Case 1:22-cv-01417-TDC Document 1 Filed 06/10/22 Page 1 of 58
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`UNITED STATES DISTRICT COURT
`DISTRICT OF MARYLAND
`
`CHARLES R. BLACKBURN and MICHELE
`ROSATI, Derivatively on Behalf of
`NOVAVAX, INC.,
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`Case No. 1:22-cv-01417
`
`
`
`Plaintiffs,
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`v.
`
`STANLEY C. ERCK, GREGORY F.
`COVINO, JOHN J. TRIZZINO, GREGORY
`M. GLENN, JOHN A. HERRMANN III,
`GREGG H. ALTON, RICHARD H.
`DOUGLAS, MARGARET G. MCGLYNN,
`DAVID M. MOTT, RACHEL K. KING,
`MICHAEL A. MCMANUS, JR., JAMES F.
`YOUNG, and GARY C. EVANS,
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`Defendants,
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`and
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`NOVAVAX, INC.
`
`Nominal Defendant
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`VERIFIED STOCKHOLDER DERIVATIVE COMPLAINT
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`

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`Case 1:22-cv-01417-TDC Document 1 Filed 06/10/22 Page 2 of 58
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`TABLE OF CONTENTS
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`I.
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`II.
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`III.
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`IV.
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`NATURE OF THE ACTION ..............................................................................................1
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`JURISDICTION AND VENUE ..........................................................................................5
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`PARTIES .............................................................................................................................6
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`THE DUTIES OF THE INDIVIDUAL DEFENDANTS ....................................................9
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`A.
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`B.
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`Fiduciary Duties .......................................................................................................9
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`The Board Committee Charters .............................................................................10
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`V.
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`SUBSTANTIVE ALLEGATIONS ...................................................................................13
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`A.
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`Background ............................................................................................................13
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`1.
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`2.
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`Covid-19 Gives the Company a Lifeline ...................................................14
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`The US Government Gives the Company Over $1.6 Billion
`to Develop its Vaccine Candidate ..............................................................16
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`B.
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`Novavax Expands its Manufacturing Capabilities and Anticipates
`Seeking Regulatory Approval of its COVID-19 Vaccine by
`Second Quarter 2021 ..............................................................................................16
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`C.
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`The Company’s Quality Controls Were Gravely Deficient ...................................18
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`1.
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`2.
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`Novavax Was Required to Adhere to the FDA’s Strict Manufacturing
`Regulations ................................................................................................18
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`Unbeknownst to Stockholders, the FDA Had Cited Severe
`Manufacturing Deficiencies at Novavax’s Facilities .................................21
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`The Individual Defendants Cause the Company to Issue Materially False
`and Misleading Statements ...................................................................................24
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`The Truth Emerges ................................................................................................34
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`The Individual Defendants Cause the Company to Issue a Materially
`Misleading Proxy Statement ..................................................................................38
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`Defendants Sold Nearly $90 Million of Novavax Stock While in
`Possession of MNPI ...............................................................................................42
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`D.
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`E.
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`F.
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`G.
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`VI.
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`VII.
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`DERIVATIVE AND DEMAND FUTILITY ALLEGATIONS .......................................45
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`CAUSES OF ACTION ......................................................................................................49
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`i
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`Case 1:22-cv-01417-TDC Document 1 Filed 06/10/22 Page 3 of 58
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`
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`COUNT I
`Against Defendants Erck, Alton, Douglas, McGlynn, Mott, King, McManus, and Young
`for Violations of Section 14 of the Exchange Act .........................................................................49
`
`COUNT II
`Against Defendants Erck, McManus, Mott, Young, Alton, Douglas, King and McGlynn
`for Breach of Fiduciary Duty (Caremark) .....................................................................................50
`
`COUNT III
`Against Defendants Erck, Evans, Glenn, Herrmann, McManus, Mott, Trizzino, and
`Young for Breach of Fiduciary Duty (Caremark) .........................................................................51
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`COUNT IV
`Against Defendants Erck, Evans, Glenn, Herrmann, McManus, Mott, Trizzino, and Young
`for Unjust Enrichment ....................................................................................................................52
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`PRAYER FOR RELIEF ................................................................................................................52
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`JURY DEMAND ...........................................................................................................................52
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`ii
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`Case 1:22-cv-01417-TDC Document 1 Filed 06/10/22 Page 4 of 58
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`
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`Plaintiffs Charles R. Blackburn and Michele Rosati (collectively, “Plaintiffs”), by and
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`through their undersigned attorneys, bring this stockholder derivative complaint for the benefit of
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`nominal defendant, Novavax Inc. (“Novavax” or the “Company”), against its Board of Directors
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`(the “Board”) and certain of its current and former executive officers to remedy defendants’
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`violations of Section 14(a) of the Securities Exchange Act of 1934 (the “Exchange Act”), as
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`amended; breach of fiduciary duty for insider trading (Brophy claim) and failing to adequately
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`oversee the Company’s mission-critical compliance with manufacturing safety regulations
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`(Caremark claim); and unjust enrichment. Plaintiffs’ allegations are based upon their personal
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`knowledge as to themselves and their own acts, and upon information and belief, developed from
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`the investigation and analysis by Plaintiffs’ counsel, including a review of publicly available
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`information such as filings by Novavax with the U.S. Securities and Exchange Commission
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`(“SEC”), press releases, news reports, analyst reports, investor conference transcripts, publicly
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`available filings in lawsuits, and matters of public record, as well as documents obtained pursuant
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`to a Freedom of Information Act (“FOIA”) request to the U.S. Food and Drug Administration
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`(“FDA”) and books and records produced in response to Plaintiffs’ books and records demands
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`pursuant to 8 Del. C. § 220 (the “220 Demands”). All such books and records are expressly
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`incorporated into this Complaint. For the avoidance of doubt, this incorporation by reference does
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`not change the pleading standard applicable to any motion to dismiss that may be filed in this case.
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`I.
`
`NATURE OF THE ACTION
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`1.
`
`Novavax is a late-stage biotechnology company that seeks to discover, develop and
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`commercialize innovative vaccines to prevent serious infectious diseases and address urgent,
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`global health needs. When the Covid-19 pandemic began in March 2020, Novavax had 127
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`employees engaged primarily in research, development and manufacturing activities. The
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`1
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`Case 1:22-cv-01417-TDC Document 1 Filed 06/10/22 Page 5 of 58
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`Company was at risk of being delisted from the Nasdaq stock exchange as its stock traded under
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`$4 per share and had just enough cash to survive another six months.
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`2.
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`Although the Company had never successfully brought a vaccine to market in its
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`35 year history, the Company announced its intention to develop a Covid-19 vaccine on February
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`26, 2020. On March 10, 2020, Novavax received $4 million in funding from the Coalition for
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`Epidemic Preparedness Innovations, a global partnership among organizations to accelerate the
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`development of vaccines for emerging infectious diseases.
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`3.
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`Following this initial round of funding, Defendants lobbied for additional grants
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`from government and private organizations. In mid-April 2020, and again in June 2020, when it
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`believed additional funding was imminent, the Board granted over $70 million in equity
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`compensation to the Company’s senior executives “in recognition of the extraordinary work of
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`Novavax employees to implement a new vaccine program against SARS-CoV-2 and to incentivize
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`the additional work necessary to make the program successful.”
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`4.
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`In July 2020, Novavax announced that it was selected to participate in Operation
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`Warp Speed (“OWS”) and would likely receive over $1 billion in additional funds to support
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`development of its Covid-19 vaccine. Thereafter, Defendants told shareholders that the Company
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`was ramping up development and production of its vaccine candidate.
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`5.
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`Having sold its own manufacturing facilities in 2019 to alleviate its cash crunch,
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`beginning on July 23, 2020, Novavax announced that it had entered into agreements with contract
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`development manufacturing organizations (“CDMOs”) through which third-parties would
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`manufacture the Company’s vaccine.
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`2
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`Case 1:22-cv-01417-TDC Document 1 Filed 06/10/22 Page 6 of 58
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`6.
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`Unknown to the public, beginning in approximately March 2021, the U.S. Food
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`and Drug Administration (“FDA”) identified a wide array of problems at the manufacturing
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`facilities used by Novavax.
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`7.
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`Defendants, however, continued to issue positive disclosures about the Company’s
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`efforts to develop its vaccine and obtain FDA approval. These disclosures caused Novavax stock
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`to leap from approximately $19 per share in April 2020 to over $200 per share for most of 2021.
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`8.
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`While Defendants were issuing this string of positive disclosures, and while the
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`FDA’s communications about manufacturing problems were being concealed, the Board sought
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`and obtained shareholder ratification of the April and June 2020 equity awards on the basis that
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`the windfall was “appropriate not only due to the achievement of critical milestones under
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`exceedingly difficult conditions, but also because it serves to continue to encourage their
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`extraordinary efforts towards the achievement of our key priorities and anticipated milestones in
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`2021.”
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`9.
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`The truth was revealed on October 19, 2021, when a Politico article revealed that
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`Novavax “faces significant hurdles in proving it can manufacture a shot that meets regulators’
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`quality standards,” such that the timeline for approval was still a year away. Politico reported that
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`the Company’s production problems include “test[ing] the purity of the vaccine [with methods
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`that] have fallen short of regulators’ standards” and “prov[ing] that it can produce a shot that is
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`consistently up to snuff.”1 For example, though it is “generally understood that each vaccine batch
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`should reach at least 90 percent [purity],” Novavax “has struggled to attain anywhere close to that”
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`and has shown “purity levels hovering around 70 percent.” The article reported that U.S. officials
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`lacked confidence in Novavax because its “manufacturing problems are seen as far more difficult”
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`1 Id.
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`3
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`Case 1:22-cv-01417-TDC Document 1 Filed 06/10/22 Page 7 of 58
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`than the “sanitary and design concerns” affecting another COVID-19 manufacturer, Emergent
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`BioSolutions, Inc. In fact, when Novavax was awarded the OWS contract, U.S. officials had
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`“repeatedly warned the [C]ompany that it risked running into problems in scaling up the
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`manufacturing of the shot,” and specifically “that Novavax would have difficulty ensuring that the
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`vaccine consistently met the FDA’s rigorous quality standards once the vaccine went into mass
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`production – the exact problem that has now stymied the company for months.”
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`10.
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`Deepening the crisis at Novavax, while their positive disclosures were causing the
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`Company’s stock price to increase ten-fold, Defendants sold enormous amounts of stock at
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`artificially inflated prices. Between the FDA’s initial communications regarding manufacturing
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`problems in March 2021 and October 2021, insiders sold nearly $90 million in Novavax stock at
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`prices far in excess of the Company’s stock price today. From a high of $248 per share in late
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`September 2021, Novavax stock plummeted to a current price of under $50 per share, erasing
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`billions of dollars in market capitalization.
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`11.
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`These revelations precipitated the filing of a securities class action in this District
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`against Novavax and certain of the defendants named herein, captioned Sinnathurai v. Novavax,
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`Inc., et al., Case No. 8:21-cv-02910 (the “Securities Fraud Class Action”).
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`12.
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`Plaintiffs served their 220 Demands upon the Company on December 30, 2021
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`(plaintiff Rosati) and January 28, 2022 (plaintiff Blackburn), both seeking to inspect Board
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`documents related to director and management knowledge and/or oversight of the Company’s
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`compliance with manufacturing protocols and knowledge of material non-public information
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`(“MNPI”) concerning the same, including their relation to regulatory approval of Novavax’s
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`COVID-19 vaccine candidate. Following negotiations and entry into a confidentiality agreement,
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`the Company produced over 2,300 pages of internal documents.
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`4
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`Case 1:22-cv-01417-TDC Document 1 Filed 06/10/22 Page 8 of 58
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`13.
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`Also on May 20, 2022, Plaintiff’s counsel submitted a FOIA request to the FDA
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`requesting correspondence, inspection reports, complaints, and/or regulatory action taken by the
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`FDA as to Novavax or FUJIFILM Disoynth Biotechnologies regarding manufacturing deficiencies
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`at its College Station, Texas and/or Morrisville, North Carolina facilities. The FDA thereafter
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`produced approximately 130 pages of responsive materials.
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`14.
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`Due to the information produced in response to the 220 Demands and the FOIA
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`request, Plaintiffs did not make a litigation demand prior to filing suit because making a demand
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`would be a futile and useless act.
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`15.
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`At least half of the Company’s current Board could not give disinterested and
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`independent consideration to a litigation demand because four of the eight current directors
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`engaged in insider trading on the basis of MNPI in breach of their duty of loyalty and were thus
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`unjustly enriched; because at least four of the eight current directors knew or if exercised their
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`duty of loyalty would have known of the grossly deficient manufacturing controls and procedures,
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`yet allowed misleading statements to be disseminated; because the entire Board failed to oversee
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`manufacturing controls and compliance with current good manufacturing practices (“cGMPs”);
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`and because the entire Board sought and obtained shareholder ratification of the April 2020 equity
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`awards on the basis that they were justified due to Defendants’ efforts to develop the vaccine,
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`while concealing the extensive manufacturing problems that undermined their entitlement to the
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`awards. As a result, a majority of the Board is unable to impartially consider whether to bring the
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`claims asserted in this action.
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`II.
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`JURISDICTION AND VENUE
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`16.
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`The Court has jurisdiction over this action pursuant to 28 U.S.C. § 1331 because
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`this Complaint involves a federal question, namely violations of Section 14(a) of the Exchange
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`Act. Pursuant to 28 U.S.C. § 1367(a), the Court has supplemental jurisdiction over the state law
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`5
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`Case 1:22-cv-01417-TDC Document 1 Filed 06/10/22 Page 9 of 58
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`claims asserted herein. This is not a collusive action to confer jurisdiction upon a court of the
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`United States which it would not otherwise have.
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`17.
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`Venue is proper in this District pursuant to 28 U.S.C. §§ 1391 and 1401 because a
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`substantial portion of the transactions and wrongs complained of herein occurred in this District,
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`and the Defendants have received substantial compensation in this District by engaging in
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`numerous activities that had an effect in this District.
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`III.
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`PARTIES
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`Plaintiffs
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`18.
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`Plaintiff Charles R. Blackburn purchased shares of Novavax stock in October 2017
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`and has continuously owned his Novavax stock since that date.
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`19.
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`Plaintiff Michele Rosati purchased shares of Novavax stock in 2020 and has
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`continuously owned her Novavax stock since that date.
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`Nominal Defendant
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`20.
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`Nominal Defendant Novavax is a Delaware corporation with its principal executive
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`offices in Gaithersburg, Maryland. The Company’s common stock trades on the Nasdaq under the
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`symbol “NVAX.”
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`Defendants
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`21.
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`Defendant Stanley C. Erck (“Erck”) has served as Chief Executive Officer
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`(“CEO”), President, and a director of the Company since 2009. He is named as a defendant in the
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`Securities Fraud Class Action. Erck received $2,771,685 in total compensation from the Company
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`for the fiscal year ended December 31, 2017; $4,158,398 in total compensation from the Company
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`for the fiscal year ended December 31, 2018; $2,438,562 in total compensation from the Company
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`for the fiscal year ended December 31, 2019; and $48,086,018 in total compensation from the
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`6
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`Case 1:22-cv-01417-TDC Document 1 Filed 06/10/22 Page 10 of 58
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`Company for the fiscal year ended December 31, 2020. Between 2017 and 2020, Erck’s publicly
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`reported income from sources other than the Company was approximately $350,000.
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`22.
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`Defendant Gregory F. Covino (“Covino”) served as Chief Financial Officer
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`(“CFO”), Treasurer, and an Executive Vice President (“EVP”) of the Company from November
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`16, 2020 to April 12, 2021. He is named as a defendant in the Securities Fraud Class Action.
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`23.
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`Defendant John J. Trizzino (“Trizzino”) has served as the Company’s Chief
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`Business Officer since March 2018, Chief Commercial Officer since November 2020, and an EVP
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`of the Company since June 2020. He served as Interim CFO from April 12, 2021 to August 16,
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`2021. He is named as a defendant in the Securities Fraud Class Action.
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`24.
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`Defendant Gregory M. Glenn (“Glenn”) has served as the Company’s President,
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`Research and Development since March 2016. He is named as a defendant in the Securities Fraud
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`Class Action.
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`25.
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`John A. Herrmann III (“Herrmann”) has served as EVP and Chief Legal Officer
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`since June 2020 and Corporate Secretary since April 2010. He served as Senior Vice President
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`from June 2014 until June 2020, as General Counsel from March 2012 until June 2020, and as
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`Executive Director, Legal Affairs from April 2010 until March 2012.
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`26.
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`Defendant Gregg H. Alton (“Alton”) has served as a director of Novavax since
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`November 2020.
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`27.
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`Defendant Richard H. Douglas (“Douglas”) has served as a director of Novavax
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`since 2010. He is a member of the Board’s Research and Development Committee (the “R&D
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`Committee”).
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`28.
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`Defendant Margaret G. McGlynn (“McGlynn”) has served as a director of Novavax
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`since December 2020.
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`7
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`Case 1:22-cv-01417-TDC Document 1 Filed 06/10/22 Page 11 of 58
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`29.
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`Defendant David M. Mott (“Mott”) has served as a director of Novavax since June
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`2020. He is a member of the R&D Committee. Mott received $727,332 in total compensation from
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`the Company for the fiscal year ended December 31, 2020.
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`30.
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`31.
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`Defendant Rachel K. King (“King”) has served as a director of Novavax since 2018.
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`Defendant Michael A. McManus, Jr. (“McManus”) has served as a director of
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`Novavax since 1998. McManus received $246,512 in total compensation from the Company for
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`the fiscal year ended December 31, 2017; $241,678 in total compensation from the Company for
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`the fiscal year ended December 31, 2018; $134,296 in total compensation from the Company for
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`the fiscal year ended December 31, 2019; and $876,252 in total compensation from the Company
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`for the fiscal year ended December 31, 2020. McManus’s compensation from the Company
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`comprised substantially all of his publicly reported income for 2020.
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`32.
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`Defendant James F. Young (“Young”) has served as a director of Novavax since
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`2010 and as Chairman of the Board since 2011. He is the Chair of the R&D Committee. Young
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`received $533,780 in total compensation from the Company for the fiscal year ended December
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`31, 2017; $471,715 in total compensation from the Company for the fiscal year ended December
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`31, 2018; $223,741 in total compensation from the Company for the fiscal year ended December
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`31, 2019; and $4,387,708 in total compensation from the Company for the fiscal year ended
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`December 31, 2020. His compensation from the Company accounts for substantially all of his
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`publicly reported income.
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`33.
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`Defendant Gary C. Evans (“Evans”) served as a director of Novavax from 1998 to
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`June 2021.
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`8
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`Case 1:22-cv-01417-TDC Document 1 Filed 06/10/22 Page 12 of 58
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`34.
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`Defendants Erck, Covino, Trizzino, Glenn, Herrmann, Alton, Douglas, McGlynn,
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`Mott, King, McManus, Young, and Evans are sometimes referred to hereinafter as the “Individual
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`Defendants.”
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`IV.
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`THE DUTIES OF THE INDIVIDUAL DEFENDANTS
`
`A.
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`35.
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`Fiduciary Duties
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`By reason of their positions as officers, directors, and/or fiduciaries of Novavax
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`and because of their ability to control the business and corporate affairs of Novavax, at all relevant
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`times, the Individual Defendants owed Novavax and its stockholders fiduciary obligations of good
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`faith, loyalty, and candor, and were required to use their utmost ability to control and manage
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`Novavax in a fair, just, honest, and equitable manner. The Individual Defendants were required to
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`act in furtherance of the best interests of Novavax and its stockholders so as to benefit all
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`stockholders equally and not in furtherance of their own personal interest or benefit. Each director
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`and officer of the Company owes to Novavax and its stockholders a fiduciary duty to exercise
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`good faith and diligence in the administration of the affairs of the Company and in the use and
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`preservation of its property and assets, and the highest obligations of fair dealing.
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`36.
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`Because of their positions of control and authority as directors and/or officers of
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`Novavax, the Individual Defendants were able to and did, directly and/or indirectly, exercise
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`control over the wrongful acts complained of herein. Because of their advisory, executive,
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`managerial, and directorial positions with Novavax, each of the Individual Defendants had
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`knowledge of material non-public information regarding the Company.
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`37.
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`To discharge their duties, the officers and directors of Novavax were required to
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`exercise reasonable and prudent supervision over the management, policies, practices and controls
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`of the Company. By virtue of such duties, the officers and directors of Novavax were required to,
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`among other things:
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`9
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`Case 1:22-cv-01417-TDC Document 1 Filed 06/10/22 Page 13 of 58
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`(a)
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`(b)
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`(c)
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`Exercise good faith to ensure that the affairs of the Company were
`conducted in an efficient, business-like manner so as to make it possible to
`provide the highest quality performance of their business;
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`Exercise good faith to ensure that the Company was operated in a diligent,
`honest, and prudent manner and complied with all applicable federal and
`state laws, rules, regulations and requirements, and all contractual
`obligations, including acting only within the scope of its legal authority;
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`Exercise good faith to ensure that the Company’s communications with the
`public and with stockholders are made with due candor in a timely and
`complete fashion; and
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`(d) When put on notice of problems with the Company’s business practices and
`operations, exercise good faith in taking appropriate action to correct the
`misconduct and prevent its recurrence.
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`The Board Committee Charters
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`At all relevant times, the Board had four standing committees: (i) the Audit
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`B.
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`38.
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`Committee; (ii) the Compensation Committee; (iii) the Nominating & Corporate Governance
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`Committee, and (iv) the Research & Development Committee.
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`39.
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`The Audit Committee is tasked to assist the Board with overseeing: (i) “the
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`Company’s accounting and financial reporting processes;” (ii) “the preparation, presentation and
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`integrity of the financial reports and other financial information provided by the Company to any
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`government or regulatory body, the public or other users thereof;” (iii) “the adequacy and efficacy
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`of the Company’s systems of internal accounting, auditing and financial controls, the Company’s
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`compliance with legal and regulatory requirements;” (iv) “the conduct, independence and
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`qualifications of the Company’s independent auditor;” (v) “the performance of the annual
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`independent audit of the Company’s financial statements;” (vi) “the Company’s compliance with
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`applicable federal and state laws and regulations;” and (vii) “the implementation and operation of
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`10
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`Case 1:22-cv-01417-TDC Document 1 Filed 06/10/22 Page 14 of 58
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`the Company’s corporate compliance program.”2The words “manufacturing,” “safety,” “CDMO”
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`or “cGMPs” do not appear in the Audit Committee Charter. The word “quality” appears in the
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`Audit Committee Charter only in the context of evaluating the Company’s principal auditors and
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`not in the context of the Company’s products.
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`40.
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`The Compensation Committee is tasked with assisting the Board “with its
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`responsibilities relating to compensation of the Company’s officers and directors and the
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`development, administration, and oversight of the Company’s compensation and benefits plans.”3
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`The words “manufacturing,” “quality,” “safety,” “CDMO,” or “cGMPs” do not appear in the
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`Compensation Committee Charter.
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`41.
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`The Nominating & Corporate Governance Committee is tasked with assisting the
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`Board with its oversight responsibilities by: (i) “reviewing and making recommendations to the
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`Board regarding the Board’s size, structure and composition; establishing criteria for Board
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`membership;” (ii) “identifying and evaluating candidates qualified to become members of the
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`Board, including candidates proposed by stockholders;” (iii) “recommending to the Board for
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`selection of director nominees to be presented for approval at the annual meeting of
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`stockholders and to fill vacancies on the Board;” (iv) “considering the qualifications, tenure, and
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`performance of incumbent members of the Board in determining whether to recommend that
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`they be nominated for reelection;” (v) “evaluating Company policies relating to the recruitment of
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`Board members; (vi) “developing and recommending to the Board corporate governance policies
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`and practices applicable to the Company; (vii) “overseeing policies and practices with respect to
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`2 See Novavax Fifth Amended and Restated Audit Committee Charter (the “Audit Committee
`Charter”), https://novavax.widen.net/s/l55pc2vqpx/audit_committee_charter_20210916.
`3 See Novavax Seventh Amended and Restated Compensation Committee Charter (the
`“Compensation Committee Charter”),
`https://novavax.widen.net/s/t6mhrp96wq/compensation_committee_charter_20211209
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`Case 1:22-cv-01417-TDC Document 1 Filed 06/10/22 Page 15 of 58
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`corporate social responsibility and environmental sustainability applicable to the Company;” and
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`(viii) “overseeing management’s plans for succession to senior management positions in the
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`Company.”4 The words “manufacturing,” “quality,” “safety,” “CDMO,” or “cGMPs” do not
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`appear in the Compensation Committee Charter.
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`42.
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`The R&D Committee’s “primary purpose” is to assist the Board “in reviewing and
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`assessing the Company’s research and development (‘R&D’) programs, and overseeing the
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`Company’s strategy and investment in R&D programs, and to perform such other functions as may
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`be deemed necessary or appropriate in carrying out the foregoing.”5 The R&D Committee Charter
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`charges the R&D Committee with the following specific responsibilities:6
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`1.
`Review and assess the Company’s R&D programs, with the
`Committee Chair playing a day-to-day role providing input on key aspects
`of such R&D programs;
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`Evaluate the Company’s progress in achieving R&D goals and
`2.
`objectives, and make recommendations to the Board on modifications to the
`Company’s R&D goals and objectives;
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`3.
`Advise the Board on the scientific and R&D aspects of licensing,
`strategic partnerships, and acquisition or divestiture transactions;
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`Review and assess the Company’s intellectual property portfolio
`4.
`and strategy;
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`5.
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`Review the Company’s regulatory efforts and strategy;
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`4 See Novavax Fifth Amended and Restated Nominating and Corporate Governance Committee
`Charter
`(the
`“Nominating &
`Corporate Governance
`Committee
`Charter”),
`https://novavax.widen.net/s/kzkjssfttq/nominating_and_corporate_governance_committee_charte
`r 20211209.
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` 5
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` See Novavax Research and Development Committee Charter (the “R&D Committee Charter”),
`https://novavax.widen.net/s/xhr5zwxgqm/research_and_development_committee_charter_20201
`214.
`6 Id. Unless otherwise stated, all emphasis in bold and italics hereinafter is added.
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`Case 1:22-cv-01417-TDC Document 1 Filed 06/10/22 Page 16 of 58
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`6.
`Oversight of management’s exercise of its responsibility to assess
`and manage risks associated with the Company’s R&D programs and
`regulatory matters;
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`Identify and report to the Board on significant emerging science and
`7.
`technology issues and trends that may impact the Company;
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`Serve as a resource for management to consult on any such topics
`8.
`regarding scientific and regulatory matters as reasonably requested; and
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`Select, retain, and supervise any advisors as the Committee deems
`9.
`necessary, in its discretion, to fulfill its mandates under this Charter, and
`compensate, at the expense of the Company, such advisors.
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`43.
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`Nevertheless, the R&D Committee Charter does not contain the words
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`“manufacturing,” “quality,” “safety,” “CDMO,” or “cGMPs” Accordingly, not one of the
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`Company’s four Board committees is directly charged with assisting the Board in overseeing the
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`Company’s manufacturing organization and operations; its compliance with cGMPs (i.e., Current
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`Good Manufacturing Practices); quality or safety assurance; or the use of CDMOs.
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`V.
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`SUBSTANTIVE ALLEGATIONS
`
`A.
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`44.
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`Background
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`Novavax is a late-stage biotechnology company that seeks to promote “improved
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`global health through the discovery, development and commercialization of innovative vaccines
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`to prevent serious infectious diseases and address urgent, global health needs.”7
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`45.
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`In the past, the Company has attempted to develop vaccines for HIV, SARS, swine
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`flu, and the Ebola virus, but each candidate either failed in testing or became obsolete as the
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`epidemics ebbed.
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`46.
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`Amid substantial doubt about the Company’s ability to continue as a going concern,
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`Novavax sold its manufacturing facilities for approximately $18 million in mid-2019 to stem its
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`7 Novavax, Inc., Annual Report (Form 10-K) (Mar. 1, 2021) at 5.
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`Case 1:22-cv-01417-TDC Document 1 Filed 06/10/22 Page 17 of 58
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`financial losses. As a result of the transactions and related attrition, the Company reduced its
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`headcount by more than 200 employees.
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`47.
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`As of March 2020, Novavax had 127 employees engaged primarily in research,
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`development and manufacturing activities. The Company was at risk of being delisted from the
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`Nasdaq stock exchange as its stock traded under $4 per share and had just enough cash to survive
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`another six months.
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`1.
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`Covid-19 Gives the Company a Lifeline
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`48.
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`In late 2019 and early 2020, a novel respiratory coronavirus – Covid-19 – sparked
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`a once-a-century global pandemic.
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`49.
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`Although the Company had never successfully brought a vaccine to market in its
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`35 year history, the Company announced its intention to develop a Covid-19 vaccine on February
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`26, 2020.
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`50.
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`On March 10, 2020, Novavax received $4 million in funding from the Coalition for
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`Epidemic Preparedness Innovations, a global partnership among organizations to accelerate the
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`development of vaccines for emerging infectious diseases.
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`51.
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`On April 8, 2020, Novavax announced that it would initiate a first-in-human trial
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`in mid-May for its coronavirus vaccine candidate, NVX-CoV2373, a stable, prefusion protein
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`created using the Company’s proprietary technology.
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`52.
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`The development and success of NVX-CoV2373 was critical for the Company. As
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`one analyst noted, “the future financial success of [Novavax] and its ability to record a positive
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`bottom-line result is highly dependent on successful approvals and rapid commercialization of its
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`Covid-19 vaccine.”
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`53.
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`Unbeknownst to shareholders, as of early April 2020, the Novavax’s executives
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`were pressuring government officials to secure financing