Novavax, Inc. (NVAX) Earnings Call Transcript & Summary

All right. Good morning. I'm Eric Joseph, senior biotech analyst here at JPMorgan. Our next presenting company is Novavax, and to tell us a little bit about the company is CFO, John Trizzino. The breakout session with the Q&A following the presentation is in the Olympic Room. With that, John?

Great. Thank you. Good morning, everybody. John Trizzino, CFO, Chief Business Officer from Novavax. And for those of you who are not familiar with Novavax, we are a late-stage biotechnology company focused on the development and commercialization of innovative vaccines that prevent serious and infectious diseases. And so the plan for today is to take you through some important elements of value-creating events that are going to be coming up in 2020 for the company, most significantly is our NanoFlu Phase III clinical trial, with data expected at the end of the first quarter. Oh, we're not up on the display here in the room. Thank you. There we go. So our NanoFlu Phase III clinical trial, end of the quarter for 2020. We'll talk more about what the significance is of this novel vaccine in helping solve flu vaccine and effectiveness that we're seeing in multiple of the past several seasons. I want to remind everybody of the significance and importance of our recombinant protein nanoparticle technology which is the basis for our NanoFlu program and many other programs in our pipeline. Matrix-M, our saponin-based adjuvant, proprietary saponin-based adjuvant is a critical element of our NanoFlu product and it's significant across our pipeline as well. So the combination of our recombinant protein nanoparticle and our novel matrix adjuvant is a value creator for the company today and going forward, and of course, the significance of the ongoing conversations we have with large pharma potential partners. So a quick look at our pipeline, this may be familiar to some of you who have already seen our pipeline, but we've added something else here, consistent with my first slide about the use of Matrix-M adjuvant, seeing it in our NanoFlu program that's completing its Phase III, and our RSV vaccine for our older adults, where we've done a Phase II trial, they're using Matrix. And our combination product plan for influenza and RSV and then the completed Phase I trial that we had for our Ebola vaccine. So these -- the value creation fundamentals for the company are important as we think about Novavax going forward. So a little bit about the NanoFlu program. So a reminder for those of you that are overly saturated with all conversations about influenza vaccine, influenza is still significant, it's still relevant, it's still important, and it's a very significant marketplace, in particular, within the older adult market. As you can see by some of the numbers that are on the display here, with over 62 million of the aging U.S. population, a premium price point that's going into the older adult marketplace because of the importance and significance of preventing influenza in the older adult population. The vaccination rates are high here because of ACIP recommendations. And in the U.S. alone, it's a $2 billion-plus market potential. So this has all been emphasized lately with a Presidential Executive Order that just came out several months ago, that was intended to place focus on critical policy objectives and reducing the reliance on egg-based vaccines alone. Egg-based vaccines are not going away, but we should not be subject ourselves to relying on them exclusively, expanding alternate methods for our prevention of influenza and advancing the development of new broadly-protective vaccines. Novavax does that and hits along every one of these points of this executive order. It's a novel vaccine, recombinant protein technology, adjuvanted to provide broad protection, and we are moving our program along and perfectly aligned with this executive order. Flu vaccine is -- influenza is not just another cold. It's a very serious disease that everybody has to pay attention to and take very seriously. Just this graphic to represent and compare to what we think are serious motor vehicle accidents, the opioid overdose and influenza disease is relevant and important that needs to be paid attention to. I mentioned a little bit about vaccine effectiveness and in particularly in the older adult space, where we're seeing kind of poor performance, right? And so the reality is the numbers that you see on the board here, right? So you're seeing, overall, we're seeing a 12% vaccine effectiveness; H1N1, 16%; and significantly here, H3N2 because this is the one that's kind of caused significant problems over the last several years. As you can see in this pie chart here to the left, H3N2 has been a dominating piece of that. Now last year was a bit unique because you had H1N1 circulating earlier in the season, and then H3N2 circulating later in the season. But the takeaway message here is this vaccine efficacy in the older adult population is just not satisfactory, and we need to do something about that. So what is contributing to that? We've got 2 primary issues that are contributing to poor flu vaccine efficacy. This antigenic evolution and drift, so you're all familiar with the selection process every year, the strains that are in the vaccine. Well, sometimes it's spot on, and sometimes, it isn't. And most of the time, there's at least some drift of the strains that are circulating in that season compared to the strains that are in the flu vaccine. We also have this from egg adaptation, so you're taking the actual virus that's circulating and you're growing that up in eggs. Well, in order for them to grow in eggs, they've got to be adapted to grow in eggs, and that creates some inconsistency with the flu vaccine that's created and the strains they're actually circulating, so you have some poor performance as a result of this. So what's important to point out, and when you get a chance to look at this deck, as for the many other slides, there's references here, so these are not only the opinions of Novavax, but here you see the opinions of the CDC as well as key opinion leaders throughout the country and throughout the world, that these are the primary drivers and what needs to be done. So how does NanoFlu help with this? So as I've said, egg-based vaccines dominate the market, with about 90% of flu vaccine doses are egg-based. Novavax is advancing an approved vaccine. And so why is NanoFlu differentiated, right? It's a recombinant protein nanoparticle, it's non-egg-based as a result of that. It's adjuvanted, as I said earlier in the presentation, with our proprietary Matrix-M adjuvant. And importantly, it's an exact genetic match. By virtue of it being a recombinant protein, we're taking that genetic sequence and making the vaccine based upon that genetic sequence and not allowing it to go through this egg adaptation process. So a little bit more before I get into some of the clinical trial data. This slide here, it's a little bit complicated, but you'll understand it clearly because it represents very clearly what's happening with the strains that are included in the vaccine. So we talked about the surveillance that's being done and what the strains are that are selected. So we're focusing here on this slide on H3N2. Those strains that are in -- highlighted in red with an X are those strains that have been in the vaccine. What you have in this phylogenetic tree, as you could see over here and over here, are the mutations that are taking place from that selected strain that are then circulating throughout the flu season. And it's this drift and this evolution that causes problem for vaccine effectiveness, and this is something that we're intending to address as well. So you see all of these frequency of these mutations, these epitope mutations in the key to the left that are affecting what's circulating in the 2019 season. These other strains that are identified here that are part of this drift are strains that we're looking at, have looked at in our Phase I trial, have looked at it in our Phase II trial and are currently evaluating our Phase III trial to see what benefit our NanoFlu program can provide to these drifted strains. So in the Phase II trial, it's a bit of a busy slide, but the takeaways here are what did we do in the Phase II trial? We needed to show adjuvant effect, and we wanted to repeat the experiment that we saw in the Phase I is to look at immune response to the homologous strains circulated in the strain -- in the flu vaccine for that season and immune response to the drifted strains. So we did that in -- with 1,375 subjects, and we looked at those as the primary and secondary objectives. So what were the results? What we saw, again, focusing in on these -- all 4 strains that are in the vaccine, so as you can see, we're identifying the 4 strains, the 4 homologous strains, okay, against the wild-type assay, and we're looking at A/Singapore, Michigan, Colorado and the 2 Bs, and we're seeing that, in a statistically significant way, that H3N2 strain that we talked about that's causing significant problems, we're seeing a 40% improvement over the immune response coming from Fluzone High-Dose. So again, Fluzone High-Dose, the leading vaccine used in the older adult community, was what we wanted to compare to because we wanted to show differentiation, and we saw that in the Phase I trial, and we are seeing that again in the Phase II trial. But we went further. We went further and we looked at the drifted strains, and we're seeing a significant benefit here as well. We're seeing that our performance against these drifted strains, in a statistically significant way, are showing 40%, 39% and 18% improvement as we're comparing ourselves to those drifted strains, right? So this is the basis for our differentiation in trying to solve for this vaccine and effectiveness. We then have another important and significant measure, right? So as a result of our antigen construct and as a result of the use of our Matrix-M adjuvant technology, there's another very important and relevant analysis that's being done and it's called cell-mediated immunity, right? So here, we have these CD for T-cells that we measured in our Phase II trial, and what we're seeing is this dramatic difference between the performance of NanoFlu and the performance compared to Fluzone High-Dose and Flublok. And so what we know is that there's significant relevance as to why CD4 and CD8 T-cells are important. And these are, again, not Novavax words, but published articles that talk about T-cell responses, play an important role in the immune systems control of influenza virus infections. Influenza-specific CD4 and CD8 T-cells have been correlated with clinical protection. And what that means, therefore, is that the next generation of influenza vaccines that induce strong T-cell responses could overcome several critical limitations of currently available influenza vaccines. So therefore, what we're not only -- what we're seeing is this phenomena of cell-mediated immunity and the robust response that we're seeing in our NanoFlu vaccine is going to play a significant role in improving vaccine effectiveness going forward, a very important takeaway from our Phase II trial. So what were the critical trial conclusions? Primary endpoint was met, we saw a Matrix-M adjuvant effect, we're seeing higher H3N2 antibody responses, again, strong T-cell responses, higher than Fluzone High-Dose and higher than Flublok, and NanoFlu was well tolerated, so having a nice, solid safety profile. So we're building the story now. We have the better product. We're showing differentiation in the way that the vaccine is constructed. We're showing differentiation in the performance of the vaccine. Now we have to think about what's the clinical and regulatory pathway. So conversations with the FDA, we were granted accelerated approval pathway. And what this does for us is very specific criteria that I'm not going to take you through, again, this presentation is going to be posted for a review later, is that this allowed us to conduct the Phase III trial in a very specific way. It's allowing us to look at immune -- measuring immune responses against a licensed comparator and doing a comparison of non-inferiority. So therefore, if our vaccine is at least as good as a licensed comparator, and we know that there's a correlative protection between immune responses and efficacy, the FDA has created this pathway that allows us to compare our vaccine to a licensed comparator and then file for licensure based upon that data. If we did not have this pathway, we'd have to conduct a significantly larger trial over multiple seasons to demonstrate specific vaccine efficacy. So this lets us move along quickly and cost effectively into having data that demonstrate the success of this program and allows us to move forward. Very important element. The Phase III trial, again, a very, very busy slide that's showing all of how the trial is designed, but again, most importantly, is we're repeating the experiment from the Phase I and Phase II, we're looking at immune responses on -- from a non-inferiority perspective, it's being conducted in 2,650 subjects, half receiving NanoFlu, half receiving the comparator. The trial was started in October. It was all participants were vaccinated and completed 2 weeks later, 28-day blood draw to look at immune responses, and we have this data now. It's all being evaluated, it's all being assessed, and we expect the data readout by the end of March. Just yesterday, in support of everything else that we're doing, so we're building for a very dramatic story about why NanoFlu is going to be successful and why we're excited, is we received fast track designation yesterday from the FDA for NanoFlu. What this does is it allows us to coordinate in a more effective way with FDA. It allows us to do some activities with FDA in parallel. And I think what this overall allows us to do is reinforce our path forward in order to get BLA filed in order to get the product licensed. So ResVax, right, our RSV vaccine, what's the program update here? So here, again, RSV is a very severe disease. It's the largest unmet need for a vaccine-preventable disease. It's the second-leading cause of death in children worldwide. It's the leading cause of hospitalization in infants in the U.S., and it's been stated that maternal immunization provides the best opportunity for the protection of the newborn. And Novavax has the only RSV vaccine with efficacy demonstrated in the Phase III trial. So many of you know that we missed our primary endpoint, but there is robust data coming from that trial that we will continue to pursue as an organization because so far, we have this efficacy data that's demonstrating success and demonstrating benefit from this vaccine. And for those of you who have been paying attention to the news about RSV, what we're seeing is a lot of media attention being paid to RSV, especially this season. And so just a little bit of pieces of information about RSV and the news that I wanted to share with all of you. So this is not just the epidemiology data that we're collecting to make the claims that we are at the burden of RSV disease, what we're now seeing is a growing awareness of why RSV disease is significant and why an RSV vaccine is important. Of course, we have to talk a little bit about market size, and this is for a market size for maternal immunization. So in the U.S., we've got a birth cohort of about 3.9 million babies per year. The vaccination would be in the third trimester and seeing burst post-vaccination of about 95%, so we're capturing 95% of all babies would benefit from an RSV vaccine. So what we have in the U.S. market is somewhere in excess of $750 million revenue-generating potential in the U.S., with a $1.5 billion potential globally. So again, serious burden of disease, significant market opportunity and, therefore, creating economic benefit to public health. So what did we learn from our Phase III clinical trial in maternal, that first RSV vaccine to demonstrate efficacy against RSV, so this is lower respiratory tract infection, hospitalizations in a Phase III trial. We prevented -- had prevention, demonstration of prevention of RSV LRTI hospitalizations and more severe disease identified by hypoxemia, this is blood oxygen level, and the reduction of all-cause hospitalization. So there's many other measures that we're seeing from the Phase III trial that give us confidence to continue to pursue a regulatory pathway and licensure and potentially partnerships for this important program. The vaccine appears to be safe in mothers with infants. And what we also saw was an interesting observation around pneumonia that I'll move on to the next slide, with a 49% reduction through the first year of life, so we're looking here at 364 days, with almost 49% reduction of efficacy against clinical pneumonia being reported, okay? And so this is a really important observation. So what are the complications from RSV disease? And we observed in our safety database, this significant benefit from our vaccine. So why is this relevant? Well, for those of you that may be familiar with a very well-known vaccine, Prevnar, this number needed to vaccinate is kind of an industry standard of looking at how many kids do I need to vaccinate to prevent 1 instance of that disease? Well, in the case of Prevnar, the data that we've collected is it has a range of somewhere between [ 47 ] to 185 babies need to be vaccinated to prevent 1 case. Well, the data that we have with our trial is concluding that we have approximately a number needed to vaccinate of 40, so -- and this wasn't even kind of the primary benefit that we're intending to get out of this vaccine, but this is a secondary benefit that we're observing in the safety database, more work needs to be done, but sharing with you because of the importance of that observation. Okay. So next steps, we've already communicated to the marketplace that we've received some feedback from FDA and from EMA that based upon the miss of the primary endpoint, that they would recommend to us to go back and conduct another Phase III trial. So what we are now doing is we're continuing to look through all of our data and having additional conversations, the door is open. We have data that we're evaluating, we want to engage in a conversation, and we're going to continue to pursue what would be potential opportunities with these regulatory authorities. What we're also doing is having ongoing conversations with potential partners as well. We feel too strongly and have confidence in the data that we have to allow ourselves to relax and not pursue the benefit of this vaccine, so we'll continue to do that. There's a robust data set, and we're going to continue to pursue regulatory pathway and licensure. Lastly, just a nod to some of our funding partners, the Bill & Melinda Gates Foundation contributed $89 million to support this maternal vaccine trial, and we thank them for that support as well as the PATH organization who's continued to support us throughout this pathway as well. So thank you for your time and attention. And -- oh, sorry, in conclusion, the first slide that I put up for everybody was what are these value creation drivers. So with data being reported at the end of March is our NanoFlu data. It's significant to Novavax for the benefit that we're going to see from that Phase III data. But again, that supports our nanoparticle recombinant protein nanoparticle technology, that also supports the benefit that we see out of -- and value creation out of our novel Matrix-M adjuvant technology, and also creates the door and the opportunity for us to create value through big pharma partnering. Thank you for your time and attention.