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

All right. Welcome, everyone. I'm really excited to have Novavax Management, specifically John Trizzino, Chief Operating Officer (sic) [ Chief Commercial Officer ] and Chief Business Officer; as well as Filip Dubovsky, who is the Chief Medical Officer of Novavax.

So obviously, you guys just had your quarterly call last week, issued your 2022 guidance of $4 billion to $5 billion. So maybe we can just get right into it and then maybe you can just walk us through the different components that make up this guidance, and then we can take it from there.

Yes. Sure. Georgi, first of all, thanks for having us. I think it was an exciting earnings call. It's chock-full of -- a lot of information about where the company is. The accomplishments, certainly over -- especially over the last several months, but certainly over the last 12 months highlighted in this latest update of the many regulatory approvals that we have across the globe. We are truly now a global organization, not only in regulatory approvals, but shipping product into Europe, into Australia, Indonesia, South Korea, et cetera. So we're thrilled with the progress that we've been made. The infrastructure that's in place and executing against our -- all of our strategic plans.

Yes. And then just going to the $4 billion to $5 billion guidance. Maybe can you just walk us through what are the different components to make up that guidance in terms of, like, how would -- should we be expecting in terms of, I guess, product sales versus government contracts that you have remaining with OWS.

Yes. So you know, as we've talked about before, we don't get into the absolute details of kind of breaking down that number. But for sure, the most significant portion of that is product-related revenue, both from a direct revenue perspective on the Novavax side as well as product-related royalty revenue coming from sales of product, whether that's at Serum or SK Bio or any of our other licensee partners. And that's a number that we're extremely confident in and backed up with the APAs that have been in place for some time now.

And then given that you don't currently have kind of like an official APA signed with the U.S., just to confirm for investors, that guidance assumes no U.S. sales, right?

Well, so that guidance assumes some ongoing grant revenues...

Grants revenues.

Coming from the now $1.8 billion as part of that U.S. government funding mechanism. That includes product shipments, so manufacturer. This was a funding mechanism to support a number of things: clinical trial development, certainly the Phase III, some ongoing clinical trials that Filip could make reference to. Large-scale manufacturing, scale-up activities as well as the manufacturing of doses. So whenever doses are coming out of production and ordered by the U.S., at least for the moment, some -- portion of that would be coming in from this $1.8 billion. And then we would move to a normal procurement mechanism with the U.S. beyond the contractual obligations that would be satisfied here.

Which will definitely be like an upside to that $4 billion to $5 billion?

Well, yes, as we head out of the pandemic period and go into the endemic period, right, we would expect that you would see government -- some additional government procurement. But then we're going to see kind of normal commercial activity probably as we get into Q1 and Q2 of next year.

Yes. And we're going to get into that a little bit later. But just maybe just on the progress, the shipment and deliveries. On the earnings call, you mentioned, you provided an update that you've already shipped almost 44 million doses of Nuvaxovid. Can you give us any update on that? And then specifically, when should we expect to start seeing doses being shipped for some of your other contracts, such as the one in the U.K., New Zealand and maybe Canada for which you have authorizations?

Yes. So we're now on this kind of regular cadence of manufacturing and shipping. And so while we don't want to give kind of the blow by blow, if you will, of kind of every batch and every shipment. We are seeing kind of regular production coming out of Serum. Most of that at the moment has gone into the Netherlands distribution center. And then from there, it goes into a country by country. And that's already now have been happening for over the last week, and that will continue through the end of the quarter and certainly as we're satisfying the rest of those obligations. The other countries will come as kind of final authorizations are reached and final in-country policy NACI had recommendations are coming through for Canada, U.K. and others.

Okay. And then do you have any idea when we could expect -- do you think that is going to happen kind of like in the next few months or is that more of a maybe like midyear to the second half of the year in terms of those…

Some of those additional happen with weeks and others will happen over the course of the next couple of months. Yes.

Perfect. Yes. And then, I guess the EU has already committed to purchasing 42 million doses in Q2. When should we start seeing those being shipped? Is that something that -- I guess like how does the contract work? Did you start shipping them like ahead of the quarter for which they're contracted or would you expect to start shipping them like actually during Q2?

So remember, it's 27 million doses in Europe in Q1, another 42 million doses in Q2. That will happen during the month. We have these ongoing conversations with the European Commission as well as within each country as to scheduling those doses to come in and how they're going to be used in their vaccination campaigns.

And then just shifting gears back to the U.S., you already have submitted your EUA. Maybe if you could tell us if you have any update on the regulatory discussions with the FDA. Have you had any recent interactions? And then one question we'd be having is, do you expect the agency will hold an ADCOM just as it was the case with the other EUAs.

Yes. So maybe I can take that. So yes, we're in continuous discussion with the agency as they decide on their questions and we answer their questions, and that's the usual process that you do at this stage. And we're absolutely anticipating a ADCOM. We think they will take this pack prior to authorization for EUA. And as we talked about, the EUA is just a stepping stone for us to achieve eventual BLA and that data is being finalized now. So after we get EUA sorted out, it's a straight track to a final authorization.

And maybe just a follow-up on that the -- for the BLA, you mentioned obviously that, that requires the longer-term safety studies. Where are you in that process in terms of like collecting that longer-term safety data? Do you think we already kind of have the majority of that data? And once you get the EUA, you could kind of like very quickly within a few months be able to submit or…

That's right. On the clinical side, really what we're looking at in this case, a safety through 6-month time period. And that's data that we're wrapping up right now.

Great. And then you've mentioned that in the U.S. state, there's an extra requirement about kind of like manufacturing lots, badge, I guess, comparability for BLA. Is that something that you're also kind of like towards completion?

Sure. So the U.S. is unique compared to some of the other regulators that don't require lot to lot consistency studies. And in the U.S., sometimes, but not always, prior to BLA the agency will want to see a study comparing 3 lots of vaccine to show they've performed comparably in people. So we're preparing for that study. It isn't clear to us if it's going to be required prior to full authorization or not. And we're -- we'll be in discussions with the FDA to see exactly where they wanted that to land. In any case, it's not a difficult study. It's just, we're looking at immune responses with 3 different patches. So it's kind of a routine study that the industry does frequently.

And how many patients does it -- or I guess participants usually does that require?

Yes. So that's really based on discussions with the agency and those are -- still are not finalized.

No, that makes sense. And then maybe sticking to the manufacturing front, a question obviously that a lot of investors have been having is, where do you stand with getting the CMC supplements for the rest of your global manufacturing footprint? Maybe if you could just provide a little bit more of kind of like the details and the remaining gating items that need to be satisfied before you can actually submit those supplements? Maybe, John or…

Well, maybe we'll tag team that a little bit. One is, it's already in process. The intent is for each of our manufacturing sites to be added on to the country regulatory submissions already. And so it is really mostly just taking, you know, the data from each of those sites and updating it specifically to that regulatory submission. So the reason for -- it's probably worth taking a step back to say, the reason why we did Serum was because it allowed us to get one manufacturing site completed quickly and then use that with all of the other regulatory authorities, because there will be questions on country -- on a country-by-country basis, and it allowed us to move quickly and consistently. Now you're going to have each individual manufacturing site being added to that regulatory submission. And then you're going to have to deal with each regulatory authority asking some questions and finalizing each of those submissions. So I think it was really a function of time. It was more of a when, not an if, and that's what we're in the process of doing right now. I don't know Filip wanted to add something to that.

No, I think that's right. I mean it's just part of the regulatory review process. You put together the data packages and you submit them in due course.

That's great.

Obviously, we -- those submissions happened in places where we've already achieved authorization. So it's a step process. First, you get approved on the material that comes out of Serum. And then we will supplement it with the other manufacturing facilities.

And do you plan to kind of submit all of them at the same time or can it just be kind of like side by side?

I think they could be stage gated. I think it's just a matter of our ability to kind of manage kind of all of the inbound questions related to each of those submissions. So we're going through that process as quickly as we can. But remember, we're now with as many countries as we're approved and that's exactly the same process we're going to need to go through for each different manufacturing facility.

And I guess just thinking about the capacity, but also kind of like the longer term side of the story. So as you said, you have already committed and plan to have $2 billion of capacity this year. But when we think about that, the endemic -- eventual endemic environment, let's say, like 2-3 years from now, what sort of global, like, demand, do you think there will be? And I guess just thinking about that capacity, what is the -- realistically the demand that there's going to be out there. So for example, Sanofi just talked about a global demand of 500 million doses for annual COVID vaccinations. Our model actually is very conservatively, only focuses on kind of like the elderly senior market in the U.S. and Europe. And that kind of requires only about a 100 million to 200 million doses in total demand annually. So maybe can you just talk about that and -- for a little bit, just how do you envision that demand going forward and the capacity that you would need?

It's a little bit hard to predict at the moment, but I think you kind of break it down and say what analogs do we have for how to assess that market sizing. And certainly, flu is one way to look at it, but I wouldn't exclusively look at just flu, because flu market has evolved over probably some 40-plus year period of time. This has been thrust upon us over the course of 2 years. It's much more widespread across the globe. The implications of this virus have been more severe than in any particular flu season in kind of recent memory or at all for that matter. And I think that while you're certainly going to see the total number of doses trailing off, I certainly feel a whole lot more confidence in its maybe at least as much as Sanofi is probably tagging it. As you really think about high-income countries, upper middle income countries and low-income countries as well. Now what you're going to see happen is with that drop-off of doses, especially in the high-income countries, you're going to see a fairly significant increase in price per dose. So overall revenue expectations for us, in particular -- Novavax in particular, given that we're coming in a little bit after the initial first round of doses is that our revenue isn't going to tail off the same way that a revenue for Moderna or a Pfizer is going to tail off. And then we would have reasonable expectations of grabbing market share from some of those existing manufacturers as we demonstrate the benefit of the -- and profile of the differentiation of our vaccine. So we're optimistic, as you would imagine, about total market size and we're confident in what we would be -- how we would be participating from a total market share perspective.

I guess the other thing to think about is, of course, the pediatric segment, right? So that's going to be a segment which is coming online, and those children are going to need primary vaccinations always into the future, assuming that this doesn't disappear and no one really expects COVID to disappear completely. And I presented data, I guess, it was just last week that really showed that in the children in our study, the immune responses we were able to induce were much higher than we saw in adults. But our safety profile, our reactogenicity profile was favorable. So here we have a situation where we think there might be an opportunity to deploy our vaccine, which gives a bigger punch with good immunogenicity with decreased arm pain, fevers and side effects. So that may be an opportunity for us to play in as well.

And in addition, let's also not forget we've now talked multiple times about our combo vaccine for flu and COVID.

Yes, hopefully, we can touch upon those…

Yes.

Yes, in a little bit. But no, these are really great points and things to kind of like consider as we kind of like take a step back and look into the future -- longer-term story of the company. And maybe just like last and more of like the near-term dynamics, how do you see the opportunity for a booster market realizing into fall? And then maybe can you talk to your positioning to participate in it in terms of kind of expectations for the booster data this year and whether or not this could get on the label?

Yes. Maybe why don't Filip talk about the booster studies and then I'll come back and talk about market?

Right. So a couple of things. First of all, when you think about participating in boosting globally, you really need to think about 2 buckets. One of them is a labeled indication and the other is a policy recommendation. And those are very different and they require different levels of data. So if you want to be -- have boosting talked about in your label, you need to go through the regulatory process and those are generally larger, more complex studies that had to fulfill the criteria that regulator has set. That's different for policy recommendations. Those can be different kinds of studies, small studies. Sometimes even the study isn't required, it can just be based on expert opinion. And even globally now for our vaccine, we do have policy recommendations for boosting, kind of, including heterologous boosting in some countries. So what do we have going on? I think we've publicly stated that we have boosting data that's being developed in our studies in our U.S., Australia Phase I, Phase II study as well as in our South Africa Phase II study. And those data are being wrapped up now and they're being prepared for submission to support label claims for boosting. There's additionally a whole host of smaller studies, including some that we're sponsoring or planning to sponsor that look at heterologous boosting and those are really meant to address the policy recommendations and eventually also hopefully a label claim. But in the first instance, the policy recommendations are the key one for us, so they can start using the vaccine we already have approved in a boosting situation.

Yes. So taking the data that we're going to get from all of that effort, right, boosting clearly is an important part of how we're going to be advancing the use of our vaccine. And I think that Filip is exactly right, right? Where we can get the -- use the label-enabling data from these studies, that would be the best path to take. But I think in the short run, policy implications and policy support is going to be critically important. We placed a large, significance in priority on booster policy support, and we're beginning to get some of that already. So it's being perceived a little bit differently on a country-by-country basis. But I think part of it is choice and part of it is the opportunity to demonstrate success of our vaccine. As we build -- if we weren't able to build the foundation on the primary doses because of the high vaccination rates up to this point, right? What we want to do is build a foundation within boosting so that when we get to more commercial annual revaccination, we'll have established a foundation of those people to vaccinate and then, again, demonstrating the benefit of our product candidate on a go-forward basis.

And then maybe you kind of mentioned it in terms of policies and precedents. I guess we've seen from Canada that they've issued a recommendation of using a product as a booster, even though it is not indicated on their kind of like emergency use authorization label. Could that happen in the U.S.? And are there any precedents for that, just given that we're still kind of like an EUA stage rather than a full approval?

I think the answer is absolutely yes, right? And so we've seen it also happen in Australia just recently, right. Last week there was policy support where it's suitable where somebody decides it's -- the use of one vaccine is not suitable for me and therefore I want to use Nuvaxovid. And so I think those are things we expect to see repeating themselves. Certainly, ACIP has the absolute ability to do that. And I think in actuality, they did that early on during the emergency use period where they've allowed for a choice of what the booster could be. And so, we're going to bring to the table as much data as we have and as much data as Filip and his team are generating in order to make the case that this policy support is a wise part of the recommendation.

And then obviously, like that is important to understand the timing. Do we have any idea of when we could expect like kind of any recommendation or, I guess, a meeting from ACIP that could talk about this or any of the other regulatory agencies, I guess, in Europe?

I would suspect first things first from an FDA perspective, and then we'll have the opportunity to get run at ACIP.

We have recommendations in the Nordics in some countries in the main part of Europe as well, such as Ireland as well as in Asia that already speak to these points.

Perfect. No, yes, that's very clear. So maybe let's just shift to the longer term as the story and the ultimate long-term opportunity for Novavax. You have 2 differentiated vaccines with NanoFlu, which is your influenza vaccine and then also your COVID vaccine. Maybe one thing that I think it's still investors struggle with understanding is how would that eventual endemic market play out in terms of choice of what vaccine you can pick. I guess, there's a difference between the current government contract market versus an eventual commercial market. So maybe can you talk us to like how that would play out? Just given that, for example, if people think about the flu vaccine -- oftentimes when I get the flu vaccine, I don't really know -- I don't even know what I'm getting. And I don't really know if I can even like ask for it. But obviously, we live in very different times where a lot of people are kind of like starting to make more choices in terms of these things. So maybe can you talk about this eventually once we get to that endemic stage?

Yes. So it's kind of really interesting the way you kind of teed that up, right? I think for years, both in the pediatric vaccine space and even the influenza vaccine space, nobody really paid attention to, number one, what the disease is or the health burden or health care cost burden of the disease is. People know very little about what was the makeup of the vaccine. Are there differences between certain vaccines. Flu vaccine market has been around for 40-plus years now. I bet most people 3 or 4 or 5 years ago couldn't even tell you what -- who are the different manufacturers or were they all manufactured the same or they all manufacture differently. Today, everybody is keenly aware of what COVID-19 is, keenly aware that they are variant circulating, keenly aware that there's an mRNA, an adenovirus vector, there's a protein-based vaccine. So they're much more highly informed and educated about what's happening in this marketplace. I think that's going to drive to people asking, wanting to have a choice in what vaccine they have, and they will have that choice, right? Once we get into this endemic phase, it's going to be a normal commercial environment. They're going to walk into the pharmacy, or they're going to walk into their doctor's office or whatever other health clinic is available and they're going to make the ask of what the vaccine is that they want. And they're going to have a preference and they're going to want to have a choice. And I think that's going to be particularly true in the U.S. and in Europe and in other high-income countries, varying a bit on a country-by-country basis based upon their national immunization program requirements and outline. But I think you're going to see a pretty dramatic shift when we get past the emergency use phase getting into the commercial phase about choices that people are going to want to make about the vaccines that are being administered to them.

And I guess something that you already alluded to, but another, I guess, confusion is around the pricing of these vaccines. So obviously, during a pandemic stage, pricing is government-procured and contracts are government procured. That's going to be very different from what a commercial market would look like. So maybe can you talk about what pricing expectations do you expect once we get to that endemic stage? And are there any good comps that you think are reasonable here? So for example, we use kind of like the differentiated flu vaccine as kind of a base case scenario in terms of the $65 per dose that Medicare is currently reimbursing, but maybe if you could give us any insight on that.

Yes. That's a great tee up. I think that's exactly right. The higher -- the premium priced influenza vaccines, the high dose -- to both of Sanofi's premium vaccines: Flublok and High-Dose Fluzone. Fluad is also a higher priced product. Let's talk about mid-50s to high 50s. Let's keep in mind that Medicare has already given an indication on a price per dose at $60 per dose posted on the Medicare website about what they might be willing to reimburse once we go into the commercial marketplace. And so I think that there is some indication there. I think $60 is probably about a good number to be thinking about in the U.S. when we get it to normal commercial activities. A little bit harder to say what that's going to look like around the globe. But I suspect that normal kind of commercial modeling and commercial pricing proportionate with where the U.S. is priced will likely be with the way that it plays out.

And I guess one of the other interesting things coming up very shortly next month would be data from your combination COVID-flu vaccine. We just recently, actually yesterday, had a [ Carewell ] panel and basically, our panelist said that a potential like efficacious and well-tolerated COVID-flu combination would be a game changer in terms of differentiation. So maybe can we start first with talking about the technology that Novavax has and that idea of using a fixed amount of adjuvant, how that could be different from what we're seeing -- we might be seeing with the mRNA technologies? And then maybe we can transition to kind of right expectations for that COVID-flu combination date in April.

Yes. So maybe I can touch base on that. So it's what's factual is that we have the same adjuvant system for both our influenza vaccine and our COVID vaccine. And that obviously makes a combination approach very easy. You know, our antigen doses are extremely low. For COVID it's only 5 micrograms. And that means essentially, we can put as much as many antigens we want into a single formulation, and that's the approach we're taking. So what we studied in Australia was a broad range of antigen doses, both for COVID as well as for flu to find the optimal dose level we're going to take forward. We want to make sure we get their immunogenicity right and balance it up without either being wasteful or without being too reactogenic. And that's what their goal to experiment is, to identify 2 or 3 dose levels we want to test further and to take those into Phase II testing, which will be a larger study with the competitors with immunologic endpoints. And we're looking and starting that later this year. So that tell you that we'll read out soon, we'll really be looking just the immune responses of these various blends and really to steer us into what the next step should be.

And then just kind of very broadly speaking, when could we expect that to get to market just given the types of studies would be needed and that.

Yes. So obviously dependent upon on the data and the timing of the clinical trials, but let me just take one step back because I think it's important for those listening in to understand why this has got such high potential for success. We've already demonstrated success in a Phase III immunogenicity to a comparator Phase III study that met or exceeded all of the primary endpoints in that study. It's the same technology platform recombinant protein nanoparticle same adjuvant being used, the combination of the 2, therefore, kind of fit nicely together based upon just the natural construct of the vaccine and the adjuvant. So I think here we have something that has high potential for success because of proven performance of the flu component, proven performance of the COVID component, all in the same technology platform, and therefore, we should be able to have -- see success there. Now from a timing standpoint, right, what's challenging is the timing of the efficacy study for flu, right? We haven't seen much in the way of virus circulating for flu in the last couple of years. And while we don't want flu to be circulating, that's the only way for us to have an effective efficacy trial. And so we have to have a flu -- a couple of flu seasons that allow us to test the vaccine and so we're counting on that happening. But we're probably 3 years timing-wise, looking into multiple seasons of additional testing and a Phase III efficacy trial in order for that to happen.

And could you potentially get accelerated approval and do the efficacy studies after?

So it's possible. Remember, we did that for the Phase III flu trial. We had an accelerated approval…

Pathway.

Yes, pathway for the flu. And so again, we have to have conversations with the FDA about what we can do to accelerate that time line.

No, that's great. And I believe we're already at time. So I just want to thank you so much for taking the time to talk to us. This has been a really good conversation and just amazing progress, definitely a transformational year 2022 for Novavax. So we're excited to follow the progress. Thank you so much.

Appreciate it. Thanks, Georgi.

Bye, bye.

Bye.