for products more rapidly than us which may give them an advantage over us in achieving market acceptance of their products.

  We may need additional capital to grow and operate our business and we are uncertain about obtaining future financing

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      We estimate that our existing cash resources will be sufficient to finance our operations at current and projected levels of development and general corporate activity for the next 12 to 15 months. We cannot be certain that we will be able to generate sufficient revenues from product sales in the near term or at all. We may require additional funds to continue our research and development, commence future preclinical and clinical trials, seek regulatory approvals, establish commercial-scale manufacturing capabilities and market our products. We may seek additional funds through public or private equity or debt financings, collaborative arrangements with pharmaceutical companies and other sources. We cannot be certain that adequate additional funding or bank financing will be available to us on acceptable terms, if at all. If we cannot raise the additional funds we may need to continue our current and anticipated operations, we may be required to delay significantly, reduce the scope of or eliminate one or more of our research or development programs. If that is the case we will seek other alternatives to avoid insolvency, including arrangements with collaborative partners or others that may require us to relinquish rights to certain of our technologies, product candidates or products.

  We have a history of losses and our future profitability is uncertain

      Our expenses have exceeded our revenues since our formation in 1987, and our accumulated deficit at December 31, 2001 was $64.8 million. Our revenues for the last three years were, $1.2 million in 1999, $2.5 million in 2000 and $24.0 million in 2001. Sales of products that we acquired as a result of our acquisition of Fielding Pharmaceutical Company have generated modest revenues, but based on our current business plan these revenues will not be sufficient to offset our expenses in the future. We cannot be certain of when or if we will generate substantial revenues from the sale of ESTRASORB. We have received a very limited amount of product-related revenue from research contracts, licenses and agreements to provide vaccine products, services and adjuvant technologies. We cannot be certain that we will be successful in entering into strategic alliances or collaborative arrangements with other companies that will result in other significant revenues to offset our expenses. Our net losses for the last three years were $4.5 million in 1999, $12.2 million in 2000 and $9.7 million in 2001. Our losses have resulted from research and development expenses, protection of our patents and other intellectual property and other general operating expenses. We expect that our annual losses will increase in the near term as we expand our manufacturing capacity, sales and marketing capabilities and conduct additional and larger clinical trials for other product candidates. Therefore, we expect our cumulative operating loss to increase until such time, if ever, as product sales, licensing fees and royalty payments generate sufficient revenue to fund our continuing operations. We cannot predict when, if ever, we might achieve profitability and cannot be certain that we will be able to sustain profitability, if achieved.

      We intend to allocate a significant portion of our sales personnel’s time to the product launch of ESTRASORB, if and when it is approved by the FDA. Accordingly, the sales of our other women’s health products could be adversely affected by the efforts we allocate to the ESTRASORB product launch. The costs of maintaining our own sales force to market our current products and ESTRASORB, if approved, may in the future exceed product revenues. If we continue to market ESTRASORB or future products directly, significant additional expenditures and management resources may be required to increase the size of our internal sales force.

  Our sales and marketing plan for ESTRASORB depends in large part on the success of our relationship with King

      We have entered into a co-promotion agreement with King for the marketing and promotion of ESTRASORB in the United States using our sales and marketing personnel and King’s sales and marketing personnel. We have also granted King exclusive rights to promote, market and distribute ESTRASORB outside the United States. In return, we received certain milestone payments, potential future milestone payments, licensing fees and royalties on future sales. While our agreements with King give us some limited protections with respect to King’s marketing and sales efforts and, we believe, creates financial incentives for King consistent with our own, we cannot control the amount and timing of marketing efforts that King devotes to ESTRASORB or make any assurances that our and King’s co-promotion of ESTRASORB in the United States and King’s marketing of ESTRASORB in the rest of the world will be successful.

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      Our success in marketing other potential future products will also depend in large part on our relationship with King. Our co-promotion agreement with King also provides for co-promotion in the United States with King of our product candidate ANDROSORB™ and our human papillomavirus vaccine, if any of these products are approved for marketing by the FDA, and gives King an exclusive worldwide license, except in the United States, to market these future products. Under our co-promotion agreement, King has the right to co-promote future hormone replacement therapy products in the field of women’s health. If King exercises this right with respect to a particular product candidate, King is obligated to share equally with us in the development costs of such product. In the future, we might enter into other licensing or co-promotion arrangements with King or other third parties for the marketing and sale of other future products. Any revenues we receive from sales of ANDROSORB™ and other future products will depend in large part on the terms of these agreements and the efforts of King and any other third-party marketing partners.

  Our agreements with King may reduce the likelihood that we could be acquired by another company

      Our co-promotion agreement and license agreement with King for the marketing of ESTRASORB and ANDROSORB contain several provisions which would take effect upon a change of control of Novavax. One provision allows King several options in the event of a change in control of Novavax including (i) terminating our right to co-promote King products, (ii) terminating our rights to promote ESTRASORB and ANDROSORB and any other hormone therapies for women for which King is paying 50% of the development costs or (iii) requiring us to assign and transfer to King all related rights of ownership for ESTRASORB and ANDROSORB and any such other hormone replacement therapies for women and license to King on an exclusive and perpetual basis all related intellectual property rights and know how. If King chooses to exercise its rights under either clause (ii) or (iii) above, King will pay us royalties on net sales of the products. In addition, King will pay us for the cost of manufacturing, plus a markup consistent with the terms of the license agreement for the handling costs. King could also require that we redeem the outstanding promissory notes, currently in the amount of $30.0 million, at 101% of the outstanding principal and accrued interest. These provisions may have the effect of making us less attractive as an acquisition candidate.

  We need additional manufacturing capability to commercialize our products

      We do not have any experience with the large capacity manufacturing required for commercial sale of a product. Although we have had the ability to produce the limited quantities of products needed to support our current research and development program and clinical trials, we will need more production capacity for larger, later-stage clinical studies and commercial sales. Our potential products may be too difficult or costly to manufacture on a large scale, to develop into commercially viable products or to market.

      We are in the process of validating our manufacturing methods for ESTRASORB, which is required under FDA guidelines, and are awaiting FDA approval of these methods. We currently manufacture ESTRASORB at a facility of Packaging Coordinators, Inc., a subsidiary of Cardinal Health, Inc. We recently entered into an agreement with Packaging Coordinators to lease 20,000 square feet of space within their facility. Under the terms of this agreement, Packaging Coordinators will provide packaging services for the product we manufacture in their facility. We are in the process of building out the facility to meet our requirements and installing manufacturing equipment at this facility with the capacity required for commercial production of ESTRASORB. Once this new equipment is installed, we will need to confirm that the ESTRASORB made using this new equipment is identical to that used in our clinical trials. If we are unable to make ESTRASORB on a commercial scale or are delayed in validating the product manufactured with our new equipment, the commercialization of ESTRASORB would be delayed.

      In the near term, we will be manufacturing ESTRASORB only in the Packaging Coordinators facility. If ESTRASORB is approved by the FDA, we plan to qualify at least one additional site for the manufacture of ESTRASORB. If we are unable to utilize the Packaging Coordinators facility to manufacture ESTRASORB prior to our qualification of a second site, however, we would not have immediate access to ESTRASORB and would be required to reestablish our validation process at a different facility which would cause us to lose sales of ESTRASORB and would adversely affect our business.

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      We currently utilize third party contract manufacturers to manufacture our other products. Any contract manufacturer’s facility that we may use, including the Packaging Coordinators facility, must adhere to the FDA’s regulations on current good manufacturing practices, which are enforced by the FDA through its facilities inspection program. These facilities are subject to periodic inspection by the FDA. The manufacture of products at these facilities will be subject to strict quality control testing and recordkeeping requirements. We may not be able to enter into alternative manufacturing arrangements at commercially acceptable rates, if at all. Moreover, the manufacturers utilized by us may not provide quantities of product sufficient to meet our specifications or our delivery, cost and other requirements.

      If we decide to manufacture our own products, we will need to acquire additional manufacturing facilities and to improve our manufacturing technology. Establishing additional manufacturing facilities will require us to spend substantial funds, hire and retain a significant number of additional personnel and comply with extensive regulations applicable to such facilities here and abroad, including the current good laboratory practices and good manufacturing practices required by the FDA. If we elect to or need to manufacture our own products, we risk the possibility that we may not be able to do so in a timely fashion at acceptable quality and prices or in compliance with good laboratory practices and good manufacturing practices.

  We have not completed the development of many of our products and we may not succeed in obtaining the FDA approval necessary to sell any additional products

      The development, manufacture and marketing of our pharmaceutical products are subject to government regulation in the United States and other countries. In the United States and most foreign countries, we must complete rigorous preclinical testing and extensive human clinical trials that demonstrate the safety and efficacy of a product in order to apply for regulatory approval to market the product. Only a few of our products have been approved for sale and our application to sell ESTRASORB in the United States is currently being reviewed by the FDA. Two of our product candidates, ANDROSORB and our human papillomavirus virus-like particle vaccine, are now in Phase II human clinical studies. In addition, Phase I clinical trials for our Hepatitis E vaccine are currently being conducted. Our other product candidates are in preclinical laboratory or animal studies. Before applying for FDA approval to market any additional product candidates, we must conduct larger-scale Phase II and III human clinical trials that demonstrate the safety and efficacy of our products to the satisfaction of the FDA or other regulatory authorities. These processes are expensive and can take many years to complete. We may not be able to demonstrate the safety and efficacy of our products to the satisfaction of the FDA or other regulatory authorities. We may also be required to demonstrate that our proposed products represent an improved form of treatment over existing therapies and we may be unable to do so without conducting further clinical studies.

      We may fail to obtain regulatory approval for our products on a timely basis. Delays in obtaining regulatory approval can be extremely costly in terms of lost sales opportunities and increased clinical trial costs. The speed with which we complete our clinical trials and our applications for marketing approval will depend on several factors, including the following:

	•	the rate of patient enrollment, which is a function of many factors, including the size of the patient population, the proximity of patients to clinical sites, the eligibility criteria for the study and the nature of the protocol;
	•	institutional review board approval of the protocol and the informed consent form;
	•	prior regulatory agency review and approval;
	•	analysis of data obtained from preclinical and clinical activities which are susceptible to varying interpretations, which interpretations could delay, limit or prevent regulatory approval;
	•	changes in the policies of regulatory authorities for drug approval during the period of product development; and
	•	the availability of skilled and experienced staff to conduct and monitor clinical studies and to prepare the appropriate regulatory applications.

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      We have limited experience in conducting and managing the preclinical and clinical trials necessary to obtain regulatory marketing approvals. We may not be able to obtain the approvals necessary to conduct clinical studies. Also, the results of our clinical trials may not be consistent with the results obtained in preclinical studies or the results obtained in later phases of clinical trials may not be consistent with those obtained in earlier phases. A number of companies in the biopharmaceutical industry have suffered significant setbacks in advanced clinical trials, even after experiencing promising results in early animal and human testing. If regulatory approval of a drug is granted, such approval is likely to limit the indicated uses for which it may be marketed. Furthermore, even if a product of ours gains regulatory approval, the product and the manufacturer of the product will be subject to continuing regulatory review. We may be restricted or prohibited from marketing or manufacturing a product, even after obtaining product approval, if previously unknown problems with the product or its manufacture are subsequently discovered.

  Our success depends on our ability to maintain the proprietary nature of our technology

      Our success will, in large part, depend on our ability to maintain the proprietary nature of our technology and other trade secrets. To do so, we must prosecute and maintain existing patents, obtain new patents and pursue trade secret protection. We also must operate without infringing the proprietary rights of third parties or letting third parties infringe our rights. We currently have 54 U.S. patents and approximately 150 foreign patents and patent applications covering our technologies. We have three pending U.S. patent applications covering the composition, manufacture and use of our organized lipid structures and related technologies. We recently filed 15 new patent applications directed towards innovative discoveries made in the field of human papillomavirus. However, patent issues relating to pharmaceuticals involve complex legal, scientific and factual questions. To date, no consistent policy has emerged regarding the breadth of biotechnology patent claims that are granted by the United States Patent and Trademark Office or enforced by the federal courts. Therefore, we do not know whether our applications will result in the issuance of patents, or that any patents issued to us will provide us with any competitive advantage. We also cannot be sure that we will develop additional proprietary products that are patentable. Furthermore, there is a risk that others will independently develop or duplicate similar technology or products or circumvent the patents issued to us.

      There is a risk that third parties may challenge our existing patents or may claim that we are infringing their patents or proprietary rights. We could incur substantial costs in defending patent infringement suits or in filing suits against others to have their patents declared invalid or claim infringement. It is also possible that we may be required to obtain licenses from third parties to avoid infringing third-party patents or other proprietary rights. We cannot be sure that such third-party licenses would be available to us on acceptable terms, if at all. If we are unable to obtain required third-party licenses, we may be delayed in or prohibited from developing, manufacturing or selling products requiring such licenses.

      Although our patents include claims covering various features of our product candidates, including composition, methods of manufacture and use, our patents do not provide us with complete protection against the development of competing products. For example, our patents do not prohibit third parties from developing and selling products for estrogen replacement therapy that deliver estrogen through a topical lotion, ointment or similar medium.

      Some of our know-how and technology is not patentable. To protect our proprietary rights in unpatentable intellectual property and trade secrets, we require employees, consultants, advisors and collaborators to enter into confidentiality agreements. These agreements may not provide meaningful protection for our trade secrets, know-how or other proprietary information in the event of any unauthorized use or disclosure.

  Health care insurers and other payors may not pay for our products or may impose limits on reimbursement

      Our ability to commercialize ESTRASORB and our future products will depend, in part, on the extent to which reimbursement for such products will be available from third-party payors, such as Medicare, Medicaid, health maintenance organizations, health insurers and other public and private payors. If we succeed in bringing ESTRASORB or other products in the future to market, we cannot assure you that third-party payors

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      Many health maintenance organizations and other third-party payors use formularies, or lists of drugs for which coverage is provided under a health care benefit plan, to control the costs of prescription drugs. Each payor that maintains a drug formulary makes its own determination as to whether a new drug will be added to the formulary and whether particular drugs in a therapeutic class will have preferred status over other drugs in the same class. This determination often involves an assessment of the clinical appropriateness of the drug and sometimes the cost of the drug in comparison to alternative products. We cannot assure you that ESTRASORB or any of our future products will be added to payor’s formularies, whether our products will have preferred status to alternative therapies, nor whether the formulary decisions will be conducted in a timely manner. We may also decide to enter into discount or formulary fee arrangements with payors, which could result in us receiving lower or discounted prices for ESTRASORB or future products.

  We may have product liability exposure

      The administration of drugs to humans, whether in clinical trials or after marketing clearances are obtained, can result in product liability claims. We maintain product liability insurance coverage in the total amount of $9.0 million for claims arising from the use of our currently marketed products and products in clinical trials prior to FDA. Coverage is becoming increasingly expensive, however, and we may not be able to maintain insurance at a reasonable cost. We cannot assure you that we will be able to maintain our existing insurance coverage or obtain coverage for the use of our other products in the future. This insurance coverage and our resources may not be sufficient to satisfy liabilities resulting from product liability claims. A successful claim may prevent us from obtaining adequate product liability insurance in the future on commercially desirable terms, if at all. Even if a claim is not successful, defending such a claim may be time-consuming and expensive and may damage our reputation in the marketplace.

  The price of our common stock has been, and may continue to be, volatile

      Historically, the market price of our common stock has fluctuated over a wide range. In fiscal 2001, our common stock ranged from a low of $6.35 to a high of $15.55. It is likely that the price of our common stock will fluctuate in the future. The market prices of securities of small capitalization Specialty pharmaceutical companies, including ours, from time to time experience significant price and volume fluctuations unrelated to the operating performance of such companies. In particular, over the next year, the market price of our common stock may fluctuate significantly due to a variety of factors, including:

	•	sales of our products, particularly ESTRASORB, if it is approved for sale; and
	•	governmental agency actions, including the FDA’s determination with respect to our pending New Drug Application for ESTRASORB.

In addition, the occurrence of any of the risks described in this “Risks and Uncertainties” section could have a dramatic and adverse impact on the market price of our common stock.

Item 2.  Properties

      We lease approximately 12,000 square feet of administrative offices for our corporate headquarters in Columbia, Maryland. We lease two facilities in Rockville, Maryland. One facility is approximately 6,000 square feet and contains our certified animal facility and laboratories for our drug research and biologics development, which includes our vaccine adjuvant product and services group. In the other facility in Rockville, we lease approximately 12,000 square feet of space. This facility is for contract vaccine research, development and manufacturing of Phase I and II products. Our Fielding subsidiary leases a facility in

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      We believe our facilities are adequate to accommodate our current business plan and anticipated short-term needs and that we will be able to lease additional comparable space, if necessary. However, if we choose to expand our manufacturing capacity, the lease or acquisition of, and the receipt of required regulatory approvals for, additional pharmaceutical manufacturing space may be time-consuming and expensive. In addition, we might not be able to obtain such additional manufacturing space on a timely basis or on terms acceptable to us, if at all.

Item 3.  Legal Proceedings

      We are not a party to any pending legal proceedings.

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

      No matters were submitted to a vote of security holders during the fourth quarter of the fiscal year ended December 31, 2001.

Executive Officers Of The Registrant

      Our executive officers hold office until the first meeting of the Board of Directors following the annual meeting of stockholders and until their successors are duly chosen and qualified, or until they resign or are removed from office in accordance with the our By-laws.

      The following table provides certain information with respect to our executive officers.

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PART II

Item 5.  Market For Registrant’s Common Equity and Related Stockholder Matters

      Our common stock was held by approximately 770 stockholders of record as of March 8, 2002. We have never paid cash dividends on our common stock. We currently anticipate that we will retain all of our earnings for use in the development of our business and do not intend to pay any cash dividends in the foreseeable future.

      Our common stock ($.01 par value) is traded on the Nasdaq National Market under the symbol NVAX. Prior to July 2001, our common stock was traded on the American Stock Exchange under the symbol NOX. The following table sets forth, for the periods presented, the high and low sales prices for our common stock, on the applicable exchange.

Recent Sales of Unregistered Securities

      In January 2002, we issued 362,319 shares of common stock, valued at $5.0 million, to the former shareholders of Fielding Pharmaceutical Company pursuant to the terms of an earn-out provision set forth in our merger agreement with Fielding, executed in December 2000. The shares were issued in a private placement in reliance on Section 4(2) of the Securities Act and a resale registration statement was filed with the Commission and has become effective.

Item 6.  Selected Consolidated Financial Data

      The selected consolidated financial data set forth below has been derived from our audited consolidated financial statements. This information should be read in conjunction with the financial statements and the related notes thereto, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 and other financial information included elsewhere in this Annual Report on Form 10-K.