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

Here we go. With us, we have Novavax, and I'm now pleased to introduce John Jacobs, CEO; Bob Walker, Head of Research and Development; and Jim Kelly, CFO. So with that -- introduction -- please start off with the introduction of yourself, a snapshot of the company for those not familiar.

Thank you, Pete. I'm John Jacobs, CEO. As you said, Bob Walker is to my left, Head of R&D; and Jim Kelly, our esteemed CFO. And let's talk about Novavax a little bit. Just for those who don't know us, Novavax is an innovative biotech company that has a proven technology platform in vaccines and potentially immunotherapeutics with our nanoparticle protein-based platform for antigen development and our unique and differentiated Matrix-M adjuvant, which can help vaccines perform even better, driving immunity and potentially lower COGS and other things for other pharmaceutical companies when used in combination. We've really transformed ourselves over the last 3 years from a company, Pete, who was solely focused on commercializing one vaccine, our COVID vaccine during the pandemic to a company now that's in a completely different arena, where our focus is out-licensing our technology to global partners who have the infrastructure and capabilities to build portfolios of potential vaccines that might include our technology. And also while maintaining our own R&D capabilities, we're making select bets to advance our own assets and expand the utility of our own technology. In fact, we're deep into exploration now on oncology potential, not just infectious disease potential. We'll talk a little bit more about that today. And over that last 3 years, in parallel with developing and launching this new strategy, we have reduced our expense base between 80% and 90%, along with headcount while maintaining key talent and capabilities and positioning the company with over a 2-year cash runway to support the continued execution of our new strategy.

All right. So you joined the company as CEO in 2023. You've been sort of steering the company forward with this new strategy. Just touch where you are and the outcomes to date for the strategy pivot. And how are you sort of positioning the company for long-term value creation?

We're very pleased so far with what we've achieved in the strategic execution. And we launched the new strategy formally and fully in January of 2025, Pete. And to date, we now have 4 of the world's top 10 pharmaceutical companies working with us, either as direct license partners, Sanofi and Pfizer or through MTA's material transfer agreements where they get access to our technology and can experiment with that in their own laboratories. In fact, earlier this year, we announced one of the 4 top 10 was a new signee into this MTA arrangement with us and is a global leader, not only top 10 market cap pharma company, but a global leader in oncology as well. So we're really excited about where that could take us. Just a few highlights and examples of the progress we've made so far. So as I just said, 4 of the top 10, we are having right now about 30 different unique areas of exploration. That's what our partners have access to right now across infectious disease and oncology targets, encompassing a wide array of tumor types, a wide array of viral and bacterial infectious diseases and across a number of different types of vaccine platforms. Now if you take a look at those 30 areas of exploration and just suppose that works out in our favor and turns to license agreements. We're excited about the potential that represents for Novavax.

All right. So let's touch on the Matrix-M Tech platform. Sort of give us an overview of what Matrix-M is exactly where it's currently being used? And how are you thinking about leveraging for new vaccine disease areas?

Yes, sure. So Matrix-M is a saponin-based adjuvant, which is now available in 2 commercially available vaccines, Nuvaxovid, our own COVID vaccine and R21, malaria vaccine, that is a WHO prequalified vaccine and administered to millions of kids in Africa. So Matrix has some unique properties. And now that we've had experience with literally tens of millions of people who've received Matrix and a Matrix-containing vaccine, we know that its safety profile, its tolerability profile looks very strong.

I can attest to that because there's one vaccine I did take.

And it's also -- it's antigen sparing. As an immune stimulant, it allows you to administer a smaller dose of antigen to get the same immunologic benefit. And that has advantages not only in terms of exposing individuals to smaller doses of antigens, but there's cost of production manufacturing savings that go along with that, that can be very important. We're leveraging Matrix in basically 2 ways, in the infectious disease portfolio. And here, we're focusing currently on hard-to-treat, hard-to-prevent infections. And C. diff is a perfect example of a candidate vaccine that we're working to get into the clinic. So difficult-to-treat infections would be one area we would expect to be able to capitalize on some of the properties that Matrix brings. And the other is in the field of oncology that John mentioned a few minutes ago. In oncology, it's all about turning cold tumors hot, making them accessible to the immune system. And Matrix has certain properties that we're excited about and we think could play a really important role in this exciting new area of oncology.

I think it's overlooked, the fact that you actually have a very huge database of safety with Matrix.

I fully agree.

You've already signed the MTAs with multiple top 10 pharma partners. Just can you sort of speak to the level of interest you're sort of seeing around the platform and how you intend to translate this to a level of interest -- this level of interest into new licensing agreements and sort of stable revenue?

Pete, I really appreciate the question because not only is there more interest than we've ever seen before in our technology at Novavax behind the scenes from top 10 pharma, midsized pharma and small innovative biotechs, many of whom explore in the oncology arena, working with us behind the scenes, calling us, talking to us about maybe even signing up for an MTA, that first step. So more interest than we've ever seen since I joined in January of 2023. So it's almost like we say internally, facetiously, the secrets out about Matrix-M, right, with our potential partners and collaborations. In addition to that, though, Pete, you see the excitement around vaccines starting to build again. It's like this waxing and waning a little bit over time historically. There was a bit of hesitancy with vaccines and some pressure from government officials and things like that. But what you're seeing with the news around Moderna with personalized mRNA oncology vaccine options and a checkpoint inhibitor, Merck's KEYTRUDA, fantastic news for the whole industry, and I think for human time because it shows that there's a new approach that might be able to help to take on this scourge of cancer around the globe. And we had started about 18 to 24 months ago when we launched our new strategy formally in '25 for sure, with certainty to pursue and explore the potential of Matrix-M and our technology in oncology. We're well into our own experiments. We expect data in the coming quarters on those experiments. The top 10 pharma who signed with us earlier this year, who's a leader in oncology, we will also see data from their experiments, which are underway in the coming quarters. And we hope to see in the future as part of our future vision, licensed partnerships involving targeted oncology immunotherapeutics and vaccine interventions over time. So really exciting to be part of this wave and that excitement is building externally in the macro environment as well as behind the scenes with what we're seeing.

All right. So we did -- you did mention back in April, there was a new MTA signed with a top 10 pharma partner in oncology to explore Matrix-M in oncology. What do you believe Matrix-M could offer in the oncology setting from a mechanistic standpoint?

Bob?

Yes. So -- from a mechanistic perspective, I'll just build on some of the things that John said earlier. Again, it's about converting cold tumors into hot tumors. And what Matrix-M is able to do is activate not only the antibody side of the immune system, but the cell-mediated T cell side. And in oncology, you probably know, I mean, CD8 cells are the key critical killer cells and tumor-directed immunity is -- that story is all about activating CD8 cells, which Matrix-M has the ability to do. And we've seen that, and we're continuing to explore that with our own R&D programs at Novavax. We have a variety of tumor models that we're exploring that exemplify cells from head and neck tumor, for example, colorectal tumor, pancreatic cancer, melanoma. And in these types of model systems, we're exploring the ability of Matrix-M plus tumor antigens to induce those very specific immune responses that we were talking about a moment ago. Our partners, and John mentioned this also, are also doing some of the similar types of work in their model systems or with preclinical experiments that are specific to the areas where they're investigating. And so those are data that we expect to be able -- we expect to see in the coming months, and we're very excited about that. We already see early signs that are encouraging. And yes, so again, mechanistically, I come back to that point, it's turning cold tumors warm.

Okay. And we expect to see data generated internally, preclinical data or partners, both. So sort of moving on to Nuvaxovid for COVID. Congrats on getting the recent approval for the updated formulation. Can you just provide us with an overview of where Nuvaxovid will be marketed this season and by which partners plus your views on the global market opportunity?

Jim, do you want to take that?

Yes. Certainly happy to cover that. I think one of the critical things about the market that's being reinforced is that the burden of disease of COVID continues to be exceptionally high, even while vaccination rates are not reaching that equal parity with flu, which has a very similar burden of disease. And therefore, when we look at the market globally, I'll start first with, hey, who are our partners, what areas of the world are they covering? So, Sanofi. Sanofi under our collaboration license agreement is the lead commercialization partner for Nuvaxovid in the U.S., in Europe, Canada and major markets around the world. We have Takeda as a long-standing partner in Japan. So we believe we've got some of the best partners globally in the respiratory space with Nuvaxovid. In particular, as we look at the U.S. marketplace, your timing of the question couldn't be better. Shipments to retail of Nuvaxovid occurred over the weekend, right? So we had approvals of Nuvaxovid right in line with the other vaccines in late August, shipments over the weekend. And we just began to see some of the early vaccination data coming through public sources like IQVIA overnight. So we're at the very beginnings. Individuals looking to pick a protein-based option, you should expect in coming days, the ability to get Nuvaxovid scheduled at your local pharmacy, exceptionally important. In terms of the sizing of the market, we are seeing a global market for 2026, say, approximately $5 billion, right, plus or minus, with an expectation -- ex U.S. data, not as good as U.S., but expectation about a 50-50, right, split between U.S., ex U.S. And that gets you a top 5 market in terms of vaccines. COVID is still an exceptionally meaningful market. As we look forward where the market is going, it's a combination, COVID plus flu, flu being a $5 billion to $6 billion market. So when you combine where this market is going, COVID plus flu, and it's a $10-plus billion market, it's one of the top markets in all of vaccines. And that's why you're seeing our partners, and in particular, you're seeing Sanofi lean into not only marketing Nuvaxovid, but the development of the combination of Nuvaxovid plus their market-leading enhanced flu. And so that's what we're really excited about is not only the ability of our partners to execute today, but where they're headed in terms of driving combination vaccines.

So for Sanofi in the U.S. market, what are the sort of keys to grow share?

Yes, certainly. Part 1 is access to retail. The retail market is 85%, 90% of the total marketplace. Well, step one, make sure you've got contracts and availability across all the major players, check. They've done exactly that. They've stated as much. And in a timely manner, that season is starting now. So availability on the shelf. Part 2 is the pull-through of, hey, what's your direct-to-consumer look like? Are you activating consumers? The answer, yes, they're rolling out their new program and actually started earlier this week, their new program, the digital program, direct-to-consumer to help activate those looking for a protein-based option. And so those are some of the critical keys to getting product out there. Now I would say, when you look at Sanofi, they've got in the enhanced flu 2/3 market share. So they're like 70% plus in the enhanced flu market. How did they get there? They did it by investing, investing in data and methodically growing that business over time, which leads us to another critical success. Hey, are you generating real-world evidence and data? And they put out earlier this year, something called the COMPARE study that showed the favorable profile of Nuvaxovid versus mRNA. Build on data we presented, the Utah study, right, SHIELD study, University of Utah, where we showed Nuvaxovid exceptionally favorable tolerability profile. So what we anticipate as Sanofi markets Nuvaxovid over time, methodically growing market share over time and then combining Nuvaxovid with their market-leading flu combination product.