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

Hi. My name is Mike Guba. I'm Citi's U.S. health care sector specialist. And today, I have the pleasure of welcoming Greg Glenn, Novavax' President of R&D; as well as John Trizzino, Executive Vice President and Chief Commercial Officer and Chief Business Officer for Novavax. Greg, John, thank you very much for joining us.

Just to kick it off, right, I've been hopping right into it because it's been a long day for just about everyone, so I think we should just get straight to the content. So starting off at a high level, can you kind of give us a brief state of the union on where your COVID vaccine program stands as of now? Has there been any update since 2Q that you'd like to share to the market? And any kind of just broad, broad statements there to start.

Yes. So thanks, and thanks for having us, Mike. We're at a great place with our vaccine. We did a number of trials in vaccines. You do Phase I and II trials and then conduct pivotal efficacy study. So last -- over the last 1.5 years or so, we've conducted multiple trials, including 2 randomized placebo-controlled clinical trials, 1 in the U.K. and 1 in the U.S. And you've got to say it's thrilling for us to think about this because those results were very, very good. They showed the consistency of our products. So we make a recombinant nanoparticle. The protein is a spike protein, and we adjuvant with Matrix-M. Hallmark of that, it's very, very immunogenic, so you can use a really small dose. You can use with -- without at refrigerated sort of temperatures, nothing exotic for transport. And that strong immunogenicity allows to use a very small dose. Now the important thing is that we were able to test this in 2 randomized placebo-controlled trials: 1 in the U.K. with 15,000 subjects; 1 in the U.S., Mexico with 30,000 subjects. And despite the fact that the -- actually, the U.K. trial was sort of a little earlier-stage product, and the U.S. was from a commercial scale manufacturing. The results were very consistent, 90-plus percent efficacy against any form of COVID disease: mild, moderate or severe, 100% against the more severe disease. So really great results in both those trials and consistent. So I think that's unique in that we have these 2 Phase III randomized clinical trials, 90-plus percent efficacy. I would say one other feature of those trials is they were conducted in somewhat adverse circumstances. That is, in the original Moderna and Pfizer trials, they had 1 virus floating around. By the time December came around, we were dealing with variants of concern and interest as the virus evolved, and that happened as well in the U.S. That did not affect our efficacy outcomes, actually. The efficacy, again, was real stable, very high against the variant. So that is a tremendous package of information to provide to regulators, showing how good the safety and efficacy of our vaccines are, which is really the bread and butter for why we are able to try to move to licensure. I'll say one last thing, too. There's -- those trials were followed by some work in boosters. And so obviously, that's going to become an important feature as well. We took people from our Phase II trial. We were able to boost them at 6 months. And that data was just spectacular. It's in our corporate slide deck, and we presented it about a month ago. But the couple of things to note. These trials I just described, Phase III trials had 90% to 100% efficacy depending on what you look at. And we had measured the immune responses in those trials in the booster setting. The end result was the immune responses we get are four- to sixfold higher than the responses that gave us the 96% to 100% efficacy. So very high. And the hallmark of them is the breadth of response, which is a feature of our technology. We can immunize, get responses to Alpha, Beta, Delta that really exceed what you saw from the immune responses that drove the efficacy that I just mentioned. So we're very confident that the vaccine and the boosters will work in the face of what clearly is a changing virus. And I think, clearly, it's not going to really go away for years. So we're going to need to be vaccinating and boosting, and I think we're bringing a really good technology and data set to that problem.

Great. So -- and I absolutely am going to push you on the booster side later on. But just kind of -- so don't get ahead of ourselves there, I guess. But just kind of put a little focus on what I'm sure you've been hearing from a lot of investors our questions throughout the day. There's been a lot of focus on time line, right, especially with regards to your filings. So I just want to give you both the opportunity to kind of clear the air and lay down how you're seeing their submission time line at the current state.

I'm going to let John tackle that one.

Yes. Let me take that. I think there's been a tremendous amount of progress made globally over the last couple of months, and we've had some -- already made some final submissions of regulatory filings with our partner Serum into India and Indonesia and the Philippines. And so we're pleased by the progress that we've been making with that and our partners. And we expect multiple additional filings over the next couple of months, as a result of the final conversations we've been having with various regulatory agencies around the globe. And so these multiple final presubmission meetings have been really helpful for us and then provided some feedback into our final CMC package. And I think where we are right now is that that's resulted in alignment with these regulatory authorities and has provided a convergence of opinion and consensus about that documentation packages that we would be submitting. So I think what people are reacting to is the sensitivity around the timing of those filings. And it's difficult to kind of put a pin in the calendar on a specific date. And so we felt better providing some additional guidance here that you're going to take these regulatory filings in these multiple jurisdictions. And you're going to see a commonality in the package that's being submitted. And therefore, what we felt more comfortable doing is say, listen, instead of there being a little bit of a saddling across the end of September, let's just call it and say for -- within the next couple of months, we're going to see these regulatory filings being submitted, MHRA, EMA, Australia, Canada. And I think we're more confident saying that than trying to put a pin on a particular date in time.

That's very fair, and I appreciate the candor there. So I also think another point that's important to touch on is the difference between the developed world, which everyone seems to be myopically focused on, right, and your kind of progress and -- continued progress with the undeveloped world -- or developing world, rather. So I would love to kind of hear your general thoughts on how you're approaching the rollout of your strategy there and kind of what markets you're most excited about. I know -- I think it was yesterday, you guys had a press release with relation to Japan, which is still the developed world, but not necessarily the EU and the U.S. where everyone's most focused. So I would love to kind of hear general thoughts there and how you guys are approaching that strategy as a whole.

Yes. I'd ask you and everybody watching to remember that 18-plus months ago, we didn't have a manufacturing facility available to the company. We were finishing up on our Phase III trial for NanoFlu and has built over that period of time, a global infrastructure in -- with 8 antigen facilities in 7 different countries, engaging with a dozen regulatory authorities around the globe. And while we're building that, we've been out having conversations based upon the robust data set that Greg outlined for you earlier in this conversation, and immediately began to get financial support from organizations like CEPI, Operation Warp Speed, which has now been transitioned to BARDA. And that's allowed us to move very, very quickly. But while we were collecting all this data, we immediately began to engage in relationships with supplying product to the U.S., to New Zealand, to Australia, to Canada, to U.K., to the European Commission. And right now, those bilateral APAs account for some 400 million doses of commitment, 110 million doses into the U.S. and what has already been announced, the 1.1 billion doses in combination with Serum to the COVAX facility. So this is a part of our obligation to CEPI, and this is product going to low-income countries, upper middle-income countries and high-income countries. And so we've taken our role very seriously kind of as a global vaccine supplier where we've made sure that we're doing an equitable allocation of doses across all of those needed communities. So -- but it really is a nice balance between what we've tech-transferred to Serum, and for those who are not familiar, the largest vaccine manufacturer by dose in the globe, but primarily into Gavi-funded, UNICEF-funded countries around the world. And that then left us Novavax with high-income country focus. So I think we've built the infrastructure, we have the clinical data, we have committed doses that take us through the first half of 2022. And then with licensure under hand would go back and seek out additional doses, as a result of ongoing booster strategy, which we can talk about in a more robust way later on in the conversation but important to the overall demand profile globally.

That's very helpful. And again, I appreciate the color there. So now jumping back over to the booster side, right, which you both have obviously kind of highlighted. And Greg, thank you kind of for that early overview of that data that you guys presented on the 2Q call. So I guess, like what are the next steps that we need to see? And what are you most focused on both from a data perspective as well as kind of how you're thinking about booster utilization as a whole going forward? Now I know you have a handful of trials currently in the clinic. And so a summary of what you've got going on there would be helpful as well as kind of the broader strategy. Greg, I think you're on mute.

Yes. Near and in hand, we have 2 trials that we expect to report out in the not-too-distant future. They're being run -- they're being sponsored by the vaccine -- U.K. Vaccine Taskforce, and they're evaluating what we call heterologous vaccination, where you, say, give the first dose of 1 vaccine and the second dose of the other. And then the second trial is heterologous boosting where they've gotten the full series of Pfizer or AZ's vaccine, and then they get boosted with our vaccine or their vaccine. So that's kind of mixed around. And so that's really important data because -- so we've got some data now on utilization of a vaccine in a -- in people who have gotten the primary series looks very good. We expect the heterologous boosting also very good. We have some data experience in our trials with people who are what we call seropositive who have been infected and then get our vaccine. And we just know that we get very high responses. So that's going to be important because you can imagine, as a health care worker, you may have someone who shows up at your door and say, "I got Pfizer's vaccine. I need -- I'd like to get Novavax' boost." And so we've created some data around that safety and immunogenicity data. I'd say more importantly, for going forward is this idea of boosting on top of someone else's vaccine, so -- especially a vector-based vaccine like AZ or mRNA vaccine. So that data should read out. Obviously, that provides the justification for use of Novavax vaccine as a booster. Now there's a couple of routes to that happening. You can have a recommendation of use by a body like the ACIP or the equivalent in the U.K. or Europe where they actually don't need any data in the most extreme situation to make a recommendation. But this will help them look at the data, look at the value boosting, look at the breadth of protection, look at the, say, coverage of Delta, and they could make a recommendation based on this data that you could use Novavax' vaccine on top of an mRNA or an AZ. So fairly generalized recommendation. For a label -- for it to be in the label on -- for example, on FDA's grant you part of your license that is saying you can boost and you can enter all of its boost, it requires a much larger study, and we're in the process of starting up those types of studies. Same questions, can you boost on top of someone else's vaccine? So I think we're in a very good position, and we expect to see the readout on the U.K. Taskforce, 2 trials that I mentioned, quite soon. And I think that will be extremely telling and helpful as countries think about their boosting regimens. We know there's a ton of interest in that. I think I'll just turn it over to John here to talk a little bit about we've got incoming interest by many countries. And part of the interest is primary immunization as well as boosting.

Prior to turning it over to John, I just had a question from the field, right, that's kind of focused on towards the science side. Greg, I'd love for you to address it. The question is, is there a theoretical reason why heterologous boosting would do better? Do the various vaccines react to different epitopes on the spike protein uniquely?

Yes. That's actually an insightful question. So if you present a spike protein to the immune system in one way, so one method, and come in with another method, it's known that that's a -- that is the way to get both the best high-quality immune responses and the highest immune responses. So -- and I think it's been a long-standing maxim in the field that the ideal thing to boost with is a recombinant vaccine. So we will see. But that's our expectation, and it's precisely that reason is that you get this -- the spike protein is seen by B and T cells in a way that in one way, it creates its repertoire of cells. You come in with another method of that being delivered to the draining lymph node area, and you get another set of repertoire cells and you stimulate all of them. So you get a bigger response, a broader response and a more high-affinity response. So we're expecting. And I think every -- just to say every vaccinologist knew this little secret that the ideal regimen for immunization is not 0, 1 month. But given the exigencies that existed last year, we needed to get moving. That was given. But every vaccinologist would have told you at 6, 8 months, the immunity is going to wane. You're going to need a boost. And so we're seeing that. And now you're going to need to boost. But the immune response that you get from that is highly desirable, will be higher and better, and we're seeing that with our data. So over to John. I mean, just we are kind of thinking about the utility of boosting in many settings, and I think we'll be well set up to do that.

Exactly it, John. Just kind of how you're thinking about the booster strategy both in the U.S., EU and then the rest of the world would be super helpful.

Yes. I think in a very obvious way, booster strategy provides for more demand in the marketplace. I think right now, we know that there are some countries that have high vaccination rates and are doing well. Although high vaccination rates is relevant. I mean you look at the U.S., I think the number is somewhere between 53% to 55% of people in the U.S. are fully vaccinated. And while that's good, that leaves 45-plus percent that are not vaccinated. And I think that's a significant number related to first dosing -- first 2 doses. So I think there's still some catch-up that we'll have. You've got some vaccine-hesitant people out there that are going to decide to get vaccinated when there is something other than an mRNA vaccine available. And then, of course, we're -- it's clear now that there's going to be a need for a boost dose and from a commercial standpoint that simply ups the demand profile in those countries that we're vaccinating early and then presents a secondary demand profile for those countries that are just catching up on their first dose regimens and then will ultimately have to be boosting those people as well.

Helpful. Now moving over to kind of a topic that's been front and center for past months or so on -- even more so now given the kind of the state of health care conferences that we've got going on, like variants. And variant is a concern, right, particularly Delta right now, but also, there are some more emerging now. I guess how, Greg and -- how are you thinking about the approach to variants? What -- what's the strategy there? And how should both -- how should investors think about it with regards to both Novavax' approach with 2373 and the broader vaccine landscape? Greg, you're muted again.

So when COVID first was identified, our team said, okay, we know what to do. So these are viruses. They have a common mechanism of infection. So flu and RSV, very similar. This protein, the spike protein has a strong analog with flu and with RSV. Those viruses evolve. They evolve in the human population under immune pressure. And our technology is uniquely, I would say, designed to address that. And how do we do that? So if you look at the variation of the spike protein amongst these variants of concern or interest, actually, the spike protein is quite similar. It's 97-plus percent we call homologous. So if you line up the amino acids from that, there are also -- they vary in some key epitopes, key parts of the protein that are exposed to -- on the surface of the virus to the human immune system. So what we do with our technology is we make the spike protein. And unlike in the virus where the protein is packed like -- and so like you would be in a subway in Tokyo, for example, all you can see is heads because it's so packed. You can't see the rest of the -- you can't see whether they're wearing yellow tie or green tie. But in our case, we have 5 to 6 of these primers, these spike proteins, on little ball, little nanoparticle, and now the side parts are exposed. And so those parts don't vary. Those -- the top parts, the head, if you will, is evolving under immune pressure. And the ones that -- are not being well recognized by the previous immunity escape, and that's why not only do previous infections not protect against these variants, but also vaccination potentially could not protect against. But in our technology, those parts of the spike protein are seen, so you get really common immune responses to these proteins, and thus, you see broad protection. So that happens with flu. That happens with -- and now I'm gratified to see. We really detailed that with flu in our NanoFlu program, was based on making a better flu vaccine both for better efficacy and also the ability to not have to work too hard to get a strain match because of the variation we see under immune pressure. So a long answer to say, we are uniquely -- I think our technology is unique for addressing this. And we are really gratified to see that when we boosted or immunized with our vaccine, we see that broad protection. That's explained by the fact that these -- the sites on the side of the spike protein can be seen by the immune response. They don't change, thus, you get this response to conserve vaccine. I expect the virus like flu will continue to evolve. It's what it -- it's how it survives. And with all the broad establishment of the virus all over the globe, it's going to continue, I think, to boil. New variants are going to come up. I'm quite certain that the vaccine we have with Wuhan will cover Alpha, Beta, Delta, Mu, et cetera. There could be a point where a new virus arises. So we are turning the crank. We've made a variant. I think we're going to start a trial in the coming months to see how that looks. But right -- I think we're doing that with a conviction that currently, for what we know currently, our vaccine matrix-M adjuvant recommend nanoparticle will cover the variants quite well. So we -- our technology does lend itself to doing things that making new constructs do variants, and we can do it quickly now that we have infrastructure. But I think we're thinking we will be able to cover that with our current technology. John, I don't know if you can pick up the ball here a little bit and what else do you want to say. I think...

No, I think that was well said, Greg. I don't know that I've got much else to add there. Well done.

And then, I guess, John, just on the back of that, I guess, how should we think about the future there, right? With -- in terms of the boosters, right, in terms of the tail of boost utilization, it's becoming clear and clear that we're going to need to. So I guess, like how do we think about the both ramp in terms of the manufacturing side? And is there any need -- is there going to be a need for additional spend there? And I guess, like how -- what's the strategy from that perspective for you?

I think it's fair to say that we're -- all of the vaccine manufacturers, the global public health officials are reasonably confident that we're going to see this pandemic last for well into '23 and beyond. I think there's going to need to be some reboost or whether that's at 6 months or 1 year, I think it's yet to be determined. I think we're still learning more about the vaccine and the virus every day. So I think in the short term, '22 or early '23, I think however much can be made will be used globally. And then I think you're going to see a fine-tuning of that based upon what we determine and define as what that booster strategy is going to look like. But there's a lot of catch-up vaccination that has to happen around the globe. Like I said before, even in those countries that have a relatively high vaccination rate, there's still a lot of room for improvement there. And I -- but I think the longer-term view from a commercial standpoint, when we get out of the pandemic period, and we will, at some point, there'll be the need for some annual vaccination, let's call it. And I think we haven't touched on it yet, and maybe if we have a little bit of time, we could talk about the combo vaccine. I think a combo with our recombinant protein nanoparticle flu and our proprietary Matrix-M adjuvant makes perfect sense and is the longer-term solution to the annual vaccination of these 2 serious viruses.

Taking the words out of my mouth there. That was the next question I was going to ask because, obviously, prior to the pandemic, you guys had a lot of promise within the NanoFlu area. And thank you, honestly, for kind of dropping what you're currently focusing on to kind of address what was happening at a time of such a need. So I guess, on that same, topic. Greg, how should we think about the combo going forward? What data do you have currently? What are the next milestones? And then just like broadly, how should we think about that from the science side?

We've done a lot of work in thinking about the flu. We have a lot of internal expertise. So we generate some really great data with flu prior to COVID, but we would be remiss not to take advantage of the many, many learnings that COVID has created for our vaccine technology, proof of concept that is just stunning. So what we've begun to think about is how can we recapitulate the kind of efficacy we've seen with COVID here, where we have 90-plus percent efficacy against any symptomatic disease. So flu needs a better vaccine. I'd say 2 meeting features, as we talked about earlier, kind of broadly cross-reacting. So as the virus changes, but also just when there is a mass, the vaccine efficacy is just not that -- has not been that great. And so can we really improve? I mean we're seeing 100% protection against severe disease. So can we improve on that is our goal. So I think learnings we expect to take the program into a trial, an efficacy study, a field trial where we collect cases. I think we know -- again, have learned a lot about how that can best be done from COVID because they're similar diseases. And at the other end of it, I want to hand John vaccine that's working really well in an area where there has been a lot of work, but I would say, chronic lack of progress. And so it's our view that the nanoparticle technology can achieve that, and there's a big need for it.

Yes. Let me just add on real quick. I think the need is clear, right? Not only from a COVID standpoint, from a flu standpoint, the most needy are the older adults, immune compromised. And I think we can make a profound effect in having a better flu vaccine and a better COVID vaccine.

That's very helpful. And obviously, it's a future in [indiscernible] that we're going to have to be living with going forward. So another question I'd like to ask is, would you guys mind discussing how, if at all, the recent CDC guidance on the COVID-19 clinical trial participants impacts your ongoing trials? Are there any implications here with regards to unblinding participants and observers? Because I know part of that guidance was that patients on the active arm of your trial would have to -- would be classified as vaccinated after 2 weeks, right? And so I guess, like how are the trials structured? And how do we think about boosting trials going forward with respect to that guidance?

Yes. I think we built into our trials, what we call crossover, where at the end of the surveillance period, we give the people who got placebo vaccine. And placebos get a placebo, so they don't know, so they're still blinded, but they've gotten the vaccine, and that was highly successful. We were dealing with this really back in January, February. So while we're conducting the U.S., Mexico trial, our Phase III trial, the vaccine was starting to be deployed in sort of key populations. And so we -- it was telling, actually, we have really good enrollment, very fast enrollment. And then we begin to have lose people who they had to be given the option to get unblinded and then they're out of our trial and find it whether they got our vaccine or not. Many have expressed to us that they would like to have -- know that they had our vaccine. They got in the trial for that purpose. And so we went to the FDA and said, look, we really want to offer this. Let's do a crossover. So we are really pioneering this area where people got our vaccine or placebo. They didn't know for a couple of months, then we conducted the unblinding of the trial and offered vaccine to the people who, as I said, there was a crossover trial. So that's designed into everything. For example, as you know, we have an adolescent trial going on. And after a certain period of time, we've offered crossover, and that portion is almost complete. And that sort of closes down the surveillance period under placebo controlled. So -- and just one other thing I should mention is that if we're gratified and CDC is recognizing that when our -- when people get our vaccine, they've been vaccinated. And so that came from our collaboration with the NIH, who has a DSMB, Data Safety Monitoring group. They essentially said, this Novavax' vaccine should be counted -- people that are participating in the trial should be counted as fully vaccinated. And of course, that helps them as they obviously think about protecting themselves and others and can make a legitimate claim that they've been -- they have received the vaccine. So that's good. So crossover is a part of -- is part of the way we operate now, making sure everybody does get vaccinated and design the trials around that as a part of -- to benefit the patients, the subjects.

That's helpful context. I guess another question I had previously from an investor. And this is less so focused on Novavax but more kind of on the broader vaccine landscape, Greg, so I'm going to target you again. There are a number of inactive whole virus vaccines in development. Would these cover more variants or be preferred over the long run? I guess like how should we think about this whole virus vaccines going forward?

Yes. I think actually, in the very beginning, most people would have said that's contraindicated because there have been some really adverse experiences in the past with a similar virus RSV and inactivated vaccines. But I think it's fair to say they're generally considered to give an inferior immune response, an inferior level of efficacy. We've been approached by several countries where they went for the inactive vaccine because it was available, but they're seeing breakthrough infections. And so they want to boost with the recombinant vaccine. So I really think that if you look at the efficacy, there's 3 vaccines that have shown outstanding efficacy, and everyone else is some level below that. So the mRNAs and ourselves have distinguishing levels of efficacy. And I think most vaccinologists would consider the inactive vaccine is kind of an interior approach. We'll see. I know there's a couple really credible groups out like Valneva that's working on that. And -- but to date, I think that I'm not sure that there's a lot of convincing evidence that they work really well.

Helpful. Very helpful. With that, we're kind of bumping up towards the end of the time here. So I'd love to give you both the opportunity kind of just -- or John, I'd love to give you the opportunity to just kind of set the stage, final message to the market prior to kind of continuing along the conference road show that I'm sure you guys will be having over the next couple of days.

Well, I appreciate the opportunity to do that. Thanks for having Greg and I on today to kind of give an update and answer your questions. I think just to reiterate that we've made tremendous progress. It's almost unbelievable to think what we've been able to do in the last 18 months. We have a very robust global infrastructure. We're engaged across the globe with various countries to supply vaccine to high-income countries and low-income countries. We are conscious and aware of what our obligations are to this global health crisis from an equitable access standpoint. And we've got great data. So we're -- we believe that we're kind of well positioned to be picking up the remainder of the initial regimen as well as to capitalize on the booster market. So we -- while we might be a few months behind Pfizer and Moderna, we feel that kind of we're well positioned from a value creation standpoint and well positioned from a commercial strategy perspective.

Very helpful. John, Greg, thank you very much for joining us. Again, my name is Michael Guba. I am the U.S. health care sector specialist here at Citi. And thank you to all the investors who joined. With that, we can close it out.

Great. Thank you.