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

Welcome, everyone, to Jefferies London Healthcare Conference 2025. My name is Roger Song, one of the senior analysts covering SMID Cap Biotech in the U.S. It is my pleasure to have the fireside chat with our next company, Vaxcyte. Welcome, Grant and Andrew.

Thank you, Roger. Pleased to be here.

Awesome. All right. So for people maybe not familiar with Vaxcyte, which should not be the case, but give us some maybe updated elevator pitch for Vaxcyte and where the current state of union.

Yes. So if you're new to the Vaxcyte story, we are focused on developing a 31-valent pneumococcal conjugate vaccine. We have a proprietary foundational platform, which is a cell-free protein synthesis platform for which we are able to develop conjugate vaccines that are sites specifically joined in ways that we think we can increase coverage without sacrificing immunogenicity as it relates to pneumococcal conjugate vaccines, but also unlock novel vaccines, including a group A strep vaccine we have in preclinical development. So we're mostly known for the pneumococcal conjugate vaccine franchise. Our 31-valent vaccine has read out an extremely positive Phase II outcome comparing to the standard of care 20-valent vaccine. And we're about to initiate Phase III clinical development for that program in adults, and we have a Phase II program underway in infants with that same 31-valent vaccine.

Excellent. Okay. So it is a very focused story for pneumococcal conjugate vaccine. And then we know this is $8 billion to $10 billion growing market. And then historically, it's a winner takes all. That's why people are really looking for best-in-class profile, which speaks to broadest coverage without sacrificing the immunogenicity. That's what Vaxcyte is striving for. So maybe just an additional kind of high mark there. And then let's just focus on the program. So it is bifurcated by age group. One is adult and then the other maybe older adult and then the other one is for the infant, maybe focus on the adult. It is in late stage. You have been talking with the FDA, finalized the Phase III and you're about to start the Phase III pretty imminently. So what's the gating factor outstanding steps you still need to finish before you can start the Phase III?

Yes. So we're pretty much there. We have guided to be initiating our Phase III pivotal study for VAX-31 in December of this year. So that's right around the corner. So we will be making the announcement of that study as we vaccinate the first subjects in the study. So you can look out for those details in relatively short order. And I appreciate the assist on some of the comments. But yes, we're extremely exciting and gratified to have seen the results we've seen with our 31-valent vaccine. And what usually characterizes a dominant position in this class is simply the coverage advantage that one vaccine has over another. And what's unusual about what we have been able to do with our 31-valent vaccine is not only expand coverage relative to the current standard of care, but also show better immune responses in a head-to-head comparison. Usually, you're sacrificing one or the other, and we have the benefit of that combination of both superior coverage and better immune responses. So we're looking to replicate that in Phase III. There are 2 standard of care vaccines that are currently available today. One is a 20-valent, the other is a 21-valent. And what we haven't said yet is which of those 2 or if we will be looking at both of those in the Phase III study, but that will be one of the things that we put out in the next month as we get the study started.

Okay. Great. And then by the way, the profile is supported by the Phase II data you already shown pretty impressive in the adult population. Okay. Good. And then maybe just remind, I say this is $8 billion to $10 billion growing market. Historically, infant is getting a bigger portion of the market, but adult is actually probably underappreciated by a lot of investors because it's growing, particularly with the recent ACIP kind of the universal recommendation. How do you think about the adult market for PCV? How big that could be? And then how much credit you should get that?

Yes. So historically, the market has broken out with infants and adults. It's been about 80% infant revenue. So Roger has it right. It's $8 billion run rate for the current market today. About 80% of that is in infants, 20% of it is in adults. But the expectation is that the adult market is going to grow quite quickly. So historically, the United States has been the only country that has universally recommended vaccinating adults, and that's changing very quickly. Most of the developed countries, particularly those in Europe, Asia, Australia, have recently made recommendations for universal vaccination for pneumococcal conjugate vaccines for adults at various ages, usually 60 or 65 and up. So in Pfizer's most recent quarterly update, their international sales of Prevnar went up 17% in the last quarter. So we're really seeing a new wave of appreciation for the impact that these vaccines can have in adult. Looking forward, it's hard to know exactly how it will play out, but the expectations are that this market in the next 5 to 10 years will grow from $8 billion a year to more like $12 billion to $15 billion. We could see that end up with somewhere around 50-50 split between adults and infants ultimately. So having the best-in-class profile with our 31-valent in adults is quite exciting given the anticipated revenue growth there.

And I might just expand on that, Roger, the U.S. market, that's also one of the key drivers of the expectation of the growth in this adult market. Historically, the recommendation in the United States has been to vaccinate adults upon turning age 65. Just a year ago, they lowered that recommendation from 65 to 50. Obviously, you have more Americans entering the age of 50 than you do 65. You have this bolus population of 63 million Americans that now become immediately eligible for vaccination. So it's expected that, that bolus population will be kind of vaccinated or a good proportion over the next several years. We think we'll be able to participate in that upon approval, if we're fortunate to get there with our VAX-31 program. And then this market in the United States is setting itself up for what historically has been a 1-dose market to a prime boost market where Americans would get vaccinated with the initial dose upon turning age 50 and would need likely to be boosted as adults immunosenescence at about the age of 65. This was discussed among ACIP about a year ago, and the discussion was tabled until broader valent vaccines become available. And we think the potential approval of our VAX-31 adult program would be the impetus for revisiting this discussion to boost adults. And again, that is one of the 3 key drivers of the expected growth in the adult market.

Yes, exactly. So the adult market is growing in a very rational way, right? So with all the supporting evidence, they will become a bigger driver. I think start from 80-20 to 50-50. And then in a growing market, the adult market is pretty sizable, already very sizable and even more significant in the future PCV market. Okay. Good. So that makes this adult program is maybe more critical than investors thinking because people say, okay, infant is the bigger driver, but actually adult in the future can be equally kind of important program. Okay. Got it. And then we have to ask this kind of because you're in vaccine space and we know a lot of FDA and the CDC, a lot of the change in the political and the policy environment. Anything recently you can give us an update in terms of your interaction with the regulator or the policymaker? Anything we should know?

Yes. I mean maybe I can start and you can finish. Just by virtue of us being able to guide to initiating the Phase III clinical development means that we've had those end of Phase II conversations with the FDA. And while we're stopping short of providing the finest detail of our Phase III pivotal study that we're getting underway, what we have said publicly is that through the course of these conversations that we've had with the FDA, there's been no mention of any necessity for a field efficacy study or a placebo-controlled trial nor have we had any suggestion that we would need to produce a safety database that would be out of the norm for programs like this. So we're decidedly reassured that it's been primarily business as usual as it relates to the regulation of this class of vaccines.

Yes. And I would just add, the team with which we've been working at FDA has largely remained unchanged pre-administration to the current administration. Of course, we've been dialoguing with the FDA really since the IND submission a few years ago, certainly more recently in the context of this Phase III trial that we're now poised to start. So we haven't seen a material change in the team nor in the tone and tenor of this conversation. So there have been -- there will continue to be interactions with the FDA as it relates to both of our adult and infant programs in normal course. And then clearly, given the dynamic, we are investing to build relationships with folks in the executive branch in Congress as well as the agencies to continue to advocate and remind folks of the importance of vaccines and protecting our population as well. And those have been constructive dialogue as well. Certainly monitoring what is happening externally, but very involved from a government and public affairs standpoint to be apprised of what is happening as best one can as well, as I said, to build important relationships there.

Got it. Yes. Okay. And then just back to one of the components you say you will be -- you were disclosing, which is the comparator for the Phase III study. Does that really change any study design or the size of the study if you want to do one or both selections that create more complexity? Or it's -- no matter which FDA you agree with, and it's not changing any kind of like of success or the time line or the size of the trial?

Yes. So in the moment, the current standard of care includes either Prevnar 20 or the 21-valent vaccine for Merck, which is called Capvaxive. So for us, we believe we have the best-in-class vaccine. Our Phase II study was conducted comparing VAX-31 to Prevnar 20. We showed on average a 25% higher immune response on the common serotypes. So we know we have an immunogenicity advantage and a coverage advantage based on the Phase II outcome. We're also able to look at the Capvaxive pivotal studies for which they compare themselves to the same comparator, Prevnar 20. And when we look at those relative immune responses, the advantage that we're seeing with the responses to VAX-31 only go up relative to Capvaxive when we look at that sort of transitive comparison. So our view is that we could compare to either of those vaccines using very similar powering and sample size. The conventional cohort size in this class is around 850 to 1,200 subjects per cohort, and we've been guiding to staying within that range.

Awesome. Great. Okay. So -- and then we should move on to the infant program because you had a recent Phase II from the VAX-24 and then with the full data from the PD3 and PD4 Phase II data. So what did you learn from that trial and then the most recent, this full data and then you apply the learning to the Phase II VAX-31 program, which will have later.

Yes. So going back a bit, our first clinical program in our pneumococcal conjugate vaccine franchise was a 24-valent vaccine. So we had originally gotten positive adult data for that program in late 2022. We then quickly advanced our 31-valent program into adult studies and showed that with incremental conjugates, 7 more do the math, we could not only get broader coverage, but we're able to maintain high immunogenicity and even to push to higher doses to drive even higher immunogenicity. So we had a lot of learnings as we were able to graduate from 24 to 31-valent coverage in the adult category. In this moment, we have read out the VAX-24 infant study. We have already initiated the 31-valent infant study. And the big learning was that in this naive infant population, driving the right amount of protein carrier will deliver the right sort of prime and boost response that you want to see to deliver durable protective responses. So we have already shown that our 24-valent vaccine has shown adequate immunogenicity and an improved coverage profile relative to today's 20-valent standard of care. Now the opportunity for us is to graduate to the 31-valent vaccine. So we have taken certain learnings from the data that read out for VAX-24, and we've incorporated higher doses in the VAX-31 study that we think will put us in a position to graduate to the VAX-31 program to deliver meaningfully higher coverage than what we would be able to deliver with VAX-24. And given the sort of relative immune responses we've seen in adults, we have confidence that VAX-31, once it reads out, will give us an opportunity to upgrade to that program for the Phase III advancement.

Excellent. Yes. So I think the Phase II VAX-24, the purpose always kind of to learn a little bit more about this -- the profile and then to apply -- eventually, you want to do the 31 and because this is standing -- establishing a bit higher kind of barrier of entry for the competitors.

Yes. So the coverage advantage, like for VAX-24, it's only a modest coverage advantage. But when you look at the 31 valent and compare it to the 20-valent that's currently available, you go from around 60% coverage of circulating disease to 90% to 95% coverage for our 31-valent vaccine, which would be a massive upgrade in terms of the amount of disease that we could prevent with that 31-valent program.

Excellent. Okay. So you're running the Phase II recently you add another high-dose cohort, which increased the likelihood of success for that program. So what will we consider a winning scenario for that data readout in the coming years?

Yes. I mean, the way we think about the composition of the vaccine is there are kind of 3 different buckets of the conjugates that are in the vaccine. So we have 11 more serotypes in VAX-31 than we'll have in the comparator 20-valent vaccine. Those should have a relatively straightforward opportunity to show the sort of effect that would warrant inclusion in the vaccine. So that's a lower bar. Then there are those serotypes in the 20-valent vaccine that are still circulating in earnest. And we already showed with the VAX-24 data that we showed really good relative immune responses on those. It just so happens that it was the serotypes in the current vaccine, the 20-valent that aren't circulating where we showed weaker relative immune responses. So if we could have picked any to where we looked a little worse, those were the ones because they're not relevant if they're not circulating. So by increasing the doses in VAX-31, we think we can do better from an immunogenicity perspective, but the only area for improvement were in those serotypes that are no longer circulating. So what I would say is even if we had a few misses on these serotypes that are no longer causing disease in the context of a 31-valent vaccine, that would be very much a winning hand on a relative basis. And every version of increasing coverage vaccines in this class in infants have shown some misses, but it's more than counterbalanced by the incremental coverage that the newer vaccine is able to deliver. So we have that sort of same opportunity with us, but in the context of data that's already shown us we're on track it's just a question of how much of a coverage advantage will we be able to deliver.

Excellent. Okay. And then this infant program is a multi-dose, right? So they have a prime 3 doses and then booster the final dose that we call PD3 and PD4. You say you will release those 2 data set by first half 2027. Now strategic decision you will make is if you will separate them or report them together, what's the criteria you will do? And then how likely you will start to see those blinded data and help you to make that decision?

Great. Yes. And just to level set, just to reinforce what you said, Roger, what we have said publicly is we expect to be in a position to disclose the PD4, the booster data by the end of the first half of 2027. And that will either be concurrently with the PD3 data or there's a scenario under which we would unblind and therefore, also disclose the PD3 data prior, which would be about 6 months, plus or minus before then. There's no scenario under which we would unblind the PD3 data and the wait to disclose it. If we're going to unblind it, it's material enough data, we would disclose it. And for us, there are a few factors at play, kind of the 2 most relevant are which just what do we believe is the right communication strategy. Both data sets are required to get a true picture of the total profile of VAX-31, both data sets are required to put together a package to submit to FDA for an end of Phase II meeting. And so there's the communications component. There's some minor but not material operational component. The other component is we'll be -- we're enrolling in this infant study right now. We'll soon be enrolling in a number of adult studies that collectively comprise our VAX-31 adult program. And the immunoassay work, the serology work is conducted by vendors that serve both our adult and infant studies. So that will also have an impact in terms of when we'd be in a position for not only the infant, the adult studies to have the data. So you should expect in the early part of next year, not necessarily in January, but the early part of next year, once we're further down the enrollment pathway and have really had a full discussion on the communications to announce what the plan is in terms of the unblinding and result and disclosure strategy and what the expected timing of those would be depending on where we land.

Yes. We'll stay tuned, right? So in terms of strategy and then you'll give us a little bit more guidance. Just curious about how you're going to make that decision. Maybe you will tell us kind of a little bit more specifics later. Okay. Good. So that's that. And then obviously, this is a Phase II and then after this, you will end the Phase II and just follow the same kind of playbook as the -- move forward, this is a vaccine space and the vaccine play and then the manufacturing matters a lot. I know you've been building out the manufacturing. So where you are for that? And then what's the CapEx right now? And then what you're about to spend a little bit more on the manufacturing part?

Yes. So we have already made a very fulsome investment on the manufacturing side. So we entered into a working relationship with Lonza almost a decade ago, and we will be launching initially out of multipurpose facilities at Lonza for which we've made many, many batches of the vaccines over the preceding years. But we recognize that in those multipurpose facilities, the capacity isn't there to be able to meet the full demand that we could expect for our vaccines. So we recognized that a few years ago. We expanded our relationship with Lonza and have invested in a dedicated larger capacity facility that we will bring online shortly after the launch in adults and certainly in time to support the launch in infants, where, as you say, they get 4 doses, adults only get a single dose. So you see a really major uptick in the demand for doses associated with the infant indication. So we've mostly completed that facility construction. And maybe I can hand it to you to talk a little bit about the CapEx and a bit more about the details on the manufacturing front.

Yes. So we just provided an update a couple of weeks ago in connection with our Q3 results. When we embarked on this initiative to build out this incremental capacity, we guided to completion of this dedicated suite within the Lonza complex in the early part of 2026 at a total cost of $300 million to $350 million. We're on track and on budget. We reaffirmed that just a couple of weeks ago. So well positioned to meet -- to get that facility beginning to make product to qualify that facility and to build inventory in anticipation of the future launches. And then I would just add what Lonza does on our behalf for a number of components of the manufacturing, including the drug substance. We have done and we'll continue to do the drug product, the fill/finish in the United States. We're currently working with a very well-regarded CDMO there. And as some of you may have seen, we announced several weeks ago, a relationship with Thermo Fisher to serve as our long-term fill/finish facility. So I think the punchline is we are well positioned with both Lonza and this existing U.S.-based CDMO to support the expected demand for the adult indication and these newer facilities this dedicated suite with Lonza and this relationship with Thermo Fisher -- we expect we'll be on track to meet the supply requirements upon the infant indication coming online, which obviously is significantly larger given you have a global market and a multi-dose market versus the U.S. market, which historically has been principally U.S. that's growing for reasons we talked about.

Excellent. Okay. Great. So this space is -- historically, most of the large pharma is playing this vaccine and the pneumococcal vaccine. Now you are one of the biotech, but you still have a lot of the large pharma doing this. And any updated kind of a competitive landscape that we should be aware, I think Pfizer, they're pushing forward the 25 and then they're also moving to the 31 and GSK the same thing. Any updated kind of information you can give us?

Yes. So they have been providing periodic updates on their programs. And yes, I think the most recent update was that Pfizer has pushed back the potential initiation of the Phase III program for their 25-valent program from late this year to potentially late next year. But they are still in the process of nailing down what the formulation would look like for that program. So I think it's still a bit of a work in progress. We know they have talked about a 30-plus valent program that's in preclinical development, which will be an additive program on top of this 25 valent. So I think it's kind of a first things first kind of moment for them. They're trying to get that 25-valent on track. And then GSK also has had a 24-valent program that they've been working on, but they've fallen back to a 30-plus valent program, I think, to be more competitive and try to match up with us. And that program has just gotten the clinic with a small Phase I study. So they're behind us, and we've generated really compelling data to date, but I'm sure they're going to keep trying hard.

Excellent. Okay. So how is the balance sheet, Andrew? And then how does that support everything we just said?

Yes. Based on our Q3 update, we have $2.7 billion on the balance sheet as of September 30. So really in a strong position. And what we have indicated is that balance sheet is sufficient to fund our operations and advancing our business and of course, investing in our PCV programs as expected into the middle part of 2028. So that would put us to the cusp of the potential launch of the VAX-31 adult program and obviously, a period through which we're able to fund multiple milestones, not only the -- all the Phase III readouts for the adult VAX-31 program, but as well as these key readouts for the ongoing VAX-31 infant study.

excellent. Thank you. Thank you for being with us. Yes. Thank you, everyone.

Yes. Thank you.