Vaxcyte, Inc. (PCVX) Earnings Call Transcript & Summary

Thank you so much for joining us at the Bank of America Annual Healthcare Conference. My name is Jason Gerberry, I'm one of the biotech analysts here. I'm pleased to be introducing our next company presenter, Vaxcyte. We've got Grant Pickering, CEO; Andrew Guggenhime, CFO; Jim Wassil, COO. So gentlemen, thanks for joining us.

Our pleasure. Thank you for having us.

So maybe I don't know if you have any brief kind of prepared remarks that you may want to offer up at all, or you just want to jump straight into Q&A.

I'd say we just jump right into Q&A. We'll let you drive.

All right. Sounds good. Maybe if you can just like briefly talk about just your thought process as a biotech company going into a space that is historically been dominated by large-cap pharma. It's not a space we typically see a lot of biotechs going into, all of the barriers to entry that you see there and how you felt like the company was uniquely positioned to take on those challenges.

Yes. It's not an accident that vaccines have almost exclusively been the purview of major pharma. There are very good reasons for that, which largely center around the certainty for vaccines, which aren't usually delivered until the Phase III data reads out. And that's usually because, certainly, for a novel vaccine, and we all saw this with the COVID vaccines, we had to wait for the outcome of those tens of thousands-strong clinical study results that told us whether or not we actually prevented the disease. And so that backloaded answer works very much against, certainly, venture-backed entities where the time from formation to the receipt of that data can be so long, the capital intensity and risk profile makes it very difficult for smaller companies to address novel vaccines. And what we saw with this opportunity, despite the magnitude of a pneumococcal conjugate vaccine having historically been the largest revenue-generating vaccine in the space, is a very different dynamic, which, now that we know that efficacy is derived by the early antibody responses that you get right after vaccination, those validated surrogate immune end points are received in Phase II clinical development. So you get that answer where you're derisking the asset years before you would ordinarily. And that allows you to get that answer earlier and make that major investment to supply a vaccine, which could have global demand. You get started on that supply much earlier than having to wait until the end of Phase III. So those things were all working for us as we set out on this mission to create best-in-class pneumococcal conjugate vaccines. And that's what set us up to get the answer that we got in October, which was a very clear signal that we have what it takes to deliver a best-in-class pneumococcal conjugate vaccine that was further exemplified by our Phase II data set of a few weeks ago. So it allows us to get ahead of that supply, which is what the proceeds of that last financing that we raised will help us do. So those were the big drivers that gave us the confidence that, unlike tradition, a small emerging company could rise to the occasion of a product of this potential magnitude.

Sure. Sure. So you kind of alluded to it, but you have what you said about a Phase II trial, you can get a pretty quick answer. And you may be in a position to advance the 31-valent into the clinic in the second half of this year and get a pretty quick answer on that. So you could have 2 programs in parallel, the investments that you're making in VAX-24. Can you just talk about if you have this embarrassment of riches and you've got VAX-31 going for you, can those investments kind of aid you along in sort of the ramp-up and scale-up for VAX-31?

Yes. I think you're really on to something there, Jason. And we always felt that the technology that underpins our pneumococcal conjugate vaccines would lend itself to delivering broader spectrum pneumococcal conjugate vaccines that could exceed the spectrum of coverage that's possible with the first-generation chemistry that the current vaccines are based upon. And so we felt like a 24-valent vaccine was what the market needed. But we felt like a 31-valent would be the best long-term solution for this market. And so that 31-valent started out as basically the dream that we have that we'd want to get to eventually as we were showcasing this technology and thinking about how to manage our pipeline. But then the reality is, and the synergies between the 2, made it manageable to keep VAX-31, as you say, right behind VAX-24, with an expectation to be putting an IND for that program in later this year and be able to receive the clinical data next year. And so that comes from the mere fact that 24 of the conjugates that are in VAX-24 are also in VAX-31. So we've been able to make adequate supply of those 24 conjugates to have us 3/4 of the way to VAX-31 already. And so it's just been that incremental investment on top of the 24 conjugates we already had. So that's a fairly modest increment and something we've been able to manage to keep that optionality and, as you say, what could turn out to be an embarrassment of riches with a best-in-class 24-valent and then a 1 better -- well, 7-better vaccine in VAX-31.

Got it. Sorry, are you going to say something, Jim?

No.

Okay. You mentioned coming off the Phase II elderly data that you had recently. Maybe can you just talk about your preparations going in for Phase III, what that study could look like? And any clarity on when second half the FDA interaction could happen for the Phase III trial design?

Yes. Jim, do you want to take that one?

Sure. So in terms of our Phase III approach, obviously, we got to do 3 prerequisites. One is the pivotal noninferiority study, second is a lot-to-lot consistency study and the third is to hit 3,000 subjects. So we're developing our protocols to meet all 3 of those requirements. For the pivotal noninferiority, Merck did their Phase III study for VAXNEUVANCE in 50 years of age and above, and Pfizer did theirs in 60 and above, which roughly 2/3 were 60 to 64, 1/3 were 65 and above. So we've got a lot of precedent to look at. We're looking at our data. But we're actually not looking at what we need to do in terms of a population to meet noninferiority. What we're going to try and do is to actually see if we can get some superiority claims for a few of the serotypes in our label. Merck has set a precedent, where they were able to get serotype 3 in their label with statistical superiority. So when we do our study design, we're going to take a look at the 50 and 60 population to see if we can maximize our opportunity to have more than 1, probably, at least 4, maybe even more, serotypes in the label that allow us to say that we're statistically superior.

Who do you think is going to read that label claim? Do you think it's the doctor, the payer, the CDC? The CDC tends to focus, I feel, like a lot more on sort of post-market outcome events, if I think about them. But maybe correct me if I'm wrong, do you think about ultimately who that will sway in the downstream process?

I'm hoping it sways everyone. I mean, it's pretty much well-established that having higher levels of immunogenicity are not going to necessarily be negative. It's just that they might not be leading to additional outcomes. The general sense is that you'll have better outcomes and longer protection with higher immunogenicity. So if you look at the ACIP right now when they were debating the Pfizer infant vaccine back in February, they were debating about immunogenicity as well as breadth of coverage. So I think, if nothing else, if we are able to show higher levels of immunogenicity and broader coverage, both the ACIP will acknowledge that and potentially give us a preferential recommendation. But yes, the individual physicians, when they see higher levels of immunogenicity, statistical superiority, I think it will have a marketing advantage, too.

Okay. So it sounds like, I mean, from listening to more recent calls that you guys have done, this FDA interaction is somewhat procedural, I don't want to put words in your mouth, but mainly maybe some small tweaks on composition of age subgroups and perhaps what your active comparator is. And I would imagine that PCV20 might be an easier comp than VAXNEUVANCE. But for practical purposes, maybe you might go with the PCV20?

Yes. No, I think you're exactly right. It's -- for me, normally, you go into an end-of-Phase II meeting and you're really nervous. And in this case, there's 2 precedents of programs that are on ClinicalTrials.gov that have been approved products by the FDA. And the FDA likes to stick with precedent and not treat any one company any differently. So I think we've got a playbook, and we don't need to get fancy here. We just need to show the noninferiority immunogenicity. We have to hit the lot-to-lot. We've got to get concomitant use with flu. We got to do a few studies in at-risk groups, and we're ready to go.

Okay. Maybe an Andrew question. I think you exited about $1.5 billion in cash. You've talked about on, I think, your fourth quarter call about being in a position to supply the U.S. adult market from a supply perspective. You've added some capital, right, to sort of step that up. But you've also said that to be global and despite the infant market, that could be a several-fold increase, perhaps. I assume, in sort of the cost to get there, I know CMC tends to be the big cost outlay item. So maybe if you can just sort of frame sort of what we're up against in terms of dreaming the dream and getting to maybe a monopoly position in both of those segments, what that might cost and how you'd sort of scale up those investments with success-based milestones along the way?

Yes. So to your question, yes, on the balance sheet as of March 31, pro forma for the financing that was done in April, about $1.5 billion on the balance sheet, so certainly in a fortunate position. And the proceeds of that last financing are principally directed to the long game from a manufacturing perspective. We believe, Grant talked about this earlier, but having 2 very strong and consistent data sets leads us to believe we've got it from a clinical standpoint and now putting ourselves in the position to deliver and execute on it from a manufacturing standpoint. So when we think about R&D spend, yes, the majority is directed to CMC manufacturing supply chain vis-à-vis clinical, and the manufacturing really in 3 components. The first 2, we have been investing at at-risk even prior to the clinical data. So one, putting ourselves in a position to start the Phase III trial timely after the end of Phase II meeting, making sure we've got the product to enroll patients in that trial, that's work that is already underway, and we'll continue to pace up to the start of that trial. The second category, also an investment we've been making prior to the data, we'll make at greater pace now, which is ensuring we're in a position to submit the BLA and deliver the initial supply requirements to the market. And the way this typically works is we would expect to launch first in the adult population, which is principally a U.S. market. And we are already operating with Lonza today at facilities out of which we can meet the supply requirements for that adult market. And then the third step, an investment we have not been making but now intend to make with the proceeds from the financing, is to meet the long-term supply requirements. And as we expand from the U.S. adult market, you then go into the infant population, which is a larger market given it's a multi-dose regimen, and it's a global market, unlike the U.S. market. And these proceeds, putting us in a position to complete our evaluation of and ultimately execute on a facility that can meet those long-term supply requirements.

Yes. Okay. And maybe I wanted to come back to VAX-31 just because we're in the theme of adult vaccination. And the IND work, the submission, I think, you guys have said, basically, it just encompasses some formulation work. So maybe if you can just elaborate in terms of what additional steps need to occur. And if I recall, your preclinical rabbit model data with 31 looked pretty similar to 24 in terms of consistency of data. And so I guess I wonder what sort of confidence that animal model gives you going into 31.

Yes. So having guided to submitting an IND for VAX-31 in the second half of this year means we're pretty close to having it all together. So basically, we've made all of the drug substances, all 31 of the conjugates have been made, and now we're in the final stages of doing the drug product, the final formulations. And prior to that, we had made tox batches of the drug product that went into the toxicology study. So the last items that go into the IND are the readout of the tox study in animals, the final stability of that drug product and then we'll be in a position to file that IND. So we're into that one-yard line kind of deliverables for that program. Then as it relates to VAX-31, so you were asking the coverage, or what was the second part?

The animal model data that you've seen so far.

Oh, yes. yes, yes. The animal data was very consistent with what we'd see with VAX-24, which certainly translated in a very clean way to the clinical data. And as you say, the VAX-31 animal data that we've had in hand has been extremely encouraging. And then the last piece, of course, was the work that we did in the dose-ranging with VAX-24, where we had this mixed-dose cohort, which is also informing on the amount of confidence we have with the VAX-31 program. So as a reminder, in that mixed-dose cohort in both of the Phase II studies that we ran with VAX-24, we doubled the dose for 7 of the conjugates, which is very similar to the amount of material that will go into the VAX-31 clinical studies. So those results, as strong as those were, give us even more confidence on top of the animal data...

As a proof of safety.

Well, it's partly safety, but it's more the fact that what we've seen in this space, historically, is that what inhibits people from pushing coverage is the cumulative amount of the protein carrier that's in the vaccine. And so we've already mimicked effectively that cumulative amount of protein carrier that will be in VAX-31 in the form of this mixed-dose VAX-24 cohort. And we know that those 24 immune responses look good enough to have a profile for approvability and advancement. So it's that combination of animal data and this mixed-dose data that's giving us the confidence that VAX-31 is a probable winner.

I think you've said before the amount of protein carrier in 31 is something directionally below PCV20 but greater than 24, but nothing more specific than that in terms of sort of thinking about the protein carrier suppression hypothesis here.