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

Yes. Thanks, John. Yes. So in the oncology space, there are a number of translational models that are generally well accepted as early proof points to generate interest to want to look further. So we're obviously availing ourselves of those translational models. And there are standard endpoints that have to do with tumor size, tumor shrinkage, immune cells, infiltrating TIL cells, like you mentioned, other immune properties, surface markers that can be indicative of specific activities that you're trying to tailor your therapy to. So we're looking at the whole broad range of those readouts.

Yes. And then combinations with other potential therapies as well.

Yes.

Good question. Thank you, Geoff.

Guys, a lot of the -- so Sanofi, the partnership funds a lot of the OpEx and really the company, I wanted to ask you at a high level from a COVID maybe demand kind of perspective, what are your thoughts about longer-term picture in that category? And then maybe speak to kind of the backdrop today as we look to like from a policy context, right, like the attitudes towards COVID, towards vaccines.

Absolutely. And I'll hand this one over to Jim right before I do, I think it's important to understand our position coming into this, right? So if you're -- the other companies that were there ahead of Novavax originally during the pandemic, had massive amounts of revenue coming in during that time, obviously, and then they've experienced a declination in that curve, right? For Novavax and for Sanofi, this represents upside opportunity right now. And I think Jim will go through the market size of Sanofi is a world leader in flu, what COVID could mean to us with a differentiated asset in Sanofi's hands. So I think that perspective matters for us that we're not defending something that's shrinking. We're actually looking to grow within what's still a significant opportunity from our perspective in Sanofi. So Jim, you may want to take that one?

Well, certainly. To remind everybody the importance of the respiratory marketplace within broader vaccines, vaccine is about a $60 billion market. The top 5 vaccine markets are about half of that $30 billion. 2 of those 5, flu, about a $5 billion to $6 billion market. And we'd estimate COVID this year is about a $5 billion market, almost 50-50 is just an estimate U.S. ex U.S. This is a top vaccine market. But that's the dollar view. It's the burden of disease view, which I think more speaks to the durability and where this market may go. So at the May 28 VRBPAC, really nice job by Sanofi, Moderna and Pfizer talking about burden of disease with COVID as compared to flu in 65-plus. The takeaway, they're right on par with each other. They really are. These are -- this is a condition that's not going away. There's a high burden of disease, both death and hospitalization, and you're seeing that in the recommendations, both domestically and globally. So I'll start with that. Then you say, okay, great. We know that this is something that needs to be treated, high burden of disease, not just in over 65, but immunocompromised. We expect a significant durability. -- where is the market going? Stand-alone, you heard about a $5 billion market. But importantly, the flu market is converging with the COVID market via combination development, of which Sanofi, right, is an important part of that. And if you take those 2 markets together, they'll be combined the biggest combined market opportunity in vaccines. This is critical. As we look at the role our technology can play there, well, we know just from our internal marketing and preference share, there's a strong preference share for protein-based vaccines. And Sanofi invested greatly in tolerability data, the COMPARE study, showing the advantageous reactogenicity profile and tolerability profile. We think they're exceptionally well positioned, and we're looking forward to their work in the coming weeks and years to drive COVID vaccinations with Nuvaxovid. But as you look at the intersection with Nuvaxovid with their market-leading flu, and I'll remind folks, their enhanced flu, the flu pointed at the most vulnerable, they've got almost 2/3 or 70% market share. That's the exact group that you want to combine COVID vaccinations with, right? That's 65-plus and immunocompromised. So we see great opportunity for Nuvaxovid, not just as a stand-alone in the hands of Sanofi, but to continue to grow and enhance adoption of Nuvaxovid as a part of a combination treatment with and perhaps even 2 of their vaccines. They've discussed developing Nuvaxovid plus their market-leading Fluzone High-Dose and Flublok. So they're making significant investments with our technology. So we look forward to the pull-through.

Let me just follow up on that. If you look at the pushback, I would say, on the mRNA kind of platform technology for COVID, there should be kind of an incentive to move away from that, right, on the -- towards protein-based vaccines like Nuvaxovid. But I want to ask you, though, what's been the scorecard though, with respect to Sanofi's rollout? You haven't seen like massive share, but it's been in the right direction. Totally agree that like combining flu and COVID like really gives you sort of a 1 plus 1 equals 3 kind of idea. But maybe give us your assessment of the -- of the the COVID success, I would say, from Sanofi. .

I would say, Geoff, it's very early right now in that stage, and it's at the very beginning, really. So last year, they made the product available in the U.S., but no commercial effort behind that. And that's due to the retail access. So once a product gets licensed and then you can negotiate with pharmacies, you have to have access first. Even if there's consumer demand or interest, you can't pull that through unless the vaccine is in the refrigerator with pharmacy. You have contracts with those pharmacies, prebookings and other things that are part of that seasonal vaccine infrastructure in the U.S. marketplace. And for COVID, even much more significantly than flu, Geoff, right? It's about 90% or so plus of distribution of COVID is through pharmacy retail chains and stores, not through physicians' offices. Flu, flu is a bit more balanced that way. So this year was the first full launch cycle. And what we mean by that for Sanofi is under BLA licensure to start the negotiations with retail at the end of last year. In that season actually is when it starts the next year and closed that out roughly in the springtime of this year. So now Sanofi has told us and they're excited about being available in all the major retailers this year, and they just started shipping. Strains were approved on the same day as mRNA. believe that's the first product was released, and they just started shipping over the weekend. So this is the first week that pharmacies around the U.S. would begin to be stocked with Nuvaxovid by the end of this week into next week more robustly. So it's very early and premature even now to look at dailies or weeklies as pharmacies are fully stocked. And really, the bulk of the season occurs starting this week into the next 6 to 8 weeks, probably up to Thanksgiving or so, and then you have the majority of shots in arms there. So I think let's watch this now over the next 8 to 10 weeks, how it materializes. And what we would expect to see is not a gigantic market share win overnight where they gamble everything on that one season, but a methodical purposeful approach to building meaningful share over time from Sanofi. First year launch here, take that first bite of the apple proverbially and then move from there to next season, again, furthering that negotiation with retail penetrating that refrigerator further in Europe, as the Pfizer APA winds up its last year this year, tenders open up, look to Sanofi to launch in additional countries. This year, you'll see Canada, Germany, Sweden, others that they're launching in for the first time. So it's a global market, not just the U.S. market. There's opportunity out there, and they're a global player. So we don't expect miracles overnight at all, but we do expect methodical improvement in market share penetration as they build meaningful share into a potential launch of a combination vaccine franchise. So we're excited about that.

Yes. So I mean, following up on that, I definitely heard the news about Sanofi starting their direct-to-consumer campaign with the U.S. pickleball, which I think kind of hit squarely at the demographic that maybe the target demographic is. So maybe on that, do you expect the patients coming to retail asking for COVID for Nuvaxovid? Is it going to be more consumer-driven? Or do you think it's going to be more messaging out on television and DTC or physician-driven type of messaging? I mean, Jim, I know you mentioned that Nuvaxovid has benefits on tolerability. So I'd be really curious to see what type of uptake that Novavax is anticipating at least initially for and what's driving some of that uptake momentum?

Yes. So I, let's talk about 2 dimensions to your question. The first one is it's not going to be a mystery. In the coming, I'd say, beginning as early as next week, you're going to see, hey, what is Sanofi able to do as you've got stock into pharmacies and Nuvaxovid addition to the pull-down menu at major retailers, and they've got that distribution through major retailers. And then we all have IQVIA. -- and they're going to -- it's going to happen live. You're going to be able to witness it over the coming, as John said, 8 to 10 weeks. So not going to be a mystery, we're going to see a pull-through. You asked some important questions about, hey, how do you do it? Like how does this work? As folks who might be new to the vaccine market, the way it works is prebooks, which occur way early back in Q1, retail pharmacies agree that they're going to take certain deliveries right now. These are the deliveries that are occurring of commitments to buy. Then that pull-through becomes a function of patient choice and when they go to those pull-down menus and show up in the retail pharmacies. This is where Sanofi's efforts with their direct-to-consumer campaign, which includes digital, right? Digital is a really important part of their campaign right now. And they have an orientation towards tolerability in that campaign, which makes perfect sense in light of the COMPARE data. I think folks have seen that study. They funded a readout earlier this year that shows significantly better tolerability as compared to mRNA on both systemic and localized reactogenicity. It's exceptional. So let's see how they pull that through. But importantly, because availability is occurring this week in the pull-down menu, let's start looking at the trends next week and see where this goes. It's not going to be a mystery.

Totally. That makes sense. So I kind of want to circle back to our earlier conversation on the combination vaccine, just given -- we are, call it, maybe halfway through or mostly through third quarter already. And Sanofi has stated that they are looking forward to launching the late-stage study as soon as possible. But I guess thinking about seasonality and Northern Hemisphere versus Southern Hemisphere strains launching for flu, how does that kind of, in your view, affect timing of when a Phase III may start? Could EU or U.S. kind of accept a Phase III study for combination using a Southern Hemisphere data?

So though we can't comment directly on any plans Sanofi may have in their specific timing. I think Geoff is asking an important question, Bob, about how one in general might approach doing these studies. And does it have to be tied directly to an in-season moment? Can you generate data outside of that? How might that affect in general, the company's timing on a Phase III trial?

Yes. Well, it's never simple. I think you probably already know that. For the typical big clinical efficacy studies, they tend to be favored towards the Northern Hemisphere just because the population is larger, the access to populations is greater. And the populations tend to be more representative of the markets that dominate the U.S. and Europe, for example. But the other part about doing a Phase III planning for influenza vaccine studies is that you can rotate between Northern and Southern Hemisphere. So oftentimes, operationally, companies will set up and just prepare to do around the globe because it's hard to predict where flu is going to break out, and you want to try to cover as many patients as possible, particularly when you're undertaking something as large, expensive and complicated as a Phase III efficacy trial.

And Bob, there are other pathways as well, like an immunity-based pathway like Moderna had in Europe. You may want to comment on that.

Yes. So there's non-inferior immunogenicity as another potential pathway towards licensure. This is accepted in Europe. In the U.S., things have changed. So it's still evolving, a little hard to know exactly as an accelerated approval pathway in the U.S., how open regulators are going to be to that. But there, it's less important to do a study in the season or out of the season because it's immunogenicity that you're looking for. And the strains don't have to be relevant to the ones that are circulating because you're not trying to prevent disease in those studies. You're trying to demonstrate a biomarker effect that will be extrapolatable from strain to strain. That makes sense.

Yes. So there are different pathways to get there. And for Novavax, whether they start a clinical trial, if Sanofi were to start it either in Europe or the U.S., we earn our $125 million milestone, which is important. And we would anticipate Sanofi since they want to be and have claimed that they will be one of the first with the combination vaccine to want to penetrate the U.S. market as well. So there's a pathway in both markets. We're getting additional clarity on the U.S. market pathway. And it'd be interesting to watch what Moderna says in the coming months and quarters on where they are with their original application on the COVID vaccine for the combo for the U.S. marketplace. And it was encouraging to see the approval of their flu vaccine. So we're seeing a bit of change in tone. And I think also the new news around mRNA vaccine platform and vaccines in general in oncology has also helped with that to really resolidify the place that vaccines may have for a long-term future in humankind. I think they're really important for public health, and I don't think there's many people that would deny that, that know about vaccines.

Let's move in a different direction. I want to talk about C. diff and maybe strategically, how important that is to you guys, give us the logic of what you looked at to move into that in an intended way and maybe give us the next kind of data points on that program.

Right, Geoff. When I joined the company, I worked with the R&D team and with our management team to establish an even more rigorous assessment process on what we may choose to invest in from an R&D standpoint. And when you couple that with our lean infrastructure, Jim, with an 80% to 90% reduction in cost, importantly, while maintaining all of the core capabilities we need to still generate R&D studies and assets, we've been extremely thorough in our assessment of market opportunities. I won't go into all of the filters if you take like a working value approach and a filter approach, you're going to look at probability of success of your tech, unmet medical need, competitive pipelines, effort that it takes to put something forth, resources and dollars that it takes, what you can't do if you're pursuing a certain thing here, what are you not doing then instead? All of those trade-offs are assessed. And we filtered that down to a few key target disease areas in infectious disease to begin bringing forward our own vaccine candidate. We landed on C. diff for many reasons, including a potential multibillion-dollar market opportunity for the same reasons that Pfizer has stated publicly. There's an unmet medical need. And in fact, personally, it hit home with our family, my sister and her best friend died of an unanticipated C. diff infection just last year, leaving 3 children behind after a routine surgery on her abdomen. So folks in -- especially in Western society where there's high antibiotic use, die by the thousands from this every year, Geoff. There's nothing for them. So we are absolutely rooting for our partner, Pfizer, to succeed there. It looks like they're on track with the Phase III. We couldn't be more excited for all of us and for our loved ones and also for them to build that market and establish that market with a successful vaccine. We think we've got something that's differentiated. That's a pentavalent target, including peptides that cover a broad array of the disease-causing agents in that bacterium. We're excited about what we've seen in our preclinical modeling, and we could be in the clinic as early as 2027 with that, heading toward proof of concept in humans. And we intend to do this as part of our existing strategy to the first potential value inflection point. And if we have a partner or a potential partner come in that wants to take that on and make those clinical investments and pay us milestones along the way and into our model, and that makes more sense than bringing that forward ourselves, that is the path. That's in our strategy. If we need to bring it a little further for further proof of concept even into a Phase II, that flexibility is already contemplated in our projected financials, Jim. It wouldn't require anything more than we already stated we're targeting on SG&A and R&D. On SG&A and R&D expenses going forward. So we're ready to move on that to optimize the value within our strategy. Hopefully, that's helpful, Jim.

Yes. Very helpful. Yes. Well, with that, John, Jim, Bob, thank you guys. Appreciate the time.

All right. Thank -- thank you, Geoff. Thank you.