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

Good afternoon, everyone. My name is Bo, and I will be your conference operator today. At this time, time, I would like to welcome everyone to the Vaxcyte Fourth Quarter and Full Year 2023 Financial Results Conference Call. [Operator Instructions]. Now at this time, I'll turn things over to Mr. Andrew Guggenhime, President and Chief Financial Officer of Vaxcyte. Please go ahead, sir.

Thank you, operator, and good afternoon, everyone. I'd like to welcome you to Vaxcyte's earnings conference call to discuss our 2023 results and to provide a business update. I'm joined today by our Chief Executive Officer, Grant Pickering; and our Executive Vice President and Chief Operating Officer, Jim Wassil. Filings can be found in the Investors and Media section of our website. Before we begin, I'd like to remind you that during this call, we'll be making certain forward-looking statements about basis, which are subject to various risks, uncertainties and other factors that could cause actual results to differ materially from those referred to in any forward-looking statements. For discussion of the risks and uncertainties associated with these statements, please see our press release issued today as well as our most recent filings with the SEC, including the risk factors set forth in our Form 10-K for the year ended December 31, 2023, and any subsequent reports filed with the SEC. With that, I'll turn the call over to Grant Pickering. Grant?

Thanks, Andrew. And all of you on the call and webcast. Thank you for joining us today. 2023 was another remarkable year for Vaxcyte, officially marking our 10th year of [ factual ] and methodical research and development by the entire Vaxcyte team and our partners. We are driven by our mission to prevent or treat infections caused by bacterial diseases, including invasive pneumococcal disease or IPD. This past year, we continued to make significant strides in advancing our potentially best-in-class pneumococcal conjugate vaccines or PCVs, VAX-24, our lead 24 valent candidate and VAX-31, our next-generation 31 valent candidate. And we remain focused on providing the broadest spectrum of coverage against IPD for both adults and children. Last year was highlighted by the successful completion of our VAX-24 adult Phase II program. Following our stellar initial crop of concept data in late 2022 in adults aged 50-64, we reported data in April 2023 from a separate Phase II study in a note 65 and older that not only confirmed the prior proof-of-concept study results that showed even greater immune responses compared to Prevnar 20 on a relative basis. These data further validate the potential of our cell-free platform and carrier sparing approach to deliver broader spectrum PCVs. The findings from our adult Phase II program support the potential investment results and the foundation we have carefully created a is well positioned to advance our PCV franchise to potentially disrupt what has consistently been a crucial vaccine class societally and financially. Following the VAX-24 adult Phase II program completion, we made important progress with regulators. This included a successful end of Phase II meeting with the FDA regarding the clinical design of the VAX-24 Phase III program as well as encouraging feedback on CMC-related matters as we plan for future potential BLA submissions. In addition to the positive developments for VAX-24 we're pleased to initiate the adult clinical program for VAX-31. With this important step, VAC-31 is now the broadest sector from PCV in the clinic. Following the FDA is accepted to the adult IND, we initiated the Phase I portion of a Phase I study in adults 50 and older in November. The strong momentum of this study continued into 2024 as we announced the start of the Phase II portion in early January and completion of enrollment less than a month later. I'm incredibly proud of our many achievements, particularly across clinical, regulatory and manufacturing for our PCV programs. And we now look ahead to several important milestones. For the adult indication, our VAX-24 program is Phase III ready. And we are in the final study in the second half of this year. We expect to announce the top line safety, power ability and immunogenicity data from our VAC-31 adult Phase I/II study in the third quarter. This timing and the overlapping time line for the completion of the VAX-24 and VAX-31 adult Phase III studies provide us the opportunity to make a strategic decision regarding which adult program when we'll move into Phase III following the VAC-31 data readout. If we advance VAX-24, we intend to initiate the pivotal noninferiority study in the second half of this year and the balance of the Phase III studies, which are shorter in duration than the noninferiority study in 2025 and 2026. If we advance VAX-31, we expect to initiate the full complement of the Phase III studies in 2025 and 2026. Regardless of which program we move forward, we expect to initiate the final Phase III studies in 2026. And subject to the results of these studies, submit a BLA shortly following the completion of the last study. VAX-24 remains a potential best-in-class candidate covering more serotypes than any pneumococcal vaccine on market or in U.S. clinics today. And VAX-31 has the potential to further increase coverage to approximately 95% of IPD circulating in the U.S. adult population. Beyond expanded disease protection, VAX-31 is designed to also maintain coverage of previously circulating strains that are currently contained via ongoing vaccination. This is critical since previously controlled strains have rebounded in prior instances where vaccines coverage was withdrawn. This puts us in a unique position relative to other sponsors who are applying the conventional PCV approach and are forced to make sacrifices in an attempt to cover newly circulating strains. We estimate that the adult pneumococcal vaccine market today is approximately $2 billion of the total $8 billion annual global market and is positioned to be the fastest-growing segment. Growth in the U.S. market is expected to accelerate due to the potential shift in universal adult vaccination from age 65 down to 50, which will both expand the market and open up the adult regimen to a prime new schedule, nearing the market. Outside the U.S., we expect to see other countries begin to routinely recommend adult vaccination evidenced by the recent recommendation in Germany to vaccinate adults 60 and older. While the adult market is expected to grow significantly, the intent segment continues to represent the largest portion of the global pneumococcal vaccine market at an estimated $6 billion in sales annually. We believe VAX-24 has a potential best-in-class profile for this vital population, and we are thrilled to be nearing the completion of enrollment in the second and final stage of our VAX 24 infant Phase II study. Based on our progress, we expect the top line data from the primary immunization series by the end of the first quarter of 2025 with the top line booster data to follow by the end of that year. In contrast to the adult program, the VAX-24 infant critical program is substantially ahead of the VAX-31 infant program. And we intend to advance both of our PCV candidates in this population. We expect to provide guidance on the potential timing for a VAX-31 infant IND following the readout of the VAX-31 Phase I/II health study later this year. Bringing the broadest PCVs to both infants and adults represents an opportunity to significantly reduce invasive disease across the entire population is what drives our efforts every day. Given the magnitude of the opportunity of our PCV franchise, we continue to invest in further solidifying our manufacturing foundation to enable robust large-scale manufacturing. These investments are intended to support the potential global commercialization of our PCVs for both the adult and infant populations. Our expanded relationship with Lonza and our decision to exercise our option on future Biopharma, both of which we announced late last year are reflective of these efforts. In addition to our PCV franchise, we continue to advance our earlier-stage vaccine candidates, including VAX-A1 to prevent Group A Strep, VAX-PG to treat period [ antitis ] and VAX-GI to prevent dysentery and shigellosis. VAX-A1 and VAX-GI as well as our PCV programs target diseases that are significant contributors to antimicrobial resistance or AMR. AMR poses a serious global health at a no action is taken, drug-resistant diseases are expected by the WHO to be a leading cause of death by 2050 while AMR who has a complex [ crisis ] that no single solution will fully address, vaccines represent an important part of the solution. We're proud to develop vaccines to help fight diseases that had become increasingly resistant to treatment with antibiotics. We look forward to sharing more updates on our earlier stage pipeline over the course of the year. From a financial perspective, we substantially strengthened our balance sheet, raising approximately $545 million in net proceeds in a follow-on financing last April and then added another $816 million earlier this month. Pro forma, after this most recent financing, we had over $2 billion in cash and investments as of year-end. This financial strength provides us the capital to fund the company through several important milestones over the next few years, which Andrew will highlight later. I'll now turn it over to Jim who will provide more details on our PCV programs and strategy. Jim?

Thanks, Grant. I'd like to start by reiterating line developing broader coverage vaccines to treat pneumococcal disease matters. Despite widespread administration of effective vaccine, the global impact of disease remain significant and is associated with high-case fatality rates, antibiotic resistance and meningitis. In the U.S. alone, the standard of care pediatric and developed cost of vaccines cover only approximately 30% to 50% of circulating disease. As a result, the public health community continues to affirm the need for broader spectrum vaccine to prevent IPD. We designed our PCVs to expand coverage and still include is critical from a global health perspective. Based on the totality results from the 24 adult Phase II program that Grant referred to earlier, we believe we have the opportunity to set a new bar for new cost vaccines by delivering broader coverage and higher immune responses relative to conventional PCVs. Following the completion of the Phase II adult program, we had a successful end of Phase II meeting with the FDA focused on the VAX-24 adult Phase III clinical program. We believe there is agreement with the FDA on the clinical design of this program, including the approximate overall number of subjects, the primary and secondary endpoints for the pivotal non-inferior study as well as confirmation that the planned immunogenicity analyses are sufficient to support licensure an efficacy study is therefore not required. Regardless of whether we advance VAX-24 or VAC 31, we expect either Phase III program to include up to 5 studies to support licensure and the broad label. Additionally, as part of the ongoing CMC focused discussions, we received encouraging input from the FDA regarding the VAX-24 adult licensure requirements. We are afforded this dialogue under the VAX-24 adult Breakthrough Therapy Designation expect to seek additional CMC focused input from the FDA as we continue to prepare for an adult Phase III program for either VAX-24 or VAX-31 and future BLA submissions. For VAX-31, we are thrilled to see that our Phase III adult study progressed from IND accessions to enrollment completion in approximately 3 months. In total, the study enrolled 1,015 adults aged 50 and older and is evaluating safety, tolerability and immunogenicity in 3 dose. Low, middle and high compared to Prevnar 20 which I will refer to PCV20. Similar to the criteria for the VAX-24 [ bill ] Phase II program, the VAX-31 study will compare the opsonophagocytic activity or OPA and IgG responses compared to PCV20 for the 20 serotypes in [indiscernible]. And for the 11 serotypes, you need to VAX-31, the study is evaluating the percentage subject to achieve a [indiscernible] rise in OPA, which is the established precedent and a basis for approval. Based on our preclinical data for VAX-31 and the clinical data for VAX-24, ,particularly the mixed dose arm for both adult Phase II studies, we are optimistic about the prospects for the VAX-31 data. Recall that in the mix dose arm from the VAX-24 study, we simulated the amount of carrier protein that is in the VAX-31 middle dose. We believe those immune -- this year results give us a preview of what we might expect for VAX-31. If we see results for VAX-31 that are comparable to those from lease-dose arms of the VAX-24 study, which all the 3 serotypes hit the non-inferiority endpoint. We believe that would be a very fine enough. Similar to our expectations for VAX-24 Phase II adult program for the VAX-31 study upcoming readout, our focus is on the [ IgG ] metric mean ratios for each serotype rather than the confidence intervals. Because this Phase I/II study will be smaller in size prior Phase III studies have shown that these ratios are adequate to achieve the noninferior threshold. When considering the historical presence for a broader spectrum PCV candidates, our focus has been on the important societal benefits of expanding disease protection. With this public helpful in mind for all prior PCV programs that have been approved, regulatory authorities have accepted generally lower overall immune responses and some missed noninferiority endpoints versus the standard of care. We believe, however, based on our VAX-24 data, that our carrier-staring platform has the potential to change this historical pattern by both extending coverage and maintaining immune responses. With VAX-31, we expect to increase disease coverage by 45% importance over the standard of care in adults today, which is significantly greater than the increase in coverage presented by [indiscernible] by approach. We believe this level of improvement will be strongly considered by [ radio engineer ] assessment of the potential public health benefits VAX-31 they provide. As a result, programs continue to advanced, they are also pleased with the progress we made with the VAX-24 program. VAX-24 has the potential best-in-class profile in this population, and we are excited to be nearing enrollment completion for our infant Phase II study. Given the size and global nature of the infant market, we are particularly excited about the primary and boosted data readouts expected in 2025. We believe these milestones, along with the VAX-31 expected in the third quarter of this year will further define the full potential and magnitude of the PCV opportunity for VAX. We look forward to sharing important updates on the progress of our PCV franchise this year. And I would now like to turn the call over to Andrew.

Great. Thanks, Jim. On the financials with respect to the income statements, the details of our fourth quarter and full year 2023 results and the reasons for the variances to the comparable 2020 periods are reflected in our 10-K filing and summarized in our press release. The year-over-year increase in R&D expenses was driven primarily by higher manufacturing expenses related to the planned adult Phase III clinical trials and potential future commercial launches of our PCV programs. Both R&D and G&A expenses also grew as we invested in our team to support our recent and anticipated growth. The acquired manufacturing life expense of $75 million for the fourth quarter and full year 2023 as related to the exercise of the option of Sutro Biopharma, of which $50 million was paid in cash in the fourth quarter. The 2022 expense for the same item was related to the upfront consideration incurred in connection with the original option agreement entered in Sutro. I would also note the contribution of the interest income line as a function of our higher cash and investment balances and the higher interest rate environment. As we look forward, we expect an increase in 2024 R&D and G&A operating expenses over both full year and Q4 2023 annualized loans, particularly within R&D. This expected increase is primarily a function of our investment to make the required clinical trial materials for a potential VAX-24 or VAX-31 Phase III adult program, which will consist of multiple trials and to continue manufacturing activities to support the potential launches of out PCV program. While expect substantial annual growth of our R&D, we do expect the amount to vary by quarter depending on timing of manufacturing activities. For G&A, we expect the expense growth to be generally steady by quarter. At this time, we do not anticipate any future acquired manufacturing rights expenses. Deferred income statements. In the fourth quarter of last year, we commenced construction and build-out of a dedicated manufacturing suite at Lonza to support the potential global commercialization of our PCV program in connection with the agreement we entered into with them in October. We expect this build-out to take approximately 2 to 2.5 years at a capital cost over this period of approximately $300 million to $350 million. As of year-end 2023, we had incurred $86.5 million of capital and facility build-out expenditures that were reflected on our balance sheet in 2 separate line items, properties equipment and other assets. A detailed breakdown can be found in our 10-K filed today. For the remaining construction and build-out cost of this dedicated manufacturing suite, we expect the majority will be incurred in 2024 and the balance in 2025 and perhaps into early 2026. Most of the associated costs will be reflected on our balance sheet in the same 2 line items I mentioned earlier and will not run through the income statement since the buildup of the suite that's complete and manufacturing activities commenced. And will be a separate and small operating expense component over the buildout period that will be reflected during the R&D expenses. Turning to the balance sheet and cash railway, as Grant noted, we continue to maintain a strong financial position and mid-2023 with $1.24 billion in cash, cash equivalents and investments. This excludes the $816.5 million in net proceeds from the follow-on offering we completed earlier this month. Going forward, we expect that our balance sheet will be sufficient to fund our operating expenses and capital expenditure requirements through a number of important milestones over the next few years, including the VAX-31-adult Phase I/II study top line data expected in the third quarter of this year, the VAX-24 for infant Phase II study primary 3 and booster does readout expected by the end of the first quarter and year-end 2025 respectively. The initiation and the anticipated Phase III study for the results PCV programming [indiscernible] with in fact, 2024 include the non-inferiority study in the second half of this year and the remaining study in 2025 and 2026 or VAX-31, the full complement of studies in 2025 and in 2026. The expected top line data from the Phase III pivotal non-inferiority study, whether we advance VAX-24 or VAX-31 and the expected completion of the build-out of the dedicated manufacturing suite to support the long-term commercialization of our PCV programs. I will now turn it over to Grant for closing remarks.

Thanks, Andrew. Before moving to Q&A, I would like to now to the entire team at Vaxcyte and our partners. 2023 was an extraordinary year of validation for VAX-24 and our pipeline. Over the next year, we look forward to several upcoming catalysts that will further define the profiles of our PCV franchise, and I am confident in our ability to execute and further scale our business in 2024 and beyond. We look forward with sharing further updates as the year progresses and we appreciate your interest by joining us today. With that, let's take some questions. Operator?

[Operator Instructions] We'll go first this afternoon to Jason Gerberry of Bank of America.

I guess, firstly, just as we think about this decision between VAX-31 and 24. You're ultimately measuring yourself against VAX-24. So I'm wondering if you can frame what success looks like. And in the end, which showing a net incremental coverage of 3 or 4 strains as measured by statistical NI or good enough point estimates or a fourfold rise collectively across the spectrum. Does that sound like to you what a bar for success looks like? And then secondly, have you guys explored ways to reduce protein carrier in the 31 valent approach? And the reason I asked is, for some reason, if this iteration of VAX-31 doesn't make the cut off, just wondering if there are ways to potentially go back to the drawing board and to optimize.

As we look forward to that data that we expect to see in the third quarter, we're quite optimistic, the way we were looking at this program is a combination of the empiric evidence generated to date, combined with the circumstances. So from an empirical data perspective, certainly, we have not only, of course, compelling preclinical data with VAX-31, but also the VAX-24 data that's been generated across the Phase II program that's readout already with a particular emphasis on that mixed dose cohort where we were able to already test the cumulative amount of protein carrier that we would expect to have put into the clinic with VAX-31. So for us, we're really looking, as you point out, and a couple of different end points -- so there's the non-inferiority comparisons to Prevnar 20 across those 20 concepts and then the Incremental 11 where it's a slightly different endpoint where you're looking at fourfold rise over baseline. So for us, the data that we generated with that VAX-24 cohort demonstrated even at that mixed dose level, really good comparative results across the 20, better in Prevnar 20. And then the Incremental 11, set 4 have already readout, the next 7 will come with this study. And so yes, for us, I think we're feeling good. The data is going to be here in the not-too-distant future. And as you mentioned the adjusting the ratio, that is certainly something that has been at our disposal historically, we do have a level of precision with our chemistry that premits us to adjust the ratio of sugar to protein in ways that we don't believe anyone else can. We've used that to great effect to date with greater sugar than protein than [ convention ]. But for the foreseeable future, we don't think we need to go back to the drawing board on that, but that would be something we could always look at down the road. For us, we've been able to show that adjustments in dose yield improved immune responses. So the first order, if necessary, would be more likely to come in the form of adjusted doses. But again, as you know, Jason, this is not perfection that's required. The whole focus of this class has been to preserve coverage of our historically circulating strains while looking to expand coverage to newly circulating strains and in that trade, it's been recognized that even with lower immune responses, that's an okay trade-off. Fortunately for us, at least for VAX-24, we didn't look like that was going to be required to push coverage. We'll see what the VAX-31 data looks like. But I guess the point is perfection is not the requirement. We've seen a few missed strains being considered a good trade-off at least in the eyes of the regulators. And I think ultimately, that's been a good decision, and we'll see what data comes out of this study in the third quarter.

We go next now to Roger Song at Jefferies.

Great. Congrats for the progress. A few questions from us. Maybe to 2. So the first one is with the 31 data in 3Q, you probably need another end of Phase I meeting with the FDA. The question is how much you can leverage from your 24 interface meeting package for that meeting because your time line is basically going to start a Phase III in 2025 and 2024, 2026 if you move forward with 31, particularly around the CMC because that's something seems is holding you back for the 24 at this moment.

Thanks, Roger. This is Jim Wassil, and I'll try and answer that question for you. I think you're very perceptive in your question. We're hoping to leverage a lot of the study designs that we proposed to before our end of Phase II design for VAX-24 and use the very similar design for VAX-31. We'll do a reanalysis from a statistical perspective. We'll power the studies appropriately to ensure that we maximize the probability of success in our non-inferiority study in our other Phase III studies. But essentially, the proposal that we put forward in VAX-24 will be very similar in terms of the overall study design that we've seen from 31.

Got it. And how about the CMC portion of the 31?

Yes. Same thing as well. We're using very similar manufacturing processes. It's not exact manufacturing process in some cases between the 24 polysaccharide as well as the drug substance. And of course, the carrier protein is still the same carrier protein. So a lot of similarities between 24 and 31. So whatever we learn from feedback from the FDA from a CMC perspective from 24, we believe is applicable to 31 as well.

Excellent. Maybe just a follow-up question. For the 31 higher dose, you mentioned on the call, the mix goes from the third 24 making the middle dose for 31. Maybe just any color you can provide related to the high dose for 31, particularly in terms of the carrier protein, how much higher? And what are the key serotypes potentially can be dosed higher? If you can give us some color around that.

Roger, Grant again. Yes, we've spent a little bit more [indiscernible] with regard to the doses we didn't provide more details here just for competitive purposes but we want to make sure that we come out of this Phase II experiment with a clear dose to advance to Phase III. So ergo, the bracketing with lower and higher doses. We haven't gotten into explicit detail, but there's a pretty tight window of dosing that spend historically applied in the pneumococcal [ conjugate ] vaccine space . So we wouldn't do anything that would be radical there, but we're not going to go into the explicit details of what those are, at least for the time being, and that will be decided at the time we review the data.

We go next now to Salim Syed at Mizuho.

This is Erik Lavington on for Salim. I'm curious what your take on possible outcomes for discussions for V116 at the upcoming ACIP might read through to either your decision between VAX-24 and VAX-31 and what it might mean for the comparison in Phase III?

Thanks, Erik, Jim Wassil. So I'll answer this by saying I think many of us know at February 29, ACIP Merck's V116 will be on the agenda I think at that meeting we'll get a better idea of the current thinking of the ACIP pneumococcal working group what most likely present epidemiological data health economic data V116 clinical data, and then they'll make a proposal to the ACIP regarding how to recommend V116, assuming they get the approval. So I don't think I'd want to speculate on this, especially since we've going to have a much better idea by the end of this week, what the ACIP position will be. I will say that I want to highlight V116 is only applicable in the [indiscernible] population, and it takes a different approach than our PCV program in order for them to reach 21 strains due to the limitations of their technology. They had to remove 9 strains that have been traditionally included in approved PCVs. So with VAX-31, we do have a potential to further increase coverage to approximately 95% of the [ latent ] disease and we're doing this by adding additional strains and maintaining coverage previously started building strains. So we'll wait and see. We'll see what the outcomes are. I think 24 will have a strong position regardless. Obviously, 31, which contains, for the most part, all the strengths in both vaccines, we'll be in a strong position to increase coverage and really take a strong position if it gets approved.

We go next now to Dave Risinger at Leerink Partners.

So first, I wanted to say congrats on the corporate progress and appreciate the updates. I guess I have 2 questions for Grant and Jim. First, ACIP preferred recommendations are rare, but Vaxcyte could be particularly well positioned for a potential preferential recommendation for VAX-31. Could you just comment on that notion and provide your perspective? And then second, could you elaborate more, Jim, on your comment about potential prime boost opportunity in adults?

Yes. Thanks for that, Dave. I appreciate the acknowledgment. And Jim, is our ACIP Guru so let me hand you to Jim let's see if he can respond to that question. Let me jump in. So yes certainly, the ACIP has within its purview the right to extend a preferred recommendation. They have been limited in those decisions in the past. The most recent course was with Shingles, over Zostavax for the single vaccines. It's been more limited in the pneumococcal conjugate vaccine space, but it does occur. And we even see that with Prevnar 20 in certain circumstances. So there are a lot of pundits out there, Dave, speculating on how the ACIP is going to react. And the margin of improvement does need to be quite material from an efficacy perspective or coverage perspective. But when you have an opportunity to potentially extend the coverage with a singular vaccine to as high as 95%, while continuing to maintain pressure on previously circulating strains. To us, objectively, we think that is the profile that would warrant a preferred recommendation. So we'll have our day if things stay on track, we'll see how they react to the V116 profile. But certainly, from our perspective, we believe there is that possibility for us, but V116 will be another data point. I think what we had heard was there was hope at Merck that there was going to be an opportunity for preferred recommendation. We'll find out, I think that's being walked back a bit from what we're reading. But as Jim pointed out, before the week is out we'll have a leading indicator.

In terms of your question on prime boost in previous discussions of the ACIP both the 15-day end and 20 got approved. There was a debate over whether we should start immunizing starting at 50 years of agents and the current recommendation of 65. I think there's a lot of support to that. And the reason is the data says that almost the third -- probably around 28% to 30% of adults right now are in an at-risk category or a high-risk category for getting pneumococcal disease, particularly pneumococcal pneumonia. And these are groups that it's not just a clinic and malignancies and HIV is very immuno suppression, these are a lot more common groups. You have severe asthma, COPD, you have diabetes [indiscernible] liver disease. And the belief is that, that population in terms of percentage in that only going to grow. And historically, at risk recommendations haven't really gotten penetration. So there's been some debate about moving the recognition on 50. And then that would mean most likely that you would need to get a booster at 65%, so there could be a prime of 50 and a boost at 65. And we'll also see some of that debate, I think, coming up in the upcoming.

That's great. And just to follow up, if I may. Could you talk about your Phase III plans in adults and your age strategy?

Well, from an FDA licensure perspective, the adult label is usually extended at age 18 and up. So we'll be looking for the same broad label that's been obtained with other pneumococcal conjugate vaccines. So the next look then is at the ACIP as to how they grant the universal recommendation. But from a licensure perspective, we'll be looking to have and across the spectrum indication, but that is a question of usage. And as Jim said, was universally recommended the uptick is much greater than when it's restricted to at-risk population.

And I'd only add that given the interest in these at-risk groups in 50- to 65-year-olds, we'll make sure they have adequate enrolled at risk groups in our clinical study so that we can support [indiscernible] [ ACIP ] does want to move down to 50 years of age on clinical data to help with the decision.

We go next now to Umer Raffat at Evercore.

Among the new serotypes you're adding to VAX-31, there's one in particular, which has a bunch of literature on it's suggesting it's very unique and perhaps difficult to manufacture. I'm referring to 35B. Can you speak to your confidence in the manufacturing as well as early intent you saw in preclinical models of 35B in particular. Secondly, is it your expectation that Pfizer's broader spectrum program, 24, 25 valent is using a second carrier protein beyond CRM197?

Yes. Maybe I'll answer the second one first, and then Jim will address the 35B question, [indiscernible]. Thank you for both of us. As it relates to the fourth generation program, yes, Umer, it's hard to know exactly what they're doing. So from what they've been willing to disclose, they've been considering all number of potential changes to try to extend beyond a 20 valent vaccine. But at the most recent earnings results, they seem to indicate that whatever incremental strains would be layered on top of what would presumably be the 20 streams that are in Prevnar 20. And there, it then comes down to, is it a unique protein carrier? Is it different chemistries? Is it different linkers or some sort of other formulation? But it's hard to know beyond that. I don't think they've gotten detailed with regard to that. That said, this idea of the notion of using an additional protein carrier that something other sponsors have tried going back to GSK's first foray in pneumococcal conjugate vaccines. And then more recently, with Sanofi's approach intermingling [ iteriatoxin and tenastoxoid ]. And those have turned out to be a bit problematic as Sanofi has not decided to proceed in the adult indication. So it's unclear at the moment, but other attempts in a similar vein haven't worked out particularly well. But we couldn't say for sure if that's the approach they're trying as of yet. And as to 35B, Jim, do you want to comment?

Traditionally, we limited our comments on some of this due to proprietary issues. But I'll say 35B is an important serotype is one of the more common circulating streams in adults, and it's probably the most significant contributor to otitis media in the U.S. today. So we are very keen on making sure that it is manufactured appropriately and that it works well in VAX-31.

We'll go next now to Seamus Fernandez at Guggenheim.

So I wanted to just talk a little bit about pediatric and how you'd like to set expectations for the 3 dose data? I know that, that is something that Merck has pitched as part of the [ VAX in a van ] story, so it is interesting to know I know that [indiscernible] is likely to dominate but 3 dose regimen has been quiet successful overseas so interested to just know how you guys opportunity for actually perhaps a superior profile at your third dose versus the Prevnar 20 third dose, just because a number of those serotypes appear to miss at 3 doses and then really required the fourth dose to catch up. So just interested to know how you're thinking about that and its importance from a market perspective longer term? And then just the second question is on whether you choose 24, 31 in the adult vaccination program, are you confident that you won't be required to study versus V116? Or is that something that could be decided after the ACIP recommendation in June?

Yes. Thanks for the question, Seamus. So yes, as it relates to the infant indication, obviously, a critical part of the market, 3 quarters of the sales consistently in that space. And as you referred to a 3-dose series, I wasn't sure exactly which direction you were until you expounded a bit. But yes, to be clear, in the U.S., we have a 3 plus 1 approach. So 3 vaccinations within the first 6 months of life. That's called the primary series. And then the fourth dose comes in the form of a boost the next year. In Europe, they restrict that primary series to only 2 vaccinations and then the third dose the next year. So it's really a 3 in Europe versus 4 dose approach. As you say, less doses create more pressure on lower immune responses. And so when Pfizer studied Prevnar 20 in infants in U.S. and Europe, the impact of the one less dose was quite profound. So in the U.S., there were 6 of the serotypes that miss the noninferiority comparison to Prevnar 13 after the primary series. And one can imagine that when you only give 2 vaccinations with a vaccine that's providing lower immune responses, the impact of that would be felt in a fewer vaccination approach. And sure enough the results of their Phase III study in Europe had 11 of the common serotypes missed the [indiscernible] comparison in the primary series. So that has been the big question mark nonetheless the [ CHMP ] in Europe did recently recommend that Prevnar 20 ought to be approved. So that will be interesting to see how that plays out with that many miss noninferiority comparisons. But to your point, what we've seen at least in adults with VAX-24 data is that we are, for the most part, getting higher immune responses relative to Prevnar 20. And if that's the case, it could widen the advantage certainly in a 3-dose regimen versus a 4-dose regimen. So yes, we'll have to see how some of this plays out with regard to how the European authorities handle -- the study that we're running that will read out in 2025 with VAX-24 in infants is the conventional 3 plus 1 approach. So that's the data we'll start with. But to the that we see higher immune responses potentially once again after that primary series that could set us up for a potentially better outcome to create even further competitive advantage relative to Prevnar 20 in Europe, but we'll see what that data looks like next year. And then, Seamus, you were also asking about the potential V116 comparisons. I thought you were first talking about VAX-24 versus VAX-31 [ in kids ], but obviously, you must be talking about adults only given that V116 will be restricted to the adults population to be extended and gets approved so, yes I think we're going see we're going to benefit to having seen not only how the conversation is progressing with the ACIP later this week. But by the time we would expect to get our VAX-31 data, we'll know for sure if the vaccine is approved. And if so, how it's sequenced or recommended relative to Prevnar 20. So yes, I think on that information, we'll have a much better sense of what the appropriate comparison would be for either VAX-24 or VAX-31, VAX-31 in particular. So I think that's a bit of a wait and see. Jim, anything to add?

No, I think that's fair. I think that if there's a non-preferential recommendation, then I think it will be up to us to choose which of the competitors we can choose to use in Phase III.

We go next now to Louise Chen at Cantor Fitzgerald.

I wanted to ask you on your global manufacturing capacity and how this gives you a competitive advantage? And then what capacity will you have once you complete this buildup? And second question I wanted to ask you was just on the infants. Are you going to also choose either VAX-24 or VAX-31 for infant? What are you thinking here? And what is your VAX-31 adult data going to give you as you think about the infant opportunity.

Yes. Thanks for the questions, Louise. Yes. So as it relates to the manufacturing buildout, from a competitive perspective, it's really table stakes if you will. If you can't supply these vaccines, at the appropriate capacity then how can you expect the ACIP amount on others to make a broad recommendation for your vaccine? So for us, it's been fundamental to unlocking the full value of these vaccines is to stay ahead of that capacity so as to have not only the ability to deliver but the profile that would warrant preferred recommendation ideally. And so that's been absolutely crucial to this whole story, and I think we've been able to stay ahead of that. We're in a position to launch out of existing Lonza infrastructure, where we've been making these materials just steady clinically. And then late last year, as you all know, we made the strategic decision to best in a dedicated facility at Lonza. And as you requested, when we're thinking about that dedicated facility is one that would satisfy the global demand from the developed world for either VAX-24 or VAX-31 for both of the adult and infant indications. So we do really expect that one to really deliver for us to maximize the opportunity that we think is at hand. And then to your question about VAX-24 versus VAX-31 going forward. I think it's really an indication dependent conversation. So for us, we find ourselves in a position where both VAX-24 and VAX-31 have an opportunity to reach the market on the same time line. So with the right VAX-31 data later this year, naturally, it would make sense for us to move to deliver the most broadly protective vaccine that we can. And ideally, that would be VAX-31. If not, we know VAX-24 looks really good as well. And so we'll wait to see that data before anointing which one to advance. That said, in the infant market, we're already well ahead with VAX-24. And so for us, we're contemplating either or both VAX-24 or VAX-31 in the infant indication just because we know we can bring VAX-24 to market faster based on the path we're on today. So it's a little more nuanced in the infant indication because of that sequencing.

We go next now to Joseph Stringer at Needham.

Just a couple of a quick ones on the pre-clinical programs [indiscernible] but just give us a quick sense b which one you think could end in the clinic first in particular in Strep A first you could give us a quick outline of the competitive landscape there and what you think the commercial opportunity in that indication is.

Sure. Thanks, Joe. So as we stated, we've got 3 other pipeline projects. We've got a [indiscernible] -- all 3 are moving forward in early-stage preclinical development. We haven't guided to when they would go in the clinic for the year. I think the one that I believe is most advanced at this point is the one that you mentioned, which is Group A Strep. The Group A Strep vaccine, I think has a very important role. I think it's one of the most underappreciated diseases over 500,000 deaths due to Group A Strep that occur every year due to rheumatic heart disease. But it's a ubiquitous disease causing pharyngitis, mainly in school entry kids as well as young toddlers. It's not treated aggressively with antibiotics, which means that there's a significant amount of [ anionic ] prescriptions associated with this disease. And also subsequently, you would expect growing levels of antimicrobial resistance have led to increasing importance of finding a vaccine to prevent against this. And there's recent economic studies that say that medical and indirect costs are around $5 billion a year. So a vaccine that can have some degree of efficacy, a reasonable amount of at significantly have direct medical cost offset. So I think you'll see a commercial opportunity here in school entry kit potentially causes. And then the one area I haven't mentioned is there's high rates of invasive disease and owner adults as well. So we can see a very similar type of recommendation. In fact, a little bit more because you're immunizing school entry kids as well that you see with the PCVs. So we're really excited about this program.

And I think from a competitive standpoint, Joe, it's not as active as certainly the PCV space is [indiscernible].

Yes. There's minimal, there's a few academic centers and one pharma company there currently looking at the Group A Strep at least so minimal competitive environment.

Thank you. And ladies and gentlemen, it appears we have no further questions today. So that will conclude today's Vaxcyte fourth quarter and full year 2023 Earnings Conference Call. Please disconnect your lines at this time, and have a wonderful day. Thanks for joining, everyone.