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

Hello, everyone. Welcome to the final session of day 2 of the 2022 Bank of America Healthcare Conference, and thank you for joining this session with Novavax. My name is Alec Stranahan. I'm Vice President and senior biotech analyst here at BofA, and I'm pleased to be joined by John Trizzino, Chief Commercial Officer and Chief Business Officer; and Greg Glenn, President of Research and Development. And maybe we'll just jump right in to the Q&A.

So John, you guys -- you had your 1Q print yesterday. Maybe you could just set the stage by going through your business and sort of what we saw in the 1Q print.

Sure. Alec, thank you very much. I think the most exciting about our earnings call this past week is our first quarter of revenue-generating business, so $703 million. It's a milestone event for the company. It's an exciting time. We have a licensed product out in the market, 41 countries around the globe. And it's just the beginning, right? There's a lot more to happen and certainly in '22. I think all of this sets the stage for a commercial launch in '23, I think as we transition from a pandemic phase to endemic phase. And at the same time, generating revenue, net profit of over $200 million and not a bad way to kind of start our commercial activities and adventure. So yes, I think we also had a number of kind of significant other announcements. We've continued to kind of develop our life cycle of the business, adding any new indications, booster data, adolescent data, pediatric data are kind of global vaccine manufacturing infrastructure. And of course, we're looking forward to our VRBPAC date of June 7.

Perfect. Perfect. And you reiterated your guidance of $4 billion to $5 billion in total revenues, including grant revenues for this year. Maybe you could just walk us through how the global rollout has been going thus far? Any pain points? Or has it been producing [ by selling ]?

Well, it's been a pandemic, right? And so it's been nonstop from January of 2020. And I think it's just been historic event, the pandemic for the globe, a historic event and advancement for the company. We just don't wake up in January of 2020 and decided we're going to be in the vaccine business. It's a 10-plus year investment in our technology platform, which allowed us to take advantage of this opportunity, contribute to global public health, contribute to prevention of the virus spreading around the globe. And so it's been across the Board of activity. I think we now have a global manufacturing infrastructure that allows us to supply against the demand that's in the marketplace. We've talked about over 2 billion doses of capacity and through our multiple facilities around the globe, we now have that. We have turned on. I just mentioned 41 countries around the globe, plus a WHO emergency use listing that takes us to a total of 170 countries, over 6 billion people now have access to our vaccine through our regulatory submissions. And it's been a significant effort on the part of everybody within the organization from a discovery standpoint, clinical development, regulatory, manufacturing team, all the support of infrastructures and, of course, the building out of the commercial organization and readiness for when we step outside of a pandemic.

Right, right. And maybe we can dig into COVID a little bit more. Obviously, 2 years into the pandemic, I think, many people are getting fatigued and hope that it's just going to go away on its own, but it's obviously still a very real health issue with still very real demand across the globe. So I guess, as you were rolling out Nuvaxovid, what is sort of your strategy to drive uptake? Is it price? Is it access? And I guess, how does durability against Omicron feed into this?

Yes, thanks for that question, Alec. It's been such a dynamic situation for us, and we're learning something new about the virus every day, if you would have asked us 12 months ago, would we still be in the pandemic phase, the answer probably would have been no. That we've been -- would have already been passed the emergency phase, we'd be entering into normal kind of commercial activities. And the virus continues to challenge us, right? It's now mutated multiple times. We're now dealing with multiple Omicron strains where we're considering the implications of a strain change. We're evaluating whether or not bivalent is the right strategy to move forward. So we're having to plan for all of these possible outcomes and do scenario planning and execution about what that's going to mean for the balance of this year. And again, we tend to talk about in these forums, the U.S.-centric market, but we're really making these decisions and executing on a global stage and a global platform. And so that makes it even more challenging to sort out what some of those next moves might be. And the value is we're getting input from multiple NITAGs. So these are advisory groups around the globe in the various countries that have different perspectives about what they're going to need. But what we do know is that there's a need for boosting where there's uncertainty about what the frequency of that boosting might be. I think it's pretty clear that there's going to be a need for an annual revaccination. And that whenever it is, we go from pandemic phase to endemic that there's going to be a need in the foreseeable future to ongoing revaccination or boosting or whatever you might want to characterize that.

Right. And you mentioned the U.S.-centric view where obviously the mRNA-based vaccines have been dominant with 70% of the population receiving a vaccine at least 1 dose. But this is not so much the case across the globe, right? And there are certain areas where price could be prohibitive or the shipping constraints to get it where it needs to go. So how is your approach between the U.S. and the rest of world may be different?

Yes. So we assess what that vaccine coverage looks like on a country-by-country basis. And generally speaking, the high-income countries have done -- and even most other countries, other than low-income countries, which I'll talk more about in a minute, have done a pretty good job at vaccination. But here's where we've spent a lot of time thinking about what our strategy might be, where is the opportunity? So we still believe that there's opportunity in the primary series of vaccination. There are those people that are vaccine-hesitant or prefer something other than an mRNA vaccine. I think just by choice, not by for any necessarily particular reason. And so I think there's opportunity there. So when we think about those people that have yet to be vaccinate, we're talking about the first 2 primary doses and plus at least the first booster, so 3 doses to that population. Then there's also the boost market, right? So people that have already been vaccinated, who may choose to have something again other than an mRNA vaccine and again, from a choice perspective, right? We're congratulatory to Pfizer and Moderna for what they've accomplished in a very short period of time with a very effective vaccine. But we're differentiated, and we're differentiated on multiple fronts, and we believe we offer a very viable option for boosting. And so there's a second market opportunity. The third market opportunity as you're stepping in down the age below 18, the adolescent population, 12 to 17, and in the pediatric population below 11 years of age. And we already have demonstrated robust data there in the 12- to 17-year-old population, are filing that data now in multiple regions across the globe. We'll be doing so in the U.S. kind of post the VRBPAC assessment. And that's where we see the opportunity, right, in those 3 categories and, of course, kind of ongoing into the future.

Great. And maybe digging into the life cycle management a little bit further. You've got the heterologous boost study that I think is being run by the NCI, if I'm not mistaken. And you've got your pediatric study that read out as well. So maybe you could just walk us through, I think the original study was in sort of an alpha dominant population, pediatric is more delta and I guess, what are you doing to address additional variants as they arise?

Yes, maybe I'll take that. We should look back at our Phase III trials as, I'd say, remarkable achievements. They were done in the context where the virus is already evolving. So the other 2, the Pfizer or Moderna were run in which at a time when the virus is pretty much homogenous. So we did get early data on how our vaccine performed in that context. And I would say it's something that our expertise has been developed over years training for in the context of flu. So flu RNA virus. It's very -- it has a lot of variation, as you know, from year to year, and it's been quite a challenge for the vaccines to cover that. So our vaccine, if we could just pause and just think a little bit about our technology, we're a recombinant protein, adjuvant and recombinant protein. There's a long track record of I would point out 2 really great licensed products that have durability, extremely high efficacy and well-tolerated HPV and Shingrix. So I think we're inheriting some of that mantle. But the unique thing here with these respiratory viruses is they are under a lot of immune pressure so they evolve. So you need to be able to cover that evolution. So I think the first signal that we have was in our Phase III trials where we had quite a bit of viral evolution. We saw the same in the adolescent trial, all of which we provided really great data. So now we're in the era where there's been another radical change. And by all of our kind of measures we use something called antigenic cartography. If this was a flu situation, there would be a recommendation to change to this new strain. We think our vaccine as it is, has some pretty good coverage of this -- the new variants like BA.2 and some of the derivatives of that. But we're certainly pursuing the strain change philosophy where we bring in. We've got Omicron and BA.1, BA.2, both of those are soon to be in the clinic. And our thinking is that in the fall, we need to be ready to do what our customer wants, if you will. So the customer may want to bivalent or BA.1 or BA.2, we intend to have the clinical data, the package that's filed for that and then be able to deploy in sort of the time frame of October. So I think that the life cycle management has to take into account the fact that this is a virus that changes. And our team, frankly, has been working on flu prior to this quite a bit, and we can talk about our flu vaccine. But the lessons learned from flu, I think, have been quite relevant. So our technology does highlight parts of the spike protein that are constant, we call them conserved regions, the adjuvant supercharges the immune response in those conserved regions. And so it's not a surprise to us how broadly our vaccine covers as it is, and it gets better as we boost. So it's going to be a very interesting next few months. We're thinking that the health authorities are going to look at the situation, recommend a strain change, possibly a bivalent, and we intend to be ready for that. And so I think now with all the approvals we have, with the tremendous manufacturing capability we have, we'll be able to fully participate in the deployment of a, say, a fall campaign for an Omicron or Omicron-like virus.

Very good. And Greg, maybe you could just speak to the logistical benefits of having a recombinant.

Yes. So recombinant vaccines like ours are, first of all, kind of built to be stable and they are built to be used in the refrigerated cold chain. Of course, that was established for the last decades by the WHO and other groups throughout the world. So no matter where you go, you could obtain a vaccine that's in refrigeration. I do think that one of the things we've seen is the presentations that require more extreme temperatures have been very hard to get beyond the warehouse whereas our vaccine, I think, is really lends itself to that sort of routine handling in an office setting. So I think that that's really an important aspect of our vaccine for deployment.

Okay. And in terms of manufacturing, I think you guys have said maybe 2 billion capacity. I guess how much of this is produced in-house? And what is sort of your supply-chain capabilities to get it where it needs to go to all the 40-plus countries?

Yes. No, that's right. So 2 billion of capacity is the network of infrastructure that we've built out over now the last couple of years, kind of one of our significant partners and what has been the manufacturer that's been on the regulatory submissions to date is our partner, Serum Institute of India, and they've just done an amazing job in scaling up to accommodate our manufacturing process. They've now has a gating event to the VRBPAC meeting, had an FDA inspection and that has opened the door to allowing us to have that forum to gain authorization from that Advisory Committee. We also have partnerships in South Korea with SK Bioscience as another partner. And then our owned facility in the Czech Republic. And both of those will be added to the regulatory submissions around the globe. So we have flexibility and capacity and manufacturing that could be used in any country where we have a submission. We also have a license partner with Takeda for Japan. And so we've built up a tremendous capability across the globe from a manufacturing standpoint, of course, regulatory must support that and then all the clinical activities that are taking place in order to add to the label of -- the existing label of the product.

Perfect. And you alluded to the VRBPAC earlier, which there's a lot of activity going on in June with the review of the EUA and also thoughts on the strain selection debate and obviously, the meeting in June is not going to be the end all be all, right? It's a continuing debate. But I guess could you just sort of help level set expectations going into the VRBPAC, like what is inside your control at this point? And what have you delivered to the committee?

You mentioned 2 important factors here. One is there's multiple meetings taking place at VRBPAC that's been announced over the past week or so. One of them is obviously reviewing of our submission and the other is whether or not we're going to go to potentially going to bivalent or a strain change. And I think the way that we view it is that global public health is going to make a decision about what best suits the needs of global public health. And maybe that's done on a global basis, maybe that's done on a national basis. But what we have to do is we've got to demonstrate our readiness. So there's 3 potential scenarios, right, as I see it, and that's take the existing strain of the vaccine in which we've demonstrated great success across strain and protection. And that might be the best most viable choice in order to move forward. Then there is a strain change of what might be one of 3 or 4 different Omicron strains that are circulating. And we've got to demonstrate our ability to manufacture that product, clinical comparability and as such. And then, of course, there's the third scenario, which is bivalent and that's taking the original strain plus some to be determined, maybe it's Omicron, maybe it's something else. And that's a bit of a moving target, right, which is why scenario 1 might be an interesting solution as well. But we can demonstrate our capabilities and then, therefore, that opens the door for the right decisions to be made from a public health standpoint. As far as the expectations of VRBPAC on just our submission, we're fully expecting based upon our submission, based upon all the back-and-forth questions that have been asked and answered, based upon the inspection at Serum is to come out of that meeting with a recommendation for emergency use authorization.

Great. Well, definitely looking forward to that. And I want to switch gears a little bit and talk about the rest of your pipeline, which is obviously robust. And Greg, you mentioned your flu vaccine, which I think had Phase III data. And more recently, you also had data for a combo, right, which I think is one of the first examples of clinical data from the combo vaccine or flu plus COVID. Can you maybe just speak to the data and where we go from here?

Yes. So we were looking at -- we look at COVID is potentially getting into the cycle of a seasonal virus vaccine. So we wanted to begin to combine that with our -- within influenza -- recombinant influenza vaccine, made the same way, same technology, recombinant nanoparticle full-length proteins, adjuvant with Matrix-M. So we did -- we have what we thought was very good data. With this complex of a product that is having 5 components, you need to see how they live together, how they stimulate immune response. And so we did what's called the design of experiments. So we had a bunch of groups from A to O, and you're able to take those through the design of experiments approach and create what we call surfaces, which show you what doses give you the desired response. So it was very informative on dosing. A couple of big take-home messages compared to what we had been doing. We think we can cut the actual dose of the flu antigen in half. So that's a nice savings for cost of goods and achieve the kind of immune responses that we would like to see, which we think should be protective. We have some experience also with the sort of the cellular immunity side, so this is measuring functional immunity. We know that the Matrix-M nanoparticle combination gives you very good what we call CD4 effector memory cells. Those are extremely important for protection against especially severe disease. And recall, when you've been fairly far out from immunization, you can recall these quickly develop antibody responses. And interestingly, and there are previous studies, we found that many old people lack specific flu CD4s. We know through immunosenescence that people lose these T cell help abilities. Our Matrix-M adjuvant NanoFlu vaccine was very good and, in fact, we call cleaning out the basement, creating a population which formerly had no CD4s to different aspects of flu and then seeing very strong levels of CD4 post-immunization. So our next step, we will do a Phase II trial in a dose confirmation. We expect to do this in the latter and start this in the latter half of this year, and that should lead to a Phase III efficacy study in the following year. And I'd say so many of the learnings we have from COVID, first of all, confidence that our vaccine would work. It gives us a lot of reasons to want to go into this, but trial conduct, how we formulate, et cetera, all those things have been enormously valuable. And I think not to skip over what's happened in the past few years is we not only developed a vaccine, we built a company. We have tremendous people like John, a ton of experience with licensed products, our manufacturing network now. So we're going into flu with a lot of strengths based on our experience in the last 2 years.

Great. And obviously, your adjuvant is maybe a little less talked about, but also a very important...

Yes. It's critical. The nanoparticles showed the immune response, show the immune cells a properly configured protein, which is critical because the structure has got to match what you see in nature. If it doesn't, you are going to be much less effective. However, to sort of supercharge that, you need to create a danger signal, and Matrix really provides a very good signal to immune response to sort of supercharge it, but with really what we think is a very desirable safety profile. And by the way, we are using Matrix-M elsewhere. You may know this. We have a collaboration with the Jenner Institute and Serum on a malaria vaccine. We have very promising breakthrough data in our Phase IIb in infants 5 to 18 months of age. We saw a 78% protection against malaria, which is really breakthrough. In that context, we're using the antigen from Serum and then our Matrix-M in this quite young age group, and it's clearly played a critical role to enhance the immune response to the malaria antigen as well. So it's kind of nice to see from parasites to viruses that our vaccine technology is relevant and performing very well.

Great. And John, you alluded to before that we could -- once we enter the endemic phase for COVID, we could see an annual booster, right? How does the combo with flu feed into your long-term vision for vaccination? And I guess how does this set you up competitively given you were one of the first to have data in the clinic?

Yes. So look, you're taking 2 demonstrated effective vaccines, right? So remember that NanoFlu on an accelerated approval pathway from FDA went into an immunogenicity only, non-inferiority trial, and we met or exceeded all of our primary objectives in that Phase III trial. And we were on a very fast path to get that product approved and used in the U.S. Along the way, we ran into a pandemic. And so that kind of stalled our initiatives there. One of the requirements of that accelerated pathway would be to get an efficacy trial in place. And that would have been impossible to do anyway in the last couple of years because it's so little is getting circulated, yes... But to get back to your question, so we have a recombinant protein nanoparticle adjuvant that demonstrated success with flu, a recombinant protein nanoparticle with Matrix demonstrated efficacy for COVID and the knowledge that COVID could and would likely be a seasonal respiratory virus that would require annual revaccination. So it seems reasonable and logical to put those 2 things together. It could potentially be that easy, right? And where, as Greg has mentioned, we're moving along at clinical development pathway to demonstrate the value of that combination. But we're also dealing with multiple needs around the globe. Again, it's not just kind of U.S. centric. We've got to look and see what would be used and what would be beneficial in the U.S., but we also have to consider the various public health policy implications around the globe, whether that's in Europe or whether that's in Asia or whether it's high-income countries or upper middle income countries and determine what the right mix is going to be from a public health policy standpoint, but also from a commercial. So I envision launching a combo, but I also envision the sustainability of a COVID-only and a flu-only as well. But again, we need to demonstrate the benefit of the combo and then we'll make those market determinations as we go down the road.

Right. The mono and the combo may have a place in the commercial landscape.

That's exactly right.

Right. Right. And in terms of strain selection, this is obviously refreshed every year for flu. And the prevailing thought has been that coronavirus is not influenza, and it's not going to mutate as rapidly as influenza does, but maybe this is changing, given what we've seen with COVID. Is the thought that you would refresh the combo every year based on the prevailing strain? And can you speak to whether your technology is capable of doing this in a rapid...

Yes. So going back to what I said before, we're already in the process of demonstrating those 3 scenarios, right? Is it better to use the existing strain? Is it better to use a variant strain in this case, Omicron? Is it best to do the bivalent? We know that, that strain change is a process that takes -- as you mentioned, takes place every year with influenza. So you know if you do a combo vaccine now is a monovalent COVID or a bivalent COVID, right, which kind of is yet to be determined. We already know that you're likely going to have to accommodate strain change for flu. We're going to be demonstrating over the next couple of months our ability to accommodate a strain change for COVID. And again, listen, 12 months ago, would we have suspected that there would have been this many variants emerging, probably not. But it appears that there's something new stirring now every few months, which we need to wrap our arms around and understand. So the virus is still telling us things every day, right? We're learning a lot about its epidemiology, about its potential for mutation, and we're going to have to be flexible and adaptive, and that's what we're demonstrating along the way is to adjust to what's being thrown at us by the virus.

Okay. And on the NanoFlu mono, so just talking about flu, you had the Phase III study data end of last year. I guess how are you approaching regulators? And do you think a second Phase III, for, say, the 2022, 2023 flu season for efficacy is probably required?

Sorry. So for the flu component?

Yes.

Yes. So I think we're showing a regulatory pathway for flu and for flu combo is looking at -- we have the Phase I/II data, which we've now disclosed and presented at the World Vaccine Congress. We're going to be going into a Phase II trial to kind of do some more dose ranging, right? We've learned a lot about some potential interference that can be accommodated by adjusting the dose levels within each. And we think that, that's a viable approach going forward, but we need to dial that in a little bit more, and we'll do that in the Phase II trial. And therefore, with that data in hand, we would reasonably expect that we could potentially go into a multiyear Phase III trial before the end of 2023.

Okay. Very exciting. And one last question in the time that we have remaining. Just on the -- taking a step back and looking at the potential applications for your technology. It's obviously not just in flu and COVID and RSV. Could you sort of talk about the opportunity for the platform in more severe infectious disease settings. You mentioned malaria with the Phase III ongoing, but also SARS, MERS or any others?

Yes. So this proof of concepts that we have with our COVID is extremely important to the platform. So what does it do? It shows that you can elicit very strong functional immunity in a very tough setting and get high levels of protection. If you had asked me what our expectations would be for efficacy 2 years ago. In fact, I think it was reflected in the FDA guidance, we were kind of all thinking 50%, 60% might be pretty good that's against severe disease, 80%. And here we are almost perfect. In fact, if you look at the -- if you biologically look at our data, where we had a strain match, exact match for our vaccine in 1 Phase III trial, we had 96% efficacy and the other one 100% against mild, moderate or severe disease. In fact, when we just recently looked at the 6-month follow-up for surveillance, we showed that we had 83% protection against any infections, asymptomatic, symptomatic disease. So this is really incredible. So exploiting that signal for an envelope virus, it just an -- so an adjuvant, recombinant envelope virus. There are the herpesviruses, as you probably know. So there's multiple viruses where this could be exploited. We before really in the kind of one iteration of the company, we were a biodefense group, and we were looking at pandemic influenza as a place for us to live. So we have made Ebola vaccine, we've made a MERS vaccine, the SARS vaccine. All these things were done kind of in the early stage. And again, really good-looking data. With Ebola, in fact, it led to the funding, I think, of our SARS-CoV-2 vaccine, we made Ebola vaccine and CEPI came to us and they really like the data for our human clinical data. We went from the description of the virus in the literature to first subject in 90 days. So we were very fast. The data we showed was very, very good. We had worked out a pathway for licensure through the animal rule. So in other words, you couldn't possibly do an efficacy study properly conducted with Ebola. So all that to say that these people at CEPI were so impressed with their program, when SARS-CoV-2 came up, they approached us and said, "We really like to fund you, would you be interested in working in the SARS vaccine?" And they gave us an initial tranche of about $4 million, which was super enabling and then $400 million shortly thereafter. So I think we and others believe the technology certainly can be applied to other viruses we like. As a team, we like those things that relate to envelope viruses, and we have big plans for the platform.

Okay. Great. Looking forward to it. Well, I think with that, we're up for time, so we'll have to end it there. But really thank you for the great discussion for participating in the conference.

Thanks. Thank you. I appreciate it.

Thank you. Thanks for the opportunity.