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

Hey, good morning, everyone, and welcome to Baird's Annual Healthcare Conference. I'm really pleased to be kicking off the conference with Novavax. And with me today, I have Gregory Glenn, President of R&D; and John Trizzino, Chief Commercial Officer and Chief Business Officer. Greg and John, thanks so much for joining us today.

Great to be here as well, thank you.

So to begin, could you provide an overview of Novavax? And I think most people here would probably be familiar with Novavax now but also kind of recent update on progress to date.

Yes. So maybe I'll just kind of kick things off with where we are with our activities since the beginning of the pandemic as it's been quite a venture, chatted a little bit briefly this morning. But we're in such a strong position right now. All the fundamentals are in place. We've had over 50,00 subjects go through significant clinical trials over the last several years demonstrating that we have a very safe and very effective product. And so the information -- clinical information is strong. We're now approved for use in over 43 countries around the globe. We've got manufacturing infrastructure in place in 3 primary facilities or owned facility in Czech Republic acquired in May of 2020. Now a significant partnership with Serum Institute in India and then a strategic partnership with SK Bioscience in South Korea. And at this point, we're shipping product around the globe, and establishing strong relationships as we move forward. And as we look forward to 2023, we can talk more about that as well. But I think we're well positioned. All the foundational elements are in place. '22 was a year of building out and catching up a bit with adolescent, we recommend label with Boost label. We have some great news from yesterday from the EU about the label approval for heterologous. So being able to vaccinate on top of any previous vaccination, which is a significant accomplishment for us. And so we have grown into their sales going in '23.

Got it. It's terrific. And at a lot of points that will be great to explore further in this conversation. Maybe to begin, could you tell us how Novavax's COVID vaccine compares with mRNA vaccines? I mean, should we think of it just as kind of doing the same thing, but it doesn't use mRNA? Or are there other differences that are important to consider?

Yes, it's quite different. So the approach to mRNA is to provide essentially the gene that is injected into human which proves to be fatal today. In the process, the mRNA itself is great to implant response is local that enhances immune response [indiscernible] cell. Our vaccine is much more aligned with the traditional recombinant vaccine. We actually make the protein that is our protein is unique in that we have completely the full line comes in at bring it all for the [indiscernible] and they have a very explosive treatment of infrastructure. So we make that as an nanoparticle. And then we have [indiscernible]. And the reason we do that [indiscernible], so it needs to be set up to receive to act to the process that you're going to get a very strong. So we have a traditional technology that and the famous safety and tremendous forward conference on HBV [indiscernible]. And so we capitalized on that mechanism of action. We actually made a full part different in the is reflected in the taste for our trial so we had a chance providing infection which we do. I'm going to be done on that. And so to randomize [indiscernible].

Got it. Yes. So that really makes sense with the -- focusing on the proteins. Can we explore that more about what the implications are of that in the real world? Say, on efficacy, is there a way that you might see differences emerge over time.

Could be. So durability is one of the futures of the recombinant proteins at some point with full [indiscernible] last few years [indiscernible] ideal presentation approaching reiteration. Another thing we're seeing, which is very relevant, obviously, the virus -- Omicron virus is not gonna go away and in another way. So the channel is to privately to address the new strain. And with the spike protein, which is [indiscernible] a versus they're [indiscernible] they're 19% [indiscernible] that's because these bias a function to inject the genetic [indiscernible] sell like [indiscernible]. So it [indiscernible] . So the way it evolves is to have a served portions of the spike protein. At our vaccine shows those net compare effect. So our Wuhan vaccine actually with us, we see a very similar response opposed to [indiscernible] I'm sorry. So that's a really important indication for [indiscernible]. And we didn't actually describe the decide data portion unchanged mean response and the change [indiscernible]. So that's very important feature of our technology.

Terrific. And maybe one kind of related point is what are the storage requirements for our vaccine?

[indiscernible] are all in the same bottle.

Terrific. So let's jump into the rollout and progress to date of the COVID vaccine. It's recently been authorized in the U.S. and around the world. Could you just provide us a kind of general update and the status of the commercial rollout?

Yes. So there's a couple of pieces certainly relative to that. We have put advanced purchase agreements in place at the beginning of last year. So we're shipping against those agreements to all the countries where we have regulatory authorizations. We are supplementing that with commercial teams around the globe right now. We have a plan for there to be regional office is a pretty typical standard format for doing this in place right now in Europe. We have a commercial office in Zurich with the support team in Brussels for policy in country managers, cluster heads. So we -- right now, we're intending to pull through on the government purchased product, right? And that's been a little bit slow out of the gate, I think mostly because there's been a lull in vaccination rates starting since about May, right? There was a lot of effort put forth for people to not wear masks and not be restricted from going out or travel restrictions. And so I think when you see that happening, you see a little bit less vaccination. But so similarly, in the Asia Pacific region, we have a very strong relationship Australia, New Zealand, Singapore, Indonesia. We've shipped significant product through to our partner at Serum Institute the Americas, for example, we -- U.S., Canada, Mexico, South America, actively engaged in a commercial team that's on all the primary areas, right? So it's product differentiation, how do we communicate product differentiation. What is the policy needs on a country-by-country basis does, the night tags, the technical advisory groups? Payer strategies, right? What's going to happen when we come out of the government purchased area and is the private and payer -- private and public payer strategy is going to be in place? And the answer is absolutely yes. And then, of course, then there's consumer and physician education about what Greg described as a difference between the products, what should you expect, is one better than the other? is one the agenda for the commercial organization.

Terrific. Recently, we've seen some -- I guess could you tell us about label expansions and the strategy there? And I know one of the points is the news yesterday that there was a label expansion in Europe that you might have to tell us about.

Yes. So that's been what the foundation laying has been for the last months now is getting all of those pieces in place. So the strategy at the beginning of the year is what was the commercial opportunity was to make sure that all those that had not been vaccinated receive a first and second dose of the vaccination. And while the vaccination rates were generally high, 60% to 70%, there is still some vaccine hesitant folks who really wanted to have an option about what they were being vaccinated with. And then there was, well, what's going to happen with booster and then what's going to happen with the pediatric population. So some of those label expansions came a little bit later than we had hoped. And so therefore, that affected a bit of the uptake in the June through current period of time. But all those pieces are being -- are coming together right now. So '22 has been a year of making sure that we have all the regulatory approvals that we want, having all the label expansion. So the heterologous boost, not just the homologous boost. We now have adolescents 12 to 17. We have a trial underway that's going to take us from 6 months to 11 years of age, having our manufacturing infrastructure in place. So that when we get to '23, when it transitions from this pandemic period through a commercial period, we're ready to go, all of that -- all of the labels are in place, and we could ship product to all of our customers around the globe.

Got it. One of the things you mentioned a moment ago is how there seems to be this transition going on from governments being the acquirers and distributors to private payers at least in the U.S., could you tell us about -- more about the implications of that as you grow the uptake of your vaccine?

It was what was needed at the time, right? There needed to be a lot of product tried over a very short period of time. that product needed to be allocated broadly without any restrictions on what was the motivating factor for where that product was going. So I think aside from the fact that there was hopes and dreams of this kind of equitable allocation and I'll comment a little bit about Gavi too in there because of what's going on with whole Gavi and COVAX is there was billions of doses acquired that had to be distributed around the globe, right? We tend in these conferences to be a little U.S.-centric, but we're so global at this point. We could talk a lot about, well, what did the U.S. do and what did European Commission do and what did the vaccine task force to in the U.K. and what happened in Australia and all over the globe. And so all this product was being purchased countries became very nationalistic when they were trying to provide equitable access and that's fine. So we're now past that period of time, and now there's just a lot of product. So where does the market go from here, right? What does the total dosage globally look like? What does total market size look like going forward. And everybody is trying to assess that. I mean there's ranges from a $5 billion a year market that looks a lot like flu to $30 billion market because there's going to be twice as many doses administered at 2x or 3x the price of a flu vaccine. So it's tough to pin it down at the moment. But I think this transition at least for us, is important because the market is going to decide. Health care providers are going to decide. The consumer is going to decide what product they want and not some procurement department within each of these individual countries, and we believe that's going to play in our favor.

Got it. I'd love to hear more about how that could play in your favor, a lot of intriguing dynamics that are all coming together.

Yes. So right now, it's very much based upon what commitment a country has made to acquire product. And there's no denying that Pfizer Moderna came out in front of us by about a year or so. And that's fine. I think we're now in a position where people are looking for a safe and effective vaccine, and we've demonstrated the basis for that. the ease of material handling, as you mentioned -- asked Greg before about what's the temperature -- normal refrigerated temperatures. We don't have to deal with frozen product and then thaw the product and then vaccinate, I think that's a big deal. . I think as we move forward, you're going to see a transition to prefilled syringes and not multi-dose vials. I think that there's reactogenicity is going to be an issue. I think there's data is still being collected about reactogenicity data still being collected about durability and protection. We feel we're in a solid position in both regards there as well. And I think just the overall ability to communicate about the product, right? We've lost the ability at least for the moment to talk about the differences in the product. right? You don't have the ability -- and we're getting closer to being able to do that. But up until this point, we've been a bit restricted on what was called promotional, right? So we have to educate and inform that you can't be promoting. So I think transitioning to the commercial phase will allow us to communicate more effectively.

Great. So in thinking about the current upcoming -- well, first, I'd ask, I've heard talk recently from some public health experts that the COVID vaccine market could transition to looking more like an annual flu-like distribution model. Is there a sense how this could play out?

So there's a couple of similarities and there are a couple of differences, right? I think annual seasonal seems to be what is the consensus around public health officials about what's going to happen. We're going to need to have a revaccination every year in front of that normal winter respiratory season. So we expect to have that to happen. We probably expect to see ongoing mutations of the circulating virus. Virus is going to continue to circulate. I don't think there's anybody that questions that what is going to be the frequency of strain changes. So I think similarities to flu in that regard right now, flus are quite revellent. You're seeing 1 to 2 strain changes a year, so we'll probably see that. I think there's still a very high fear factor with COVID, even though I think it's lulled a little bit at the moment. And I think we know for flu vaccine year after year, I've been dealing with flu vaccinations for over 40 years now. in some years, people are worried about a bad season. I think there's already talk about a bad flu season this year, and that caused people to go out and get vaccinations. But I think overall, because of the awareness of COVID and because of the concerns of COVID, in general, you're going to have a significantly higher demand for product on an annual basis than you do for flu at the moment. So I think that market size by dose is going to be significantly better.

That makes sense.

And then the economics of COVID versus flu are very different at the moment, right? So I think there's no question that the cost benefit of having a vaccination has been proven over the last couple of years, right, whereas the economy was shut down and people weren't going to work and restaurants were closed and significant hospitalizations, there's a significant public health cost that's been eliminated by virtue of vaccinations. And so therefore, the cost benefit and therefore, the price associated with COVID will probably reflect that.

Got it. So -- and piecing this together, it seems like this -- there could be a lot of COVID vaccines distributed in the marketplace over the next couple of months or so as there's the seasonal uptake, and perhaps we'll see that again about a year from now around October 2023. And my sense is that Novavax's market share over the next couple of months will be relatively low, just based on looking at the company's guidance, for example. But I'm curious, maybe looking ahead to the -- a year from now in 2023, are there certain drivers that you're focused on that could help increase Novavax's market share in the 2023?

Yes. Access to the product is probably #1 as I look around the globe. 3 of the top 10 pharmacy chains in the U.S. are carrying product. One would ask, why is that the case, right? Government is purchasing. There's no product risk associated with having the product. Yet, I've only got 3 of the major chains that are stocking the product, and they're trying to simplify their activities. I think when we get into commercial market, that's going to be a different story on how we're going to encourage them to stock the product. Similarly, in Europe, we've got products sitting in warehouses that are not necessarily getting out to health care providers or pharmacies. Europe is a bit of a different angle because it varies country by country as to where those vaccinations are being done. So I think access is first. I think, a greater awareness of the vaccines have not been come to known by their brand names. They've been come to known by their company names, right? It's the Pfizer vaccine or the Moderna vaccine. Novavax is a very unique innovator, but this is a first time licensed product. And so we're not that household name yet, but we'll get there. So I think name recognition and confidence in the product that we're delivering. I think most people are aware that there are differences between mRNAs and recombinant protein vaccines, but I think a little bit more health care provider as well as consumer education is going to be needed. And I think -- those are probably the 3 primary drivers about what we're going to be putting in place over the next 12 to 18 months.

Got it. So this season from public health officials in the U.S., there seems to be a push for these new the Omnicron, I believe BA.5-specific mRNA vaccines from Moderna and Pfizer, and that's what the talk seems about. And I don't hear Novavax mentioned much from the booster standpoint as is not authorized there. What does the path look like for Novavax having a vaccine authorized as a booster in the U.S.?

Well, this is where public policy has been difficult to kind of maneuver for everybody, frankly, right? Because in typical flu season, you have a southern hemisphere season and then it kind of cycles through that kind of informs what is the circulating strain at the time. You've got public health officials come together to decide what that should be, and then there's a consensus about the product. I mean, right now, you have U.S. demanding mostly because of it fits the story for mRNA to have a bivalent Omicron, including vaccine, and demanding that of the manufacturers. Greg will be happy to talk in a minute about why that's not necessarily true for our vaccine and protein vaccine, and that our prototype vaccine will perform really well in defending against serious disease. But we haven't had the same ask made of us by other countries around the globe. And so we're still shipping prototype vaccine into those countries, and we'll expect to continue to do that through the end of the year and probably beginning into the next year before we get into that annual vaccination cycle. So there's not a consistency. And then even for Pfizer, Moderna, there's a different product in Europe than there is in the U.S., right? It's a BA.1 instead of BA.4, 5, bivalent and monovalent for Pfizer instead of just a bivalent. So there's inconsistencies around the globe and what products they want. We -- just to reiterate, we have not had a specific ask outside of the U.S. for the bivalent Omicron vaccine. So.

I think that reflects the -- we're all humble here. This virus has humbled us again and again by coming back in new forms, big surges, and that's all, if you look globally, there's been an awful lot of vaccine deployment. So this has been a real challenge for public health officials to think forward thinking. So we were able to introduce our data on the breadth of our immunity in the VRBPAC, which happened, and that was all new information, knowing that we would be coming back and asking for boosting expansion. I think the boosting expansion for us will be very important and allow us to start to go into the market with something that is a fairly simple story. And what we've been doing, I think the data suggests that we really will be -- have the right vaccine for the next new strain as well. So boosting is really important. So I think there's a scramble, right? We have new viruses. That's combined with just the natural phenomenon of waning immunity, and those collide and people who getting vaccinated are getting sick. And so it's been quite reflecting. So a relatively conservative thing to try is what we've done -- what has been done with flu is to try to create a strain match type vaccine. But it's really unclear, in my view, whether it could be BA.5, for example, it's plateaued and starting to disappear. So I think that's going to happen. That's the track record of all the other viruses. And just ongoing March, I think we aren't recognizing just there's an ongoing disease burden, that's huge. So the -- even now, there's been kind of a downtick in the disease, the monthly rate of death and disease is sort of like the annual rate of flu. And so that's not acceptable. I think public health officials really see that. And so I think we're in a good place. We've got a great technology. We've got proof that it could give broad protection. There's a lot of comfort with the recombinant vaccine. And so I think we're seeing really receptivity to this concept we presented at the VRBPAC that our prototype vaccine with Matrix-M gives broad levels of immunity and so it could be deployed in this environment. So that is going to be an interesting few weeks. So as we are in talking to the FDA, we hope that they will act quickly. We're working very closely with them. And I think we will be at some point, able to deploy our vaccine in this environment following U.S..

Terrific. So if that materializes and results in an increased demand, whether it be this year or next year, what does the supply chain look like? Will you have to be able to ramp up the supply? Or is it already there to meet increased demand?

Yes. Supply infrastructure is well in place. I think our partnership with Serum Institute in India has been important. Those -- that facility was the facility that we applied for all of our first regulatory approvals and is capable of -- more than capable of supplying ongoing need and more, right? So there's a significant total supply capacity coming out of Serum. Again, we have our owned facility in the Czech Republic that is now ready and filed for regulatory approval so that we can then use that facility to supply Europe. And then we have another contract manufacturing arrangement set up with SK Bio. So I think we had to start from ground zero, right, back in January of 2020, right? We didn't have manufacturing capacity in place, have built that out over the last 2 years and confident that we're going to have more than enough capacity to go forward.

If I could just add to that, the Serum Institute of India was the largest manufacturer of vaccines in the globe. And we approached them, they helped us. And they delivered a huge amount of the AstraZeneca vaccine prior to that standard track record. And our collaboration resulted in the FDA approval of their facility, which is really -- it was a lot of work, but I think it represents the high-quality work that they do and their capacity is huge.

Yes. I would just love to kind of go back to another important point that you made about this boost label, heterologous boost label, and we're waiting on the FDA. We have a heterologous boost label now in multiple countries. So one would reasonably expect that FDA will decide similarly to the others. And so we're eager to hear what their answer is and confident that we'll see the same result that just came out of Europe.

Yes. Looking forward to that news

Yes. We are, too.

Prior to COVID, Novavax had a lot of successful data with a flu vaccine. Tell us about the potential to combine COVID with the flu vaccine.

Yes. What kind of got lost over the last 2.5 years was our Phase III flu trial that read out just a few months after we were kind of getting into full swing for COVID, and it just ended up being back burnered, frankly, just as a matter of bandwidth and resources to advance that. And frankly, we were under an accelerated review or approval process, which would have required an efficacy trial to be conducted as soon as the product licensure. There's no way we could have done an efficacy trial over the last 2 years for flu because it's just been virtually nonexistent. And so you wouldn't have had a high enough attack rate to do that. So you know that we had a data readout of a Phase I trial that we conducted looking at flu again, but mostly in the context of a flu-COVID combo. So we're continuing to pursue that. We're going to go into a Phase II with hopes and expectations that we can get into a Phase III trial shortly thereafter. The combo is -- makes perfect sense, right? It's the same technology platform, recombinant protein, nanoparticle. With Matrix, its annual seasonal vaccination. So the combination, too, makes sense. But you got to be careful of the conflict between the 2 antigens. And so we're being very careful about what that looks like. In any case, we know we've got 2 great products, whether we combine them or not, we know we've got a very highly effective flu vaccine, and we know we've got a highly effective COVID vaccine. But also, you well know, we were in a RSV, and we've learned a lot of lessons during COVID about our technology platform. That was a 1 dose, not adjuvanted into older adults. I guess if we wish we could do that over again, it would be 2 doses with an adjuvant with Matrix-M. And so I think that's going to be part of our going forward. Our prioritization is bringing RSV back into the clinic.

Got it. So that looks like we've reached our time, really exciting and dynamic story, so looking forward to following along. And thank you so much for the update.

Great. Thank you. Jon.

Thanks Jon.