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

First off, my name is Jason Gerberry. I'm one of the mid-cap biotech analysts at BofA. I'm pleased to be introducing Vaxcyte's Andrew Guggenhime, Chief Financial Officer; and Jim Wassil, Chief Operating Officer. So gentlemen, first off, thanks for joining us.

Thanks for having us.

So maybe a good place to start might just be kind of your overall perspective as a company that's working on next-generation pneumococcal vaccines, the broader macro backdrop and how you think about that in terms of your efforts to advance your ultra-high valency vaccines from a development standpoint. Then we can jump into your adult program because that's the most advanced and you've got the most, I think, rich data set to support that as you kind of move into Phase III. And then we can pivot to the development work that you do to develop the vaccines in infants, which is ultimately the biggest chunk of the commercial market for developing pneumococcal vaccines. So I don't know if maybe one of you guys want to kick things off and then we'll go into more specific questions?

Sure. Yes. Great. Thanks, Jason, and thanks for the opportunity to be here today. It's great to be here again at BofA conference. Yes, as you noted, we're a clinical stage company focused on developing vaccines to prevent and treat bacterial infectious diseases. As you said, we are most known for our pneumococcal conjugate vaccine or PCV franchise. We'll get into the data. Now to your question, Jason, as to the impact of the macro environment, it's certainly dynamic, it's certainly ever-changing. But fundamentally, it does not change our mission as a company and what we are pursuing, which is continue to advance these vaccines. We're on the cusp of initiating a Phase III program for the adult indication. We just unveiled positive data in the infant indication. We're certainly monitoring closely what is happening in Washington and there's certainly no lack of news and noise, but it's important -- we think most important to really distinguish the noise and the news flow from monitoring for any potential substance or policy change. And we have not seen that yet. So it really has not -- certainly, we're undertaking effort to monitor and influence what is happening in Washington. But in terms of the fundamentals of the company, our mission, the programs we're pursuing, has not had an impact, so it's unaffected by what's happening in Washington.

Okay. So maybe VAX-31 and your adult program, it wasn't that long ago you guys put up some pretty pristine data. The stock was riding at all-time highs. As you think about where you sit today, Phase III development program that you're about to start middle of the year, maybe if you can -- there weren't many holes in the data, right? So it seems like there weren't many uncertainties. You're just going to power up your Phase III study accordingly to how other studies have been done in the space. But maybe what are some of the uncertainties between now and kicking off that Phase III study in the middle of 2025?

Yes. Just from a guidance standpoint, as I mentioned, we just reaffirmed, last week, our expectation to initiate the non-inferiority pivotal study and it's the NDC study that comprises the Phase III program on the heels of an end to Phase II meeting with FDA. So this is what I would characterize as the standard blocking and tackling to stand up a broad Phase III program. But continue to expect to start that study by the middle of this year and the balance of the studies that comprise the Phase III program, either this year or next year, expect the non-inferiority study to be reading out next year with the balance of the study no later than 2027.

Yes. And just you said just blocking and tackling, that's sort of what -- we've got a program that is well precedented. We have other individual companies that have gone through and gotten approvals. Their trials are on clintrials.gov. So we're not going to get fancy here. We're going to do more of a rinse, wash, repeat, do what's necessary to get licensure, and with the 31-valent, I think we'll be in a very competitive space once we get out there on the market.

And so just remind us, with 1 noninferiority immunogenicity study, 1 manufacturing sort of CMC type of study and some additional -- the third study for the adults, for safety purposes?

Well, you need a certain minimum number of subjects exposed for safety. We're going to be doing the pivotal noninferiority. That doesn't get us to that threshold. We will have to demonstrate manufacturing consistency in 1 study by doing multiple lots in the same study showing consistency of immunogenicity. But then from a competitive perspective, you want to be able to get this vaccine with other adult vaccines like flu, so we want to demonstrate that. There are individuals who receive, say, a PCV-13, Pneumovax, a PCV20, that could benefit from having expanded coverage. So we want to demonstrate that we can be used after those vaccines as well. So we're going to use those who were previously vaccinated with another pneumococcal vaccine and try and push for a catch-up vaccination. Then they move the age of recommendation down to 50 years of age. And the reason for that was because there are a lot of at-risk adults, so we want to focus on trying to get some data in at-risk adults as well. So the additional studies get you to the safety threshold but also give a lot of important information for a good ACIP recommendation.

Okay. And I would just say upon the commencement of the first Phase III study, as we have customarily done, we'll announce some of the broad parameters of the Phase III program.

Yes. So my next question, I know we've discussed this, but I feel like it's important to ask it nonetheless. But there's a lot of headlines around placebo-controlled trials in vaccines, broadly speaking. I don't think it's that [ well-defined ] what settings that could pertain to. PCV using to be developed in field studies a long time ago. I guess where do you process this information? What's your informed speculation as to where these sort of changes, if they occur, where they could apply within the vaccine development kind of spectrum?

Sure. Yes. Again, this is one of the many topics about which there's a lot of noise and news flow. We certainly all saw the Washington Post article a few weeks ago in which an HHS employee was quoted as referencing the need for placebo-controlled studies. And like with many issues, I think when you dig into it, it often tells a different story than can be initially perceived from a first headline. And sure enough, within a week of that article, Brett Giroir, who's the former acting FDA commissioner, worked in HHS. He had spent some time with Makary and went on Fox for an interview, and this particular topic came up. And if you look at his quotes indicating that, for vaccines, where there's already been established safety and efficacy, the feasibility and need to do placebo-controlled trials to study efficacy is not something that would likely to be pursued. Senator Cassidy came out later with a tweet indicating the same. So based on what we have seen, based on where we are, we do not expect, particularly in the area of PCV, where you have done these initial field efficacy studies where the efficacy, immunogenicity and safety profile of the vaccine is very well established, do not anticipate the need to do placebo-controlled efficacy studies.

What's been the level of FDA, I guess, interaction of late? And has that changed at all? I mean there's just a lot of headlines around disruption at FDA and the feedback that you're able to get at the company.

Yes, again, many headlines. We're fortunate to be operating under Breakthrough Therapy designation, which gives us the ability, and we're taking advantage of that opportunity to have more frequent discussions with FDA and discussions at more senior levels of FDA. Those discussions have continued. We have been having those. We'll continue to have those. So again, we're certainly reading about a lot of changes, but kind of the day-to-day folks with whom we have been interacting haven't changed. We haven't seen a change in the timing of the responses they've offered to us as well. And for some of the more senior folks who have been in the news, those are not -- again, Jim mentioned, this is a very well-established regulatory pathway, those are not folks that we would have expected to have engagement with just given this is -- we're following the playbook that's been established by several precedent here.

Okay. And then with respect to the Phase III specifically, I think there are 2 items that you plan on disclosing once you start the trial, which is dose and your active comparator, unless I'm missing something?

Among other components.

Yes. But those are the big ones, I think, that a lot of investors focus on. And so what I wonder about is -- there's really 2 choices of active comparator it's Capvaxive or PCV20. And so as you think about that choice and when you run a Phase II and you get results relative to PCV20, imagine it's much more conducive to start your Phase III, because you know how much separation -- how your serotypes compare against PCV20, whereas does using Capvaxive pose some technical challenges if you were to use that? And what are the some of the pros and cons of each, I'm just curious how you're thinking about that?

Yes. So I think you've got that exactly right. We use PCV20 in the Phase II. That gives us a lot of information on the number of subjects, how to power the study in Phase III to ensure that we get success. If you go right into a Phase III with Capvaxive you don't have that type of information on the number of subjects to power to hit noninferiority. So that's number one. Number two is the guidance from the FDA and the WHO is that you want to use the comparator that has the most -- the greatest number of serotypes in common with your vaccine. For us, that's PCV20. So even FDA and WHO guidance sort of points to go to PCV20. If we do, do Capvaxive, we tried to do an analysis based on their data and our data, different assays, different studies, we think we could do either of these and be highly successful. So either way, we're -- the data was so good with 31 that we're sitting in a good position going into Phase III.

And you think commercially, either is an acceptable reference to this study?

Yes. Once we get FDA approval, people go back. And in fact, Capvaxive viewed PCV20 as their comparator in their study as well. So we're using the exact same comparator from that perspective. So I think that either comparator will not be differentiable from a competitive perspective.

Okay. And as you think about dose or any potential dose tweaks at the serotype level, there's a little bit of, I guess, my knee-jerk reaction is, if it ain't broke, don't fix it, right? You had good results and you kind of know what to carry forward. But you're also learning, right? You ran trials in infants, like maybe there are serotypes that are more important that you maybe want to tweak. So am I thinking about it right that there's still a little bit of fluidity from the data update, that maybe there's some refinements that you may consider making?

Yes. Well, I mean I'd first start by saying that 24 was a Phase II dose-ranging study. So we wanted to get a lot of information out of it. We designed the mix dose specifically to try and give us a bit of foreshadowing as to what our 31 mid-dose would look like. We wanted to see certain serotypes when we pushed the dose, if we could see some sort of dose-dependent response. We did see dose-dependent response, when we went into -- with 31, we actually had a high dose where, instead of 2.2, we went to 3.3, except for 3 serotypes, 1, 5 and 22-F, which happened to be some of the lower performers in the 24 study as well. So we think when we see the 31 data, with the information we got from the 24, with the knowledge that you can push dose, that we will see some improvements in some of these serotypes that didn't perform as well in the 24 study.

Okay. Maybe just shifting to the competitive landscape and thinking through your go-to-market scenarios. And when you push the 31 valent coverage, right, I guess, 32 epidemiologically relevant serotype. You've got competitors talking about 30-plus. What does the world look like if there are multiple PCVs that are pushing 30-plus? Where do we get to a point of diminishing returns where it's like maybe the end-market consumer or payers are kind of viewing these things as interchangeable, PCV-30 versus 31 versus 32, and this looks like more of an oligopoly type of end market? And are there analog situations you can point to? I'm just kind of curious about VAX -- I'm sorry, VAX-XL, on a recent call, makes some wonder what's the value proposition ultimately of that relative to what you have, which seems pretty full spectrum?

Maybe I'll start and Jim can chime in. I mean, we like the position of VAX-31, the broader spectrum vaccine for the adult population in the clinic. We're in a new position as it relates to timing, as I said, getting ready to initiate that Phase III program. 31 serotypes is the broadest, 95%. Disease coverage is the most. We think we're in a good competitive position. The announcement of VAX-XL, that really is an addition. I would say, the incremental bang for the buck, so to speak, with adding incremental serotypes at this moment in time is not substantial, right? The best you can do is collectively get an additional 5% disease coverage. But as we've seen over time with the serotype replacement phenomenon as we protect against more strains and more probably protective broader serotype vaccine, it's likely as we have seen that these other strains, which aren't circulating to a material degree today, will rise and begin to circulate again, and we want to be at the ready to rise to the occasion, so to speak, to the extent that does happen. And so we haven't defined the specific composition of the VAX-XL program but are looking at a number of serotypes not contained in VAX-31 that we and, given our conversations with CDC and other bodies, think might be those that will rise up to be at the ready to do so, primarily from an offensive perspective to meet the need to treat more disease, but also to the extent the competitive landscape does change to stay ahead of the pack with respect to having the broadest and most broadly protective vaccine.

Yes, it seems to me, and correct my paraphrase, but like you clearly have the first-mover advantage from the ultra-high valencies. The incremental gains in terms of coverage may be smaller, but you have at least first mover advantage and that positions you well even if the market does stay competitive because it's such a big market. Is that like a fair synopsis? Because I think getting preferential recommendation is really hard.

It is hard. We think VAX-31 has the profile that is warrant it. It's been granted before. But I would also emphasize that, frankly, it's not that critical from a strategic or commercial opportunity standpoint. And case in point, if we look back in the more recent situation in the adult population, you have the approval of PCV15 and PCV20 before Capvaxive came in. Neither of those 2 vaccines had a preferential recommendation, but PCV20 garnered the overwhelming share, 95-plus-percent share of the market, because it covers more serotype. So that's really what we -- again, we do believe that VAX-31 certainly warrants consideration for preferential recommendation given its profile. We're not hanging our hat on that. We don't think it's needed to deliver the commercial opportunity. But we'll continue to monitor the landscape. And as I said, history has shown, you asked, Jason, if you have a world in which there are several vaccines on the market, history has shown in this space that the vaccine with the greatest number of serotypes and/or the greatest disease coverage will win the market.

And is there an incremental pricing premium with incremental serotype coverage still to be had do you think in this marketplace?

Historically, there have been, both U.S. and ex U.S. Ex U.S., they have a more formalized health economic assessment. And you compare it to the standard of care, and if you prevent more disease in that model, you can change that into a price premium. Same thing in the U.S., when you look when Pfizer went from PCV13 to 20, they had a substantial increase. [ That is ] same thing, a premium price as well. So we think that we can also increase the price commensurate with the incremental amount of coverage and disease prevention that we're delivering.

Right. The health economics in vaccines, particularly PCVs are incredibly compelling. So as Jim said, I mean it's one of the greatest public health interventions in history, but the health economics for these vaccines is...

I'm learning as an analyst, it's hard to get European pricing on drugs, the last month or so, but...

It's probably even harder now.

With Capvaxive was so much of a premium relative to 13 in terms of the step-up? Do you feel like that was a good analog for a commensurate step-up?

I think, if you're talking about European, I don't think the Capvaxive prices are out yet.

But that's going to be the standard of care, because PCV20 failed on the [indiscernible] effectively to...

In infants. Yes. So Capvaxive is not designed for infants...

Oh, I'm confusing...

So I think -- and so you have the situation in Europe where PCV15 is now pushing forward in some countries. But eventually, we'll be able to see what the pricing is and whether or not there's a premium in some countries. There are some countries where you can get pricing fairly readily.

Okay. Halfway through, so I want to pivot to the infant program and your recent Phase II dose measurement work that was done. You've got, I guess, some booster data coming up by year-end, if I understand right. Yes. So I guess, just trying to get a sense what you saw to the extent that you saw good translation relative to the adult data or just running into maybe some of the challenges of going through another powered study in a naive immune system with infant and some of the variability of the third dose measurement. Just kind of how would you frame what you saw in the Phase II VAX-24?

So I'll say adults, like you mentioned, are immunologically different than infants, mainly because we've carried pneumococci in our right lifetime and we've developed an immune response to the bug, so we're no longer naive. And the vaccine is actually a boost from our natural exposure where infants are naive and they haven't developed an immune system. So that said, even though there are those differences, we did see a couple of commonalities, which was, one, we did see a dose-dependent response between the serotypes that are low, middle and high doses. We are running a dose-ranging study to see what was necessary to design the best vaccine going forward in Phase III. So we saw that, and that gives us some information as to how to design a Phase III program. And the other thing that we saw was that we didn't see a significant amount of carrier suppression when you went from -- for those who've stayed at 2.2 micrograms when you increase the dose to the mixed dose. That's similar to what we saw with the adult program where we went from 24 to 31 and we didn't see a significant decrease in immunogenicity as well. So the fact that we're not seeing the carrier suppression, the fact that we're seeing some dose-dependent responses means that we have, I think, some tools at our disposal to redesign this infant formulation and make sure that when we go into Phase III, we have an optimal chance of success.

If you were to look at that VAX-24 data and, hypothetically, if VAX-24 was a go-forward vaccine, right, for Phase III, are there certain serotypes you'd say, hey, like there might be some endpoint risk versus others that you say, clearly, we can -- we feel like we have a good handle on solving for either through whatever assay we use or dose or just study powering. I guess how would you kind of frame that? I think there were like 4 or 5 serotypes depending on the measure that you looked at, IgG or the other measures [indiscernible]? So just how would you frame that?

Yes. So I mean for the 24, I think what first I'll say is we did very, very good in the 2 most common circulating strains, which were 3 and 19-F. Those account for 30% of the circulating disease in infants right now in the U.S. So that seeing a 1.6 to 2.8-fold higher improvement in immunogenicity bodes well for having better clinical effectiveness or outcomes. Because the ones that we didn't do as well on were those that are currently not circulating and haven't circulated for some time. Now that said, we did see evidence of a dose-dependent response. So of course, we don't want to miss on any, if possible, going into a Phase III. So we believe that if we push dose, we'll see some improvement. It might not get all of them across the line, but I think it will help improve. And if we see the same improvements that we saw in the 7 that we pushed our dose on, then I think we've got a good chance of hitting or at least meeting a few of those that were the misses in the Phase II study.

Right. Jason, you alluded to this, right? Perfection is not the requirement in the field, nor has it been the standard or a precedent you mentioned, right? For Pfizer, their PCV20 program in infants, if they failed to hit the noninferiority standard for 14 of the 20 serotypes, after the primary series, they did hit it after the boost. So again, the study was a dose-ranging study. We've got the information to enable us to kind of design the optimal Phase III program, whether that's VAX-24 or VAX-31 that we take in, we'll get the results of that primary series next year. And as Jim said, we're already exploring higher doses across the board in the high-dose arm for VAX-31 that were explored in the VAX-24 study. And of the handful of serotypes for the VAX-24 data where we might have liked to see a stronger response, 3 of those are being dosed at an even higher level in this ongoing VAX-31 study.

That was going to be my next question, right? Because, I mean what really matters, I think, in a lot of investors' eyes is how next year, midyear when you get the VAX-31 infant data, how -- what that may look like, how that may look similar to what we saw with VAX-24, or different? I think the focus is on the 20 established shared strains because I think it's very rare we ever see a miss on the novel incremental strains.

Yes. So with the novel incremental, you're absolutely right. For the 4 incremental strains above PCV20, we saw really, really good immunogenicity. So very, very highly immunogenic. And if we can extend that to the other -- to the 11 in the 31, then that bodes well for moving forward. For the others, and Andrew sort of alluded to this, we already increased our high dose from 2.2 to 3.3 micrograms. So we increased the dose and we've seen that -- an improvement with dosing. And there were 3 that we chose to increase to 4.4, and those 3 with 3 of the serotypes that didn't perform as well in the 24 study. So we're hoping to see a better response overall and hopefully improve these 3 that we put dose to 4.4 to a point where they can meet the noninferiority.

Yes. Okay. So we have that to look forward to. And then I guess in the second half, we've got the booster data for VAX-24. And I guess what do you focus on with this data? Because I think your interim on booster was 2/3, I think, of the exposure. So do you think that that's pretty robust and probably the data don't look that dissimilar when they get the final booster? Or is it just too hard to know?

I mean I think having 2/3 of the data gives us a good idea of where we're going to end up when we have the final data set by the end of this year. I do think that you may see some slight changes. But more importantly, what you'll get with the incremental data is a narrowing of the error bars. And we missed on 5 of these serotypes, but we've just barely missed on those 5. I mean with lower bounds, it just crossed that noninferiority threshold. So if we can tighten those error bars, what we might see by the end of the year is actually seeing some of these that we consider misses with this interim data set, be pushed into a make or meet the noninferiority criteria.

Yes. One of the serotypes I think was -- there was maybe an issue of assay cut-off with VAX-24. Where are you guys in terms of potentially looking to modify that assay and cut off? Because I know in these infant trials, I think, was it Merck or Pfizer, used a unique cutoff for certain strains?

Yes. I mean, it was with 12-F that Pfizer had a new cutoff for. We are still doing our finalization of some of these assays as we expected. We may change the modification we made. It depends. But ultimately, I think that for some of these, it's more dose-dependent response that can improve them more so than assay modification.

Okay. And any specific serotypes do you feel like this clearly a powering issue? And when you go to a larger Phase III, the compression of the error bars, that you feel like, I don't know, a couple of serotypes might just benefit merely from power?

Yes, I think -- I mean, that's the case. In those that were just barely misses, yes, I think tightening the error bars a little bit will give us a better chance I think, in particular, post-boost, we already just talked about it, with 2/3 of the subjects in the Phase II, the error bars are wider. So even when we tighten those, I think that will give us a much better chance of a good look to what we'll see post boost as well.

As we think about a prospective Phase III program, as Jim said, one, it will be larger than the Phase II. So we expect additional serotypes that might have missed in the smaller Phase II to hit in the Phase III. We'll get the results of the higher doses for the VAX-31 study beginning next year, middle of next year. And we also have the opportunity to further optimize, again these Phase II studies, just to remind, are indeed dose-ranging studies to enable us to design an optimal Phase III program. We'll have the opportunity to, if warranted, to further optimize particular serotypes if the need arises as we embark on a future Phase III program.

So as you accrue the data next year for VAX-31 in infants, then you make a decision as a company, is it VAX-34 -- I'm sorry, 24 or 31? And that actually seems like a very straightforward decision unless 31 shows something bad, right? I mean, which we don't expect to happen based on the clinical experience that we've seen so far. But just sort of curious like what factors might we be missing that maybe go into that prioritization decision?

Yes. No, I don't think you're missing factors. I think it is relatively straightforward as it was in the adult indication when we saw the stellar data from VAX-31 program that we unveiled, as you noted, in the fall of last year, and it was very clear that, that was the program to which we pivot for a Phase III. And that's the program we're about to embark upon. I think the calculus for the infant indication is very similar. We had positive data for VAX-24. We'll get the first results of the VAX-31 study middle of next year. To the extent we see data that is frankly consistent with what we saw for VAX-24, we'll expect it certainly the higher dose arm to be better, that's likely the program with which we move forward. I mean it takes -- serotype coverage from 24 to 31, that takes disease coverage from 72% to 92% of circulating disease. So to the extent we see kind of immune responses and a comparable safety and tolerability profile as we saw for the VAX-24 study, it's hard to imagine a scenario under which it wouldn't be VAX-31 that we would take forward.

Yes. In terms of the trials you're running, you've got 2 important VAX-31 trials, one that will start soon and one that's already underway in infants, what's the enrollment dynamics look like right now in terms of just the broader backdrop? And do you feel like any kind of anti-VAX rhetoric at all is playing into slowing enrollment? Maybe you can walk through the 2 different trials and how quickly you'd expect them to run. I think most of us expect the VAX-31 adult trial to be about a year, similar to the Phase II. But I don't know if you cut certain steps out like the safety run-in that you do in like the Phase I/II versus the Phase III for adults?

Yes, that's correct. We don't have to do a safety run-in. We've already established the safety. So we opened the enrollment. Adult, we expect them to enroll very quickly. Main reason, there's so many more adults available just from that practicality perspective. And with it being a 50 years of age and above in terms of recommendations to 65, we are now open to doing enrollment in a broader age population. So yes, maybe a year or so for the adult study. For the infant, there was some impact on enrollment, I think coming out of COVID already. We made adjustments. We've increased the number of sites that we're enrolling at. So we haven't seen a decrease in the absolute number of enrolled infants in our studies. But we had to do it by compensating for expanding our coverage of sites. So overall, slightly decreased in terms of enrollment, but overall, evenly compensated for by just adding a few extra sites.

And an environment scenario for which we had planned on pace.

Yes. Maybe just in terms of an update, you're sort of well cash-wise, but you do have a high burn. Can you remind us as you kind of look ahead to the remainder of the year, your cash balance, and how long you think that will run this company?

Yes, sure. So just as of a recent announcement, we have approximately $3 billion in the balance sheet as of March 31. What we historically have said is that, that balance sheet is sufficient to take us through all of our anticipated milestones under an all systems go scenario for not only our PCV programs, but also the pipeline that could fund all the key milestones in 2025, 2026 and 2027. I know we haven't given formal guidance that would include anticipation of being able to submit a BLA. So a balance sheet that doesn't necessarily get us through the potential launch of VAX-31 in adults, but gets us through, as I said, several milestones over the next few years. So we're already in incredibly, I think, enviable financial position from a balance sheet perspective. I will say, and you might have noted this in the recent press release we issued in connection with our Q1 results, just in the context of the current dynamic, we are evaluating our investment priorities, we are evaluating our allocation of capital to, frankly, further strengthen the already strong financial position we're in. So an evaluation that is underway and stay tuned. But we believe the balance sheet is one of several competitive advantages we have. We want to make sure we keep it that way.

And just like a quick word on where that gets you from a CMC readiness perspective in terms of manufacturing, the investment that you're making in Lonza and what you'd have at the end of that 2027 period from a manufacturing footprint perspective?

Yes. So it's -- as folks may know, we plan to launch out of the existing shared use facilities out of which we operate with Lonza for the initial launch of VAX-31 in adults, but to support the global opportunity, not just for adults. For instance we are building a new dedicated facility with Lonza that is expected to be completed by the early part of next year. So we'll be done with that. We'll be beginning to manufacture product for that. And this cash runway we've outlined also includes the beginning of stockpiling of inventory levels to support the launch initially in the adult and also in the infant population. So we, over the next few years, in a very solid position from a manufacturing readiness standpoint.

All right. Well, looks like we're out of time, gentlemen. But thank you so much for joining us and best of luck.

Great. Thanks, everyone.