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`Case 8:22-cv-01415-PX Document 1 Filed 06/10/22 Page 1 of 48
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`
`
`UNITED STATES DISTRICT COURT
`FOR THE DISTRICT OF MARYLAND
`(Southern Division)
`
`
`AMY SNYDER, Derivatively on Behalf of
`NOVAVAX, INC.,
`2632 Tunlaw Road NW #107
`Washington, D.C. 20007
`
`
`
`
`Case No.:
`
`FILED UNDER SEAL
`
`DEMAND FOR JURY TRIAL
`
`Plaintiff,
`
`
`v.
`
`STANLEY C. ERCK
`21 Firstfield Road
`Gaithersburg, MD 20878
`
`
`JOHN J. TRIZZINO
`21 Firstfield Road
`Gaithersburg, MD 20878
`
`
`GREGORY M. GLENN
`21 Firstfield Road
`Gaithersburg, MD 20878
`
`
`JOHN A. HERRMANN III
`21 Firstfield Road
`Gaithersburg, MD 20878
`
`
`GREGG H. ALTON
`21 Firstfield Road
`Gaithersburg, MD 20878
`
`
`RICHARD H. DOUGLAS
`21 Firstfield Road
`Gaithersburg, MD 20878
`
`
`MARGARET G. MCGLYNN
`21 Firstfield Road
`Gaithersburg, MD 20878
`
`
`DAVID M. MOTT
`21 Firstfield Road
`Gaithersburg, MD 20878
`
`
`
`
`
`
`
`
`

`

`
`
`Case 8:22-cv-01415-PX Document 1 Filed 06/10/22 Page 2 of 48
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`
`
`
`RACHEL K. KING
`21 Firstfield Road
`Gaithersburg, MD 20878
`
`
`MICHAEL A. MCMANUS, JR.
`21 Firstfield Road
`Gaithersburg, MD 20878
`
`
`JAMES F. YOUNG
`21 Firstfield Road
`Gaithersburg, MD 20878
`
`
`GARY C. EVANS
`5128 Horseshoe Trail
`Dallas, TX 75209
`
`
`
`Defendants,
`
`
`and
`
`NOVAVAX, INC.
`21 Firstfield Road
`Gaithersburg, MD 20878
`
`
`
`Nominal Defendant
`
`
`VERIFIED STOCKHOLDER DERIVATIVE COMPLAINT
`
`Plaintiff Amy Snyder (“Plaintiff”), by and through her undersigned attorneys, brings this
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`stockholder derivative complaint for the benefit of Nominal Defendant, Novavax Inc. (“Novavax”
`
`or the “Company”), against its current and a former member of its Board of Directors (the
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`“Board”) to remedy their breaches of fiduciary duties for insider trading (Brophy claim), failing
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`to adequately oversee the Company’s mission-critical compliance with manufacturing safety
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`regulations (Caremark claim), and unjust enrichment. Plaintiff’s allegations are based upon her
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`personal knowledge as to herself and her own acts, and upon information and belief, developed
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`from the investigation and analysis by Plaintiff’s 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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`
`
`2
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`

`

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`Case 8:22-cv-01415-PX Document 1 Filed 06/10/22 Page 3 of 48
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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, and books and records produced in
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`response to Plaintiff’s books and records demand pursuant to 8 Del. C. § 220 (the “220 Demand”).
`
`All such books and records are expressly incorporated into this Complaint. For the avoidance of
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`doubt, this incorporation by reference does not change the pleading standard applicable to any
`
`motion to dismiss that may be filed in this case.
`
`I.
`
`NATURE OF THE ACTION
`
`1.
`
`Plaintiff brings this stockholder derivative action on behalf of Novavax against the
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`Company’s directors and certain of its current and former executive officers for wrongfully selling
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`the Company’s stock based on adverse material non-public information (“MNPI”). The Board
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`also failed to adequately oversee the Company’s mission-critical compliance with manufacturing
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`safety regulations and protocols. This misconduct has damaged the Company and gives rise to
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`claims for breach of fiduciary duty and unjust enrichment.
`
`2.
`
`Novavax purports to be a late-stage biotechnology company that promotes global
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`health through the discovery, development, and commercialization of innovative vaccines to
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`prevent serious infectious diseases. The Company’s product candidates include, among others,
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`NVX-CoV2373, which is in development as a vaccine for COVID-19. Novavax planned to
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`complete Emergency Use Authorization (“EUA”) submissions for NVX-CoV2373 with the U.S.
`
`Food and Drug Administration (“FDA”) in the second quarter of 2021.
`
`3.
`
`During 2021, directors and certain executive officers of the Company made
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`materially false and misleading statements regarding NVX-CoV2373’s development while selling
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`Novavax stock at artificially inflated prices. Defendants kept the Company’s stock price inflated
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`by materially misleading the public about when the Company actually planned to complete EUA
`
`submission and the true reasons for the delays in completing EUA submission.
`
`
`
`3
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`

`

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`Case 8:22-cv-01415-PX Document 1 Filed 06/10/22 Page 4 of 48
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`4.
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`Specifically, Defendants misled investors about the vaccine’s purported successful
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`development, production, and imminent FDA approval. In reality, Novavax’s vaccine was
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`nowhere close to being approved for use: (a) because the vaccine’s purity and potency numbers
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`fell well below FDA safety requirements as a result of severe manufacturing problems; (b) because
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`of the failure to manufacture the vaccine at scale; and (c) because of supply chain disruptions—all
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`of which caused significant delays that jeopardized any chance Novavax had to capitalize on the
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`market for COVID-19 vaccines.
`
`5.
`
`Contract development manufacturing organizations (“CDMOs”) are companies
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`that provide drug development and drug manufacturing services in the pharmaceutical industry on
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`a contract basis. The Company uses CDMOs to assist in manufacturing NVX-CoV2373. The
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`Company is responsible for the conditions of the CDMOs’ facilities. The Board failed to
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`adequately oversee the Company’s mission-critical compliance with manufacturing safety
`
`regulations at its CDMOs’ facilities.
`
`6.
`
`The Board’s failures were not fully revealed until October 19, 2021, when Politico
`
`published an article entitled ‘They rushed the process’: Vaccine maker’s woes hamper global
`
`inoculation campaign.1 The Politico article cited sources stating that Novavax’s “issues are more
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`concerning than previously understood” and that the Company could take until the end of 2022 to
`
`resolve its manufacturing issues and win regulatory authorizations and approvals.
`
`
`1 Sarah Owermohle, Erin Banco and Adam Cancryn, ‘They rushed the process’: Vaccine
`maker’s woes hamper global inoculation campaign, Politico (Oct. 19, 2021),
`https://www.politico.com/news/2021/10/19/novavax-vaccine-rush-process-global-campaign-
`516298.
`
`
`
`4
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`

`

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`Case 8:22-cv-01415-PX Document 1 Filed 06/10/22 Page 5 of 48
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`7.
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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,
`
`Inc., et al., Case No. 8:21-cv-02910 (the “Securities Fraud Class Action”).
`
`8.
`
`On March 4, 2022, Plaintiff served her 220 Demand on the Company seeking to
`
`inspect the Company’s books and records related to Board and management knowledge and/or
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`oversight of the Company’s compliance with manufacturing protocols and their knowledge of
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`MNPI concerning the same, including their relation to regulatory approval of Novavax’s COVID-
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`19 vaccine candidate, NVX-CoV2373. Following negotiations and entry into a confidentiality
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`agreement, the Company produced over 2,300 pages of internal documents.
`
`9.
`
`Premised on the information produced in response to the 220 Demand, Plaintiff
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`did not make a litigation demand prior to filing suit because making a demand would be a futile
`
`and useless act.
`
`10.
`
`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
`
`engaged in insider trading on the basis of MNPI in breach of their duty of loyalty and were thus
`
`unjustly enriched; because at least four of the eight current directors knew or should have known
`
`of the grossly deficient manufacturing controls and procedures, yet allowed misleading statements
`
`to be disseminated; and because the entire Board failed to oversee manufacturing controls and
`
`compliance with current Good Manufacturing Practices (“cGMPs”). As a result, at least half of
`
`the Board is unable to impartially consider whether to bring the claims asserted in this action.
`
`II.
`
`JURISDICTION AND VENUE
`
`11.
`
`The Court has subject matter jurisdiction pursuant to 28 U.S.C. § 1332 because the
`
`matter in controversy exceeds the sum of $75,000 and there is complete diversity of citizenship
`
`between Plaintiff and all of the Defendants.
`
`
`
`5
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`

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`Case 8:22-cv-01415-PX Document 1 Filed 06/10/22 Page 6 of 48
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`
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`12.
`
`This derivative action is not a collusive action to confer jurisdiction on a court of
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`the United States that would not otherwise have such jurisdiction.
`
`13.
`
`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,
`
`the Company’s principal place of business is in this District, and the Defendants have received
`
`substantial compensation in this District by engaging in numerous activities that had an effect in
`
`this District.
`
`III.
`
`PARTIES
`
`Plaintiff
`
`14.
`
`Plaintiff Amy Snyder purchased shares of Novavax stock on July 20, 2020 and has
`
`continuously owned her Novavax stock since that date. She is a citizen of Washington, D.C.
`
`Nominal Defendant
`
`15.
`
`Nominal Defendant Novavax is a Delaware corporation with its principal executive
`
`offices in Gaithersburg, Maryland. The Company’s common stock trades on the Nasdaq under the
`
`symbol “NVAX.” The Company is a citizen of Delaware and Maryland
`
`Defendants
`
`16.
`
`Defendant Stanley C. Erck (“Erck”) has served as Chief Executive Officer
`
`(“CEO”) and President since 2011 and as a director of the Company since 2009. He is named as
`
`a defendant in the Securities Fraud Class Action. Erck received $2,771,685 in total compensation
`
`from the Company for the fiscal year ended December 31, 2017; $4,158,398 in total compensation
`
`from the Company for the fiscal year ended December 31, 2018; $2,438,562 in total compensation
`
`from the Company for the fiscal year ended December 31, 2019; and $48,086,018 in total
`
`compensation from the Company for the fiscal year ended December 31, 2020. Between 2017 and
`
`
`
`6
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`

`

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`Case 8:22-cv-01415-PX Document 1 Filed 06/10/22 Page 7 of 48
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`
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`2020, Erck’s publicly reported income from sources other than the Company was approximately
`
`$350,000. Erck is a citizen of South Carolina.
`
`17.
`
`Defendant John J. Trizzino (“Trizzino”) has served as the Company’s Chief
`
`Business Officer since March 2018, Chief Commercial Officer since November 2020, and an
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`Executive Vice President of the Company since June 2020. He served as Interim CFO from April
`
`12, 2021 to August 16, 2021. He is named as a defendant in the Securities Fraud Class Action.
`
`Trizzino is a citizen of Massachusetts.
`
`18.
`
`Defendant Gregory M. Glenn (“Glenn”) has served as the Company’s President,
`
`Research and Development since March 2016. He is named as a defendant in the Securities Fraud
`
`Class Action. Glenn is a citizen of Maryland.
`
`19.
`
`Defendant John A. Herrmann III (“Hermann”) has served as Executive Vice
`
`President and Chief Legal Officer since June 2020 and Corporate Secretary since April 2010. He
`
`served as Senior Vice President from June 2014 until June 2020, as General Counsel from March
`
`2012 until June 2020, and as Executive Director, Legal Affairs from April 2010 until March 2012.
`
`Hermann is a citizen of Maryland.
`
`20.
`
`Defendant Gregg H. Alton (“Alton”) has served as a director of Novavax since
`
`November 2020. Alton is a citizen of California.
`
`21.
`
`Defendant Richard H. Douglas (“Douglas”) has served as a director of Novavax
`
`since 2010. He is a member of the Board’s Research and Development Committee (the “R&D
`
`Committee”). Douglas is a citizen of Florida.
`
`22.
`
`Defendant Margaret G. McGlynn (“McGlynn”) has served as a director of
`
`Novavax since December 2020. McGlynn is a citizen of Pennsylvania.
`
`
`
`7
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`

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`Case 8:22-cv-01415-PX Document 1 Filed 06/10/22 Page 8 of 48
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`23.
`
`Defendant David M. Mott (“Mott”) has served as a director of Novavax since June
`
`2020. He is a member of the R&D Committee. Mott received $727,332 in total compensation from
`
`the Company for the fiscal year ended December 31, 2020. Mott is a citizen of Maryland.
`
`24.
`
`Defendant Rachel K. King (“King”) has served as a director of Novavax since
`
`2018. King is a citizen of Maryland.
`
`25.
`
`Defendant Michael A. McManus, Jr. (“McManus”) has served as a director of
`
`Novavax since 1998. McManus received $246,512 in total compensation from the Company for
`
`the fiscal year ended December 31, 2017; $241,678 in total compensation from the Company for
`
`the fiscal year ended December 31, 2018; $134,296 in total compensation from the Company for
`
`the fiscal year ended December 31, 2019; and $876,252 in total compensation from the Company
`
`for the fiscal year ended December 31, 2020. McManus’s compensation from the Company
`
`comprised substantially all of his publicly reported income for 2020. McManus is a citizen of New
`
`York.
`
`26.
`
`Defendant James F. Young (“Young”) has served as a director of Novavax since
`
`2010 and as Chairman of the Board since 2011. He is the Chair of the R&D Committee. Young
`
`received $533,780 in total compensation from the Company for the fiscal year ended December
`
`31, 2017; $471,715 in total compensation from the Company for the fiscal year ended December
`
`31, 2018; $223,741 in total compensation from the Company for the fiscal year ended December
`
`31, 2019; and $4,387,708 in total compensation from the Company for the fiscal year ended
`
`December 31, 2020. His compensation from the Company accounts for substantially all of his
`
`publicly reported income. Young is a citizen of Maryland.
`
`27.
`
`Defendant Gary C. Evans (“Evans”) served as a director of Novavax from 1998 to
`
`June 2021. Evans is a citizen of Texas.
`
`
`
`8
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`

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`Case 8:22-cv-01415-PX Document 1 Filed 06/10/22 Page 9 of 48
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`
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`28.
`
`Defendants Erck, Trizzino, Glenn, Herrmann, Alton, Douglas, McGlynn, Mott,
`
`King, McManus, Young, and Evans are sometimes referred to hereinafter as the “Defendants.”
`
`IV.
`
`THE DUTIES OF THE DEFENDANTS
`A.
`
`Fiduciary Duties
`
`29.
`
`By reason of their positions as directors, officers and/or fiduciaries of Novavax and
`
`because of their ability to control the business and corporate affairs of Novavax, at all relevant
`
`times, Defendants owed Novavax and its stockholders fiduciary obligations of good faith, loyalty,
`
`and candor, and were required to use their utmost ability to control and manage Novavax in a fair,
`
`just, honest, and equitable manner. Defendants were required to act in furtherance of the best
`
`interests of Novavax and its stockholders so as to benefit all stockholders equally and not in
`
`furtherance of their own personal interest or benefit. Each director and officer of the Company
`
`owes to Novavax and its stockholders fiduciary duties to exercise loyalty, good faith and diligence
`
`in the administration of the affairs of the Company and in the use and preservation of its property
`
`and assets, and the highest obligations of fair dealing.
`
`30.
`
`Because of their positions of control and authority as directors and/or officers of
`
`Novavax, Defendants were able to and did, directly and/or indirectly, exercise control over the
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`wrongful acts complained of herein. Because of their advisory, executive, managerial, and
`
`directorial positions with Novavax, each of the Defendants had knowledge of MNPI regarding the
`
`Company.
`
`31.
`
`To discharge their duties, Defendants were required to exercise reasonable and
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`prudent supervision over the management, policies, practices and controls of the Company. By
`
`virtue of such duties, Defendants were required to, among other things:
`
`(a)
`
`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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`9
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`Case 8:22-cv-01415-PX Document 1 Filed 06/10/22 Page 10 of 48
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`(b)
`
`(c)
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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;
`
`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
`
`(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.
`
`The Board Committee Charters
`
`At all relevant times, the Board had four standing committees: (i) the Audit
`
`B.
`
`32.
`
`Committee; (ii) the Compensation Committee; (iii) the Nominating & Corporate Governance
`
`Committee, and (iv) the R&D Committee.
`
`33.
`
`The Audit Committee is tasked to assist the Board with overseeing: (i) “the
`
`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
`
`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
`
`applicable federal and state laws and regulations;” and (vii) “the implementation and operation of
`
`the Company’s corporate compliance program.”2 The words “manufacturing,” “safety,” “CDMO”
`
`or “cGMPs” do not appear in the Audit Committee Charter. The word “quality” appears in the
`
`
`2 See Novavax Fifth Amended and Restated Audit Committee Charter (the “Audit Committee
`Charter”), https://novavax.widen.net/s/l55pc2vqpx/audit_committee_charter_20210916.
`
`
`
`10
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`Case 8:22-cv-01415-PX Document 1 Filed 06/10/22 Page 11 of 48
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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.
`
`34.
`
`The Compensation Committee is tasked with assisting the Board “with its
`
`responsibilities relating to compensation of the Company’s officers and directors and the
`
`development, administration, and oversight of the Company’s compensation and benefits plans.”3
`
`The words “manufacturing,” “quality,” “safety,” “CDMO,” or “cGMPs” do not appear in the
`
`Compensation Committee Charter.
`
`35.
`
`The Nominating & Corporate Governance Committee is tasked with assisting the
`
`Board with its oversight responsibilities by: (i) “reviewing and making recommendations to the
`
`Board regarding the Board’s size, structure and composition; establishing criteria for Board
`
`membership;” (ii) “identifying and evaluating candidates qualified to become members of the
`
`Board, including candidates proposed by stockholders;” (iii) “recommending to the Board for
`
`selection of director nominees to be presented for approval at the annual meeting of stockholders
`
`and to fill vacancies on the Board;” (iv) “considering the qualifications, tenure, and performance
`
`of incumbent members of the Board in determining whether to recommend that they be nominated
`
`for reelection;” (v) “evaluating Company policies relating to the recruitment of Board members;
`
`(vi) “developing and recommending to the Board corporate governance policies and practices
`
`applicable to the Company; (vii) “overseeing policies and practices with respect to corporate social
`
`responsibility and environmental sustainability applicable to the Company;” and (viii) “overseeing
`
`management’s plans for succession to senior management positions in the Company.”4 The words
`
`
`3 See Novavax Seventh Amended and Restated Compensation Committee Charter (the
`“Compensation Committee Charter”),
`https://novavax.widen.net/s/t6mhrp96wq/compensation_committee_charter_20211209
`4 See Novavax Fifth Amended and Restated Nominating and Corporate Governance Committee
`“Nominating & Corporate Governance Committee Charter”),
`Charter
`(the
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`
`
`11
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`Case 8:22-cv-01415-PX Document 1 Filed 06/10/22 Page 12 of 48
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`
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`“manufacturing,” “quality,” “safety,” “CDMO,” or “cGMPs” do not appear in the Compensation
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`Committee Charter.
`
`36.
`
`The R&D Committee’s “primary purpose” is to assist the Board “in reviewing and
`
`assessing the Company’s research and development (‘R&D’) programs, and overseeing the
`
`Company’s strategy and investment in R&D programs, and to perform such other functions as may
`
`be deemed necessary or appropriate in carrying out the foregoing.”5 The R&D Committee Charter
`
`charges the R&D Committee with the following specific responsibilities:6
`
`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;
`
`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;
`
`3.
`Advise the Board on the scientific and R&D aspects of licensing,
`strategic partnerships, and acquisition or divestiture transactions;
`
`Review and assess the Company’s intellectual property portfolio
`4.
`and strategy;
`
`5.
`
`Review the Company’s regulatory efforts and strategy;
`
`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;
`
`Identify and report to the Board on significant emerging science
`7.
`and technology issues and trends that may impact the Company;
`
`
`https://novavax.widen.net/s/kzkjssfttq/nominating_and_corporate_governance_committee_charte
`r_20211209.
`5 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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`12
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`Case 8:22-cv-01415-PX Document 1 Filed 06/10/22 Page 13 of 48
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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
`
`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.
`
`The R&D Committee Charter does not contain the words “manufacturing,” “quality,” “safety,”
`
`“CDMO,” or “cGMPs.”
`
`37.
`
`Accordingly, not one of the Company’s four Board committees is directly charged
`
`with assisting the Board in overseeing the Company’s manufacturing organization and operations;
`
`its compliance with cGMPs (i.e., Current Good Manufacturing Practices); quality or safety
`
`assurance; or the use of CDMOs.
`
`38.
`
`Exacerbating the lack of oversight, Novavax has been a public company for decades
`
`and has long described itself as a “biopharmaceutical company engaged in the research,
`
`development and commercialization” of pharmaceutical products, yet the Board did not establish
`
`the R&D Committee until December 2020.7 According to the Company’s proxy statement filed
`
`May 2, 2022, the R&D Committee had met only one time during 2021.
`
`V.
`
`SUBSTANTIVE ALLEGATIONS
`A.
`
`Background
`
`39.
`
`Novavax is a late-stage biotechnology company that purports to promote
`
`“improved global health through the discovery, development and commercialization of innovative
`
`vaccines to prevent serious infectious diseases and address urgent, global health needs.”8
`
`
`7 Novavax, Inc., Annual Report (Form 10-K) (Mar. 29, 2001) at 2.
`8 Novavax, Inc., Annual Report (Form 10-K) (Mar. 1, 2021) at 5.
`
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`13
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`Case 8:22-cv-01415-PX Document 1 Filed 06/10/22 Page 14 of 48
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`40.
`
`In the past, the Company has attempted to develop vaccines for HIV, SARS, swine
`
`flu, and the Ebola virus. Each candidate either failed in testing or became obsolete as the epidemics
`
`ebbed.
`
`41.
`
`Amid substantial doubt about the Company’s ability to continue as a going concern,
`
`Novavax sold its manufacturing facilities for approximately $18 million in mid-2019 to stem its
`
`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.
`
`42.
`
`As of March 2020, Novavax had only 127 employees engaged primarily in
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`research, development and manufacturing activities. The Company was at risk of being delisted
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`from the Nasdaq stock exchange as its stock traded under $4 per share and had barely enough cash
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`to survive another six months.
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`1.
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`COVID-19 Gives the Company a Lifeline
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`43.
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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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`44.
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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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`45.
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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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`46.
`
`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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`
`
`14
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`

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`Case 8:22-cv-01415-PX Document 1 Filed 06/10/22 Page 15 of 48
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`
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`47.
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`The development and success of NVX-CoV2373 was critical for the Company. As
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`one analyst, CFRA, noted, “the future financial success of [Novavax] and its ability to record a
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`positive bottom-line result
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`is highly dependent on successful approvals and rapid
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`commercialization of its COVID-19 vaccine.”
`
`2.
`
`The U.S. Government Gives the Company Over $1.6 Billion to Develop
`its Vaccine Candidate
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`48.
`
`On June 4, 2020, Novavax announced that it was awarded up to $60 million by the
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`U.S. Department of Defense (“DoD”) for the production of “several components” of its COVID-
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`19 vaccine candidate, including “a 2020 delivery of 10 million doses of NVX-CoV2373 for DoD
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`that could be used in Phase 2/3 clinical trials or under” emergency regulatory approval.9 To that
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`end, Novavax would work with one or more CDMOs “to manufacture the antigen component of
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`NVX-CoV2373 for at least 10 million doses of vaccine” and scale up production.
`
`49.
`
`On July 7, 2020, Novavax announced that it was selected to participate in Operation
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`Warp Speed (“OWS”), the U.S. government’s $10 billion effort to develop and deliver a COVID-
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`19 vaccine. Specifically, the Company was “awarded $1.6 billion by the federal government to
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`complete late-stage clinical development, including a pivotal Phase 3 clinical trial; establish large-
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`scale manufacturing; and deliver 100 million doses of NVX-CoV2373… as early as late 2020.”10
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`As a condition of the award, Novavax was required to demonstrate it could scale up manufacturing
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`the vaccine candidate.
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`9 See https://ir.novavax.com/2020-06-04-Novavax-Awarded-Department-of-Defense-Contract-
`for-COVID-19-Vaccine.
`10 See https://ir.novavax.com/2020-07-07-Novavax-Announces-1-6-Billion-Funding-from-
`Operation-Warp-Speed.
`
`
`
`15
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`

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`Case 8:22-cv-01415-PX Document 1 Filed 06/10/22 Page 16 of 48
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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
`
`50.
`
`Having sold its own manufacturing facilities in 2019 to alleviate its cash crunch, on
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`July 23, 2020, Novavax announced that it had entered into an agreement with a CDMO, Fujifilm
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`Diosynth Biotechnologies (“FDB”), to manufacture bulk drug substance for NVX-CoV2373. In
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`fact, FDB’s North Carolina site had already begun production of the first batch, which would be
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`“utilized in a future pivotal Phase 3 clinical trial of up to 30,000 subjects which is expected to
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`begin in the fall of 2020 and which will determine the safety and efficacy of NVX-CoV2373.”11
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`As Defendant Trizzino later acknowledged, the “antigen produced at the Fuji sites in North
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`Carolina and Texas are a critical component of our US supply chain.”12
`
`51.
`
`On November 9, 2020, Novavax announced that the FDA had granted “Fast Track
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`Designation for NVX-CoV2373.”13 Such designation is the FDA’s procedure to “facilitate the
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`development and expedite the review of drugs to treat serious conditions and fill an unmet medical
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`need.”14
`
`52.
`
`On February 4, 2021, Novavax announced that it had begun the rolling review for
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`authorization of NVX-CoV2373 by multiple regulatory agencies, which was contingent on the
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`pivotal Phase 3 trials. Later that month, the Company completed enrollment of PREVENT-19, its
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`Phase 3 trial evaluating the safety, efficacy, and immunogenicity of NVX-CoV2373.
`
`
`11 See https://ir.novavax.com/2020-07-23-Novavax-and-FUJIFILM-Diosynth-Biotechnologies-
`Initiate-Large-Scale-Manufacturing-of-COVID-19-Vaccine-Candidate.
`12 Testimony of John Trizzino at the Hearing on “Pathway to Protection: Expanding Availability
`of COVID-19 Vaccines” on February 23, 2021 before the House Subcommittee on Oversight and
`Investigations, available at https://docs.house.gov/meetings/IF/IF02/20210223/111226/HHRG-
`117-IF02-Wstate-TrizzinoJ-20210223.pdf
`13 See https://ir.novavax.com/2020-11-09-Novavax-COVID-19-Vaccine-Granted-Fast-Track-
`Designation-by-U-S-FDA.
`14 Id.
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`
`
`16
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`

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`Case 8:22-cv-01415-PX Document 1 Filed 06/10/22 Page 17 of 48
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`53.
`
` On March 1, 2021, Novavax filed with the SEC its annual report on Form 10-K
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`for the year ended December 31, 2020 (the “2020 10-K”), which disclosed that the Company
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`planned “to file submissions for Emergency Use Authorization (‘EUA’) with the FDA and
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`expect[ed] to complete [its] EUA filing in the second quarter of 2021.”15 With respect to the
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`manufacturing of NVX-CoV2373, the Company stated in the 2020 10-K that it had “secured
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`fill/finish activities for NVX-CoV2373 at several sites globally.”16 The Company cited to “various
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`manufacturing partnerships,” announcing a “projected global manufacturing production rate of
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`NVXCoV2373” of more than 2 billion doses annually once manufacturing was at full capacity,
`
`which Novavax expected “to occur in mid-2021.”17
`
`54.
`
`The same day, the Company issued a press release announcing its fourth quarter
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`and full year 2020 results, which confirmed the statements made in the 2020 10-K. In addition to
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`reiterating projected global manufacturing capacity of more than 2 billion annualized doses by
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`mid-2021, the press release noted that the Company had “[e]ngaged in ongoing dialogue with [the
`
`FDA]…with potential for EUA filing in the second quarter of 2021.”18 The press release also
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`quoted Erck, who stated that “Novavax continues to make significant strides towards bringing
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`NVX-CoV2373, our Covid-19 vaccine candidate, to market.”19 Erck also touted various attributes
`
`of the vaccine that would purportedly “support emergency use authorization.”20
`
`
`15 Novavax 2020 10-K at 9.
`16 Id. at 55.
`17 Id. at 10.
`18 Press Release, Novavax Reports Fourth Quarter and Full Year 2020 Financial Results and
`Operational Highlights (Mar. 1, 2021), https://ir.novavax.com/2021-03-01-Novavax-Reports-
`Fourth-Quarter-and-Full-Year-2020-Financial-Results-and-Operational-Highlights.
`19 Id.
`20 Id.
`
`
`
`17
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`Case 8:22-cv-01415-PX Document 1 Filed 06/10/22 Page 18 of 48
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`
`
`C.
`
`The Company’s Quality Controls Were Gravely Deficient
`1.
`
`Novavax Was Required to Adhere to the FDA’s Strict Manufacturing
`Regulations
`
`55.
`
` Vaccine