Novavax, Inc. ($NVAX)

Well, thanks, everybody, for being with us this afternoon. My name is Dave Risinger. I'm very much pleased to welcome members of the Novavax leadership team. So immediately to my left is John Jacobs, CEO. To his left is Ruxandra Draghia, she is Head of R&D; and then Jim Kelly, the CFO; and Luis and IR is in the audience.

So thank you for being here with us. I thought we'd just start off at a high level, John, with you, particularly for those that are less familiar with the story, just providing an overview of the company's strategy at this point. The company has been through a lot, but since you've already troughed and stocks moving in the right direction, we'll look forward.

No, absolutely. And just take a moment to look back in appreciation of the opportunity we've had the last 3 years to really pivot the company fully away from its original attempt to launch the COVID vaccine and help folks around the world with that terrible pandemic. And through that generating a proof point, a significant level of proof points on the technology platform that Novavax actually is sitting on, which is this amazing Matrix adjuvant technology and our nanoparticle technology, which allows us to really do some innovative things in the vaccine and potentially immunotherapeutic space that we can talk about a little bit more today. But we've made that full pivot, David, away from a company that was solely focused with all of its energy effort and resources on the one attempt to get a COVID vaccine out and help folks with that to now a company that's focused on partnering and business development supported by innovative research and development to out-license this unique technology platform. And you just -- you saw the Sanofi deal, of course, back in 2024 and then just this January Pfizer, signing up and you see key components in that deal that we see as potential components of future deals and partners. And Pfizer was one of the earlier companies we initially approached as we began to pivot into the new strategy. There are numerous potential partners, other companies behind Pfizer that are at different stages of discussion with us. Multiple material transfer agreements that have been signed, which enabled those potential partners to experiment with our tech in their own labs to get a sense for what it can do to unlock value in their vaccine potentially immunotherapeutic portfolios. And we intend for some, if not all, of those to become additional partners in the future for Novavax. And then on an R&D side, Ruxandra and her team support us is really in 3 key areas. And first, data generation. Rux and her team have worked to generate data to demonstrate our technology's effectiveness across multiple vaccine types and platforms as well as in some specific marketed products that our business development team can take that data in and share with potential partners to get their interest, often then stimulating an MTA and their own desire to experiment with our tech to see it for themselves in their own lab. Secondly, we're innovating Ruxandra, right, on Matrix-M, new formulations of Matrix-M, life cycle management, dry powder for instance, or lyophilized Matrix-M. And then new adjuvants themselves based on the Matrix platform. And it's our vision that we will have eventually or intend to have a portfolio of new adjuvants based on Matrix, selected and targeted to hit very tough to treat diseases and also to penetrate markets like oncology. And finally, last but not least, on R&D, new assets using our nanoparticle technology and our adjuvant. We have 3 in the pipeline or the C. diff and VZV and RSV combination that Rux can talk about a little bit later today, if you like. And through those, we learned. It feeds the first 2 components of data generation and learning more about Matrix to test platform for some of these new adjuvant approaches as well potentially. And also through that then, we could be in humans as early as '27 with one or more of those programs, generating in-human data to then foster further partnering. That's the new strategy for the company. And we're deep into it now and having fun with it.

Phenomenal. So just talk a little bit more about Matrix-M and that potential extension into immunotherapy.

Rux?

So as John has mentioned, we are working on a new Matrix-based adjuvant. So we took Matrix and we've asked the question, are the immune responses that we are generating with Matrix appropriate for some of the new applications that are coming into our direction, for instance, in oncology. And in some circumstances, the answer is clearly yes. But in some other types of tumors or oncology models, we felt that we need to actually do some tweaks, maybe add some components or actually reengineer the Matrix particles in order to elicit a different type of immune response. So for instance, some of the oncology targets require more CD8-positive cells. So this is exactly what we are doing, using those learnings and the prototypes that we are designing to feed back into the innovation loop. We are actually working on Matrix. We are applying it to different tumor types or to those prototypes and then we are going back and asking the questions, are we good enough for this, that and the other. So very simple.

Excellent. So let's turn to key catalysts for this year. What should we be watching for?

Look, continued execution on this strategy and starting with the potential for new deal announcements. Obviously, we can't provide David, any time lines on that, let you know who we're speaking with. But we're seeing more interest right now in our technology from third-party potential partners, other companies than any time since I joined in early 2023. It's quite remarkable actually what we're seeing. And I think other companies are waking up to understand what Matrix-M and our tech might be able to offer them as a potential unlock for significant value in their portfolio. So very exciting. When those are inked, if they're inked, you will find out at that time. It's our intention to do many, and we have multiple conversations going on right now behind the scenes. No guarantees ever. There's always risk in biotech, but it's our intention to bring forward multiple new deals.

Excellent.

So secondly then...

Actually before you go there...

Yes, please.

You don't mind, could you just recap the Pfizer deal. And there's a limited amount that you could say, but would love to hear about that.

Jim, do you want to comment on the Pfizer deal?

Well, certainly. So incredibly excited in January to announce this new agreement with Pfizer to use our Matrix-M technology with not just 1 but 2 different potential fields. Now at this time, those fields are not being disclosed. This is important, not just to Pfizer, but many of our potential future partners for which they want to maintain appropriate discretion to get ahead in their own clinical development. And of course, we'll honor that.

So I'm sorry to interrupt, but when you say 2 fields, you mean 2 different vaccine or 2 different disease states that vaccines would target? Is that what you mean?

That's correct. Within infectious disease that would result in 2 different vaccine candidates.

And 2 potential revenue streams then composed of milestone -- potential milestone payments for clinical development milestones as well as sales milestones and then royalties.

That's Exactly right. And so the architecture of the agreement itself was a $30 million upfront. And then for each one of these field/new vaccines eligible for up to $250 million a piece in milestones or $500 million total. And so they're split between $70 million development, $180 million in sales based. So exceptionally good upfront and milestones. And then the royalties, 20 years, high mid-single digit. So the way to think about the royalties because that's clearly where the long-term value lies is that over a 20-year period, for each $1 billion in average revenue over that period, we get $1 billion in royalties. So if over that period you average $3 billion, you got $3 billion in royalties based on that mid-single digit. And I think the way most of the large pharma players when they're looking at our adjuvant Matrix-M technology, they're looking at very significant markets. And so now you can imagine in the future, if you could, a diversified portfolio of agreements across multiple pharma players that have this type of economic profile with respect to our matrix. And what we're seeing is that this concept that in this agreement, it's not just one opportunity or a vaccine, but two. This is fairly consistent with what we're seeing as we continue our dialogue with other pharma players. When they get the opportunity to get Matrix-M into their labs, they not only want to do one deal, but they want access to do more.

Excellent. Excellent. That's great. I had interrupted. So you were going to move to point 2 in terms of the catalysts?

In terms of the catalyst, right? But certainly, key catalysts would be looking for more partnership announcements. Second key catalyst is advancements of existing partnership agreements that we have, right? So announcements from partners like Sanofi watching for what comes of the fall season now, right? We'll look at the meetings like ACIP and others recommendations for that strain. Sanofi communications around the fall season for Nuvaxovid, where they've got their first opportunity, David, for a full cycle launch of Nuvaxovid under a BLA with a full opportunity to do contracting discussions and negotiations for this coming fall season, '26, '27. So we're excited about that. And any announcements coming from Sanofi on the further advancement of their combination vaccine programs that include their flu vaccines and our Nuvaxovid COVID vaccine. Those were fast tracked. They had positive results on Phase I/II and their own public commentary recently from December forward especially, has been how important, not only vaccines are to Sanofi, but how important those potential vaccines themselves, those products will be to closing some of the gaps they may be facing in the future on patent loss. And so very exciting that they're very committed to that. They're outstanding partners. So look to updates from Sanofi, look to Pfizer for the selection of a second field and potentially us earning some of the initial clinical milestone opportunities from Pfizer. So that would be pillar #2. And then pillar #3 to watch for in catalysts is things coming out of our own pipeline, data, R&D, innovation, et cetera, and continued cost reduction.

Excellent. That's great. And so just to go back. So I guess we talked a little bit about Matrix-M, but one in particular is it that's drawing these partners, what drew Pfizer and what's drawing these potential additional partners from...

I'll hand it to Rux in a moment, but what I will say is when the ability to unlock potential value and what our technology does for companies that are interested in the immunotherapeutic space that -- where this tech could apply and especially the vaccine space and infectious disease and beyond even into oncology is the potential unlock of value. So if you have, for instance, some partners may have assets on their pipeline that they hit a wall with, they hit an impediment on and perhaps Matrix unlocks the potential to move that asset forward in clinical development and potentially enter market in the future, they didn't think they might be able to. If it's a company that's trying to enter an existing market perhaps and they have an asset that could compete in that market, and they think Matrix could give an edge to that, and they've seen maybe something in their lab. That's another example. And this is just generically, not particular to Pfizer here, right? But something that can unlock value matters. And you're talking about large markets. I mean the vaccine global marketplace is projected to be over $60 billion by 2032 globally an opportunity. There's a lot of unlock there, a lot of potential for our tech. Rux, what would you add from a scientific perspective?

From a scientific perspective, we are actually experimenting in our labs, and we are asking the question, as John was mentioning, if we are adding Matrix to these different vaccine platforms with different antigens being viral or bacterial, what do we see? And typically, for the applications that we have tested, we are seeing better immune responses, better durability of those responses, consistently, including in human clinical trials we have seen a very favorable reactogenicity tolerability profile, even if Matrix is added not only to our nanoparticles to our protein-based vaccine, but in conjunction with other platforms and with a multitude of antigens. So those are the types of characteristics that then can enter into the decision-making process that John was mentioning from our partners. Do I have this much of an immune response with the current vaccine, and I would need better immune responses. Do I have a durability of protection of X, but my market would require durability protection of 2x or 3x in order to be competitive? Or if we have, let's say, a vaccine that already have very good immune responses, can I reduce my cost of goods because instead of using, let's say, 10 or 20 micrograms of a specific antigen, I get the same immune response with 0.1 or 0.5 micrograms. So all those considerations, we have evaluated with a number of platforms and antigens, and this is what our partnership with our BD team is generating that the opportunity based on data.

Super interesting. Okay. Excellent. So then I guess we should probably move to your pipeline. So what are you seeing in the preclinical data of your C. diff vaccine candidate that makes you excited about its potential?

I'm very excited about my R&D programs, all of them. But as you are asking about the C. diff, I'll concentrate on it. So first and foremost, we've actually took lessons from the previous vaccine candidates that might not have actually hit the results that were needed to show efficacy in humans. And there are many hypotheses there. So we kind of took one by one. We've looked at the type of antigens that have been used. Prior vaccines have used mostly toxin-based approaches. We've asked the question, is that sufficient? And we decided to go to a multivalent vaccine that might have a broader coverage. Second question was around mucosal immunity because obviously, this is a bug that lives in the gut. And then we thought that having not only human responses in the blood, but the mucosal level would be actually very favorable. So we've entered that into the design, and we've asked those questions in the experimental -- in the experimental design. And then obviously, this is a pathogen that creates spores, yes? So you give the antibiotics to the patients, the bacteria might go away, but it leaves behind these spores, which are extraordinary hard to treat and to get rid of. So the question was, can we do something about it? So we've designed both the antigen and then every single one of the experiments to really address those questions. And we are starting to have data from those experiments, including challenge studies which are encouraging. So of course, we need to take it to the next step and ask additional questions before we would be ready to move to the clinic, which we hope to be in the clinic as early as 2027.

That's one of the first things we discussed when the team took months to really assess about 18 months ago plus, which targets did we want to approach.

Exactly.

Engage in the new strategy and make the pivot away from a commercial COVID company to an innovative company through partnering. And this was a big part of that discussion and show me why we should believe that we have a chance to succeed where others had failed. What were the reasons they failed. Is it just another attempt that what are we doing differently? And what could we learn from what's in the public domain on how they approach these studies. How they approach the design of their prototype vaccines that didn't work out of the past from big players who have a lot of knowledge and resource. And I think, Rux, you did a great job with your team on that. And showed us that we believe we can and we're making so far at this early stage, very nice progress there. We're being careful exactly what we share, we think we found a potential unlock pathway here, but still more work to be done, very exciting progress to date.

The North Star being the target product profile.

Yes, exactly.

And if I could, one of the things, and I won't give away some of the details that I like about the work that Rux and her team are doing, is that it moves beyond just delivering unlocks related to those particular markets or candidates. What would each of the experiments that she's working on right now speak to some of the scientific underpinnings of why our technology is working where others have failed. And that matters. It matters not only to partner these programs as you advance them, but as you talk to potential partners who perhaps have their own antigen who may be stuck we're an idea or a market they want to go after, we are putting forward proof points through our early-stage development that open up other BD opportunities.

An innovation feedback loop really.

Absolutely is.

That's phenomenal. And just talk about the patent protection for that, for Matrix. And obviously, you're advancing other candidates as well. But how should we think about that given the competitive nature of the vaccine?

Jim, maybe you want to comment on IP in general.

Yes, certainly. That's right. And I'll start with patents, but of course, it's a broader right set of protections. So for Matrix, we've got either existing or pending applications that would go out through the 2040s. Okay. But as we know with biotech and in particular, vaccines, it's well beyond IP. It is also know-how of manufacturing as an example. But there's more beyond that in terms of supply chain management, and also the safety database that we have accumulated over the past 5 years, not just with COVID, but remember, R21 over 30 million doses delivered and that's being dosed down to as young as 6 months.

5 months.

Five months of age, an exceptional global safety database across multiple indications, across multiple age groups. So that is really tough to replicate.

And for the new formulations for the new Matrix-based adjuvants for new work, as Jim was mentioning, we are capitalizing on the data, and we are continuing to gather additional intellectual property. I'd like to call it an onion because it is really layers and layers of protection that is not only adding to the existing portfolio, but with an eye of where can we take it from here to where we want to be in the future.

And Rux, as you said earlier, we're working on new formulations of Matrix-M. David, we're working on new adjuvants that are Matrix-based that are targeted and selective to certain hard-to-treat diseases and potentially certain types of tumors in oncology, et cetera, each with the potential for its own IP as well.

Excellent. Excellent. So then, Jim, maybe we could turn to the company's financial prospects.

Yes, certainly. What a difference 36 months make, right? And we were very happy to be able to articulate at our most recent earnings that we see a really strong balance sheet that we have, therefore, the ability of the cash runway that could get us into 2028 and at a point where we could be approaching or reach non-GAAP P&L profitability as early as 2028. So that was an incredibly important update that we were able to provide just recently. When you think of, well, how the heck did you get here? Over the past 3 years, we have taken out in terms of R&D and SG&A over $1 billion out of our P&L as we transition the company with the new strategy that John mentioned and focus on our core technology. In addition to that, we reduced our current liabilities by $2 billion, I mean, which is unbelievable. And then we took the liabilities we had and we renegotiated them, spread them out over time. And then we've been generating cash, 80% of which $1.4 billion from -- of that $1.4 billion from non-dilutive sources, upfronts and then more recently, a credit facility. So we're doing all those, call it, financial management requirements to now turn the business towards value creation through all the innovation through the partnership, and that's the path we're on now.

Excellent. And could you talk about the levers, the pushes and pulls to achieving non-GAAP profitability?

Certainly. To kind of ground folks on where we ended 2025 as we go towards 2028, our R&D plus SG&A, and I speak net of reimbursement was just over $400 million. And then as we look to 2028, we just shared that we're going to target $200 million or below or cut that in half. And so that's going to occur over the next few years as first. We complete some of our trailing obligations to partners and APAs in this year 2026, of about $100 million. So we've guided to -- and I should say, starting in '26 and forward, we're already operating at that mean $200 million or below. We're already there.

The core business.

The core business. What we have in '26 and '27 that add to that are some trailing obligations related to APAs, some aspects of our agreement with Sanofi that aren't reimbursed like our share of the postmarketing commitment. So those are going to play through in '26 and a small amount in '27. But I think the key point is that we are seeing ourselves operate already at that core spend level of $200 million or below.

Perfect. Well, we're almost out of time. So John, let me ask you to just wrap up with what else we should be focused on. We've covered a lot of ground, but we'd love to here any closing comments that you have to offer.

Thank you, David. Well I appreciate your attention and everyone here that's listening and joining us today. Thank you. Thank you very much for that. We couldn't be more excited about 2026. So Jim, like you said, wow, what happens in 36 months. You take a look back what a journey together to put the company together through our collective efforts into a position to focus a lot more on value creation, a much more stable financial position than when 3 years ago when I first came here. So we're excited about where we stand today. We're seeing more interest in our technology than seen since the first time I got here 3 years ago. Lots of other companies coming to chat with us, really interested experimenting with Matrix in their own laboratories. We intend to bring forward more deals and partners. And our vision is to have, as Jim was saying and Rux has been saying a portfolio of assets that we can continue to out-license, whether those are early-stage vaccine candidates, new versions of Matrix-M, new adjuvants that are matrix-based, a portfolio of partners, plural, with multiple assets in development, each with tiered or stacked opportunities for Novavax to earn milestones on clinical and sales and then royalties for decades. That's the vision. On a lean expense platform, and we remain focused and diligent. And my last comment is the culture we've developed at Novavax is one of partnership, family, collaboration and humility. We take nothing for granted. We're working really hard to not let any of you down. It's been a tough journey. Biotech is risky, and it's difficult, but we're very proud of the accomplishments that we've had the last 3 years and very excited about where we sit today and the potential opportunities ahead for Novavax to drive value in frankly, make a meaningful impact on global public health.

Phenomenal. That's a great way to wrap up.

Thank you.

So thank you again. Appreciate you being here.

Thanks for joining us everyone.

Thank you.

Thanks.