From time to time, we may become involved in legal proceedings arising from the ordinary course of business. We record a liability for such matters when it is probable that future losses will be incurred and that such losses can be reasonably estimated. Significant judgment by us is required to determine both probability and the estimated amount. We do not believe that there is any litigation or asserted or unasserted claim pending that could, individually or in the aggregate, have a material adverse effect on our results of operations or financial condition.

In the normal course of business, we enter into agreements that contain a variety of representations and provide for general indemnification. Our exposure under these agreements is unknown because it involves claims that may be made against us in the future. To date, we have not paid any claims or been required to defend any action related to our indemnification obligations. As of

June 30, 2022, we did not have any material indemnification claims that were probable or reasonably possible and consequently have not recorded related liabilities.

To the extent permitted under Delaware law, we have agreed to indemnify our directors and officers for certain events or occurrences while the director or officer is, or was, serving at our request in such capacity. The indemnification period covers all pertinent events and occurrences during the director’s or officer’s service. The maximum potential amount of future payments we could be required to make under these indemnification agreements is not specified in the agreements; however, we have director and officer insurance coverage that reduces our exposure and enables us to recover a portion of any future amounts paid. We have not incurred any material costs as a result of such indemnification and are not currently aware of any indemnification claims.

On October 21, 2016, we entered into a development and manufacturing services agreement, as amended, with Lonza (the “Lonza DMSA”), pursuant to which Lonza is obligated to perform services including manufacturing process development and the manufacture of components for VAX-24, including the polysaccharide antigens, our proprietary eCRM protein carrier and conjugated drug substances.

In September 2017, we and Lonza agreed to defer the completion payments for any stage that commenced after December 31, 2019 or had not been completed by December 31, 2019 until the earlier of the completion of all Investigational New Drug (“IND”)-enabling activities or December 31, 2020. In March 2020, Lonza agreed to defer the completion payments until the earlier of the completion of all IND-enabling activities or April 30, 2021. In April 2021, Lonza further agreed to defer 50% of the completion payments until the earlier of the completion of all IND-enabling activities or December 31, 2021.

In June 2018, we and Lonza entered into a letter agreement pursuant to which we agreed to certain terms for potential future payments in shares of our common stock as partial satisfaction of future obligations to Lonza. This agreement states that the initial pre-IND cash payments would be subject to a specified dollar cap (the “Initial Cash Cap”). After the Initial Cash Cap has been reached, we would have the option to make any further pre-IND payments owed to Lonza in cash, in shares of our common stock at then market prevailing prices, or a combination of both, at our election, provided that (i) Lonza had the right to receive up to 25% of pre-IND payments in shares of our common stock, up to a maximum of $2.5 million, and (ii) we had the right to issue no more than $10.0 million of pre-IND payments in shares of our common stock. In April 2021, we reached the Initial Cash Cap and notified Lonza that we would be exercising our option to issue approximately $10.0 million in shares of our common stock as payment for a portion of pre-IND payments due April 30, 2021. In June 2021, we issued 399,680 shares of our common stock to Lonza at a price of $25.02 per share to pay for $10.0 million of the pre-IND payments due April 30, 2021.

In October 2018, we entered into a second development and manufacturing services agreement with Lonza (the “Lonza 2018 DMSA,” and together with the Lonza DMSA, the “Lonza Agreements”), pursuant to which Lonza is obligated to perform services including manufacturing process development and the manufacture and supply of VAX-24 finished drug product.

In April 2022, we entered into a master services agreement for drug product development and manufacturing (the "Master Services Agreement") with Lonza effective as of March 22, 2022, pursuant to which Lonza will perform manufacturing process development and clinical manufacture and supply of our proprietary pneumococcal conjugate vaccine. Unless terminated earlier, the Master Services Agreement will remain in place for a period of five years. Either party may terminate the Master Services Agreement for any reason with prior written notice to the other party, provided that Lonza may not exercise such right until a specified future date. In addition, either party may terminate the Master Services Agreement (i) within a given time period upon any material breach that is left uncured by the other party, or (ii) immediately if the other party becomes insolvent. We may also terminate the Master Services Agreement upon an extended force majeure event. Upon expiration and/or termination of the Master Services Agreement and/or any purchase order, we will pay Lonza for all services rendered, all costs incurred, all unreimbursed capital equipment and any cancellation fees.

Under the Lonza Agreements, we will pay Lonza agreed-upon fees for Lonza’s performance of manufacturing services and reimburse Lonza for its out-of-pocket costs for purchases of raw materials, as well as a customary procurement and handling fee. Each Lonza Agreement is managed by a steering committee and any dispute at the steering committee will be resolved by senior executives of the parties.

We enter into agreements in the normal course of business with CMOs and other vendors for manufacturing services and raw materials purchases. We rely on several third-party manufacturers for our manufacturing requirements. As of June 30, 2022, we had the following amounts due of non-cancelable purchase commitments related to manufacturing services and raw materials purchased due to our key manufacturing partners. These amounts represent our minimum contractual obligations, including termination fees. If we terminate certain firm orders with our key manufacturing partners, we will be required to pay for the manufacturing services scheduled or raw materials purchased under our arrangements. The actual amounts we pay in the future to our vendors under such agreements may differ from the purchase order amounts.


Years ending December 31,	(in thousands)
Remainder of 2022	$	51,470
2023		28,318
Total non-cancelable purchase commitments due to our key manufacturing partners	$	79,788