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Acquisition of Isconova AB | 9 Months Ended
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Sep. 30, 2013
Acquisition Of Isconova AB [Abstract] |
Acquisition Of Isconova AB | Note 4 - Acquisition of Isconova AB On July 31, 2013 (the "acquisition date"), Novavax announced the acquisition of Isconova (the "Acquisition") pursuant to its public tender offer to acquire all outstanding shares and warrants of the company directly from such holders and its private offer for all of Isconova's outstanding stock options. As a result of the public offer for shares and warrants and private offer for stock options, Novavax issued approximately 15.6 million shares of its Common Stock valued at $41.9 million and paid cash of approximately $22,000 to acquire 99.5% of the outstanding shares and all of the outstanding stock options and warrants of Isconova. On September 6, 2013, Isconova AB was renamed "Novavax AB" and was delisted as a publicly traded company in Sweden. This transaction has been accounted for using the purchase method of accounting, with Novavax as the acquirer. The results of Novavax AB's operations have been included in the consolidated financial statements since the acquisition date. For the three months ended September 30, 2013, the minority interest in Novavax AB's net loss and stockholders' equity is immaterial. Novavax AB has focused its recent efforts on the development of saponin-based, immune-modulating adjuvants that work with different types of vaccine antigens to enhance the immunogenic effect of the antigen. Novavax AB has collaborated with several vaccine companies to allow its lead adjuvant, Matrix-M™, to be tested with a number of antigens in development; the Company has recently begun development work pairing the Novavax AB adjuvant with its own pandemic influenza VLP antigen. The Company believes that the Novavax AB adjuvants can be powerful complements to certain of its recombinant vaccine programs and will enable future discovery efforts and potentially reduce vaccine development timeframes and costs both by eliminating the need to in-license third-party adjuvants and related costs and by harmonizing operating and regulatory processes. The total purchase price is summarized as follows (in thousands):
Value of shares of Novavax Common Stock issued |  | $ | 41,942 |
Cash paid to Isconova warrant holders |  |  | 22 |
Total purchase price |  | $ | 41,964 |
The value of Novavax Common Stock issued is based on the closing price of Novavax' Common Stock on the acquisition date. The table below summarizes the preliminary allocation of the purchase price based upon the fair values of assets acquired and liabilities assumed at the acquisition date. The preliminary allocation is based upon information that was available to management at the time the consolidated financial statements were prepared. Accordingly, the allocation may change.
|  | (in thousands) |
Cash and cash equivalents |  | $ | 3,056 |
Accounts receivable |  |  | 603 |
Prepaid expenses and other assets |  |  | 1,092 |
Property and equipment |  |  | 165 |
Intangible assets |  |  | 16,380 |
Goodwill |  |  | 25,298 |
Accounts payable and other current liabilities |  |  | (2,784 | )
Capital leases |  |  | (94 | )
Notes payable |  |  | (193 | )
Other non-current liabilities |  |  | (1,559 | )
Total purchase price |  | $ | 41,964 |
A substantial portion of the assets acquired from Isconova consisted of intangible assets relating to its proprietary adjuvant technology and collaboration agreements. The preliminary fair values of the proprietary technology and agreements were determined based on estimates of expected future net cash flows. The present value of future net cash flows was then determined utilizing an estimate of the appropriate discount rate, which is consistent with the uncertainties of the cash flows utilized. The fair value measurements are based on significant unobservable inputs that were developed by the Company using publicly available information, market participant assumptions, cost and development assumptions, expected synergies and other cost savings that a market participant would be expected to realize as a result of the combination and certain other high-level assumptions. The proprietary technology is amortized over its estimated remaining useful life based on the Company's expected future net cash flows. The agreements are amortized over the estimated periods of expected future net cash flows. Amortization expense for intangible assets will be recorded on a straight-line basis over the expected useful lives of the assets, ranging from seven to 20 years. The carrying value and expected lives of the intangible assets may change based upon finalizing the purchase price allocation, and such intangibles will be periodically reviewed to determine if the facts and circumstances suggest that a potential impairment may have occurred. Impairment charges, if any, will be recorded in the period in which the impairment occurs. The Company recorded $25.3 million in goodwill related to the Acquisition representing the purchase price paid in the Acquisition that was in excess of the fair value of the assets acquired and liabilities assumed, which is included in the Company's vaccine operations because of the anticipated complementary use of Novavax AB adjuvants with its vaccine candidates discussed above. The goodwill generated from the Acquisition is expected to be deductible for U.S. federal income tax purposes. The Company incurred approximately $1.3 million in transaction costs related to the Acquisition, which is included in general and administrative expenses in the Company's consolidated statement of operations. From the acquisition date to September 30, 2013, the Company has recognized revenue of $0.4 million and recorded a net loss of $1.5 million from the operations of Novavax AB. The following unaudited consolidated pro forma financial information is presented as if the Acquisition occurred on January 1, 2012. The unaudited pro forma financial information has been presented for comparative purposes only and is not necessarily indicative of results of operations that would have been achieved had the Company completed the Acquisition during the periods presented, or the future consolidated results of operations of the combined company. The unaudited pro forma financial information combines the historical results of operations of Novavax and Isconova for the periods presented below and reflects the application of the following adjustments:
| · | Elimination of the historical intangible assets and amortization expense unrelated to the Acquisition;
| · | Amortization expense related to the fair value of intangible assets acquired; and
| · | The exclusion of acquisition-related costs incurred for the Acquisition.
|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
|  | 2013 |  |  | 2012 |  |  | 2013 |  |  | 2012 |
|  | (in thousands) |
Revenue |  | $ | 4,869 |  |  | $ | 6,272 |  |  | $ | 14,195 |  |  | $ | 19,530 |
Net loss |  | $ | (15,687 | ) |  | $ | (8,490 | ) |  | $ | (40,565 | ) |  | $ | (25,033 | )
Basic and diluted net loss per share |  | $ | (0.09 | ) |  | $ | (0.06 | ) |  | $ | (0.24 | ) |  | $ | (0.18 | )
Novavax AB has an operating lease for its facility that expires in 2017. As of September 30, 2013, the aggregate remaining rental payments due under this operating lease commitment was approximately $1.9 million.

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