Novavax Inc Q2 FY2021 Earnings Call

Good day, everyone, and welcome to the Novavax Second Quarter 2021 Financial and Operating Results. All participants will be in a listen-only mode. After today’s presentation, there will be an opportunity to ask questions. Please note that this event is being recorded. I would now like to turn the conference over to Silvia Taylor, Senior Vice President, Corporate Affairs and Investor Relations. Please go ahead.

Thanks, Paul. Good afternoon, everybody, and thank you to all of you who have joined today’s call to discuss our second quarter 2021 operational highlights and financial results. A press release announcing our results is currently available on our website at novavax.com and an audio archive of this conference call will be available on our website later today. We’ve also posted the slides we are using during today’s call under Events in the Investors section of our website. Joining me today is Stan Erck, President and CEO, who will provide an overview of our progress in the second quarter, our supply commitments, our regulatory timelines, as well as updates on manufacturing; Dr. Filip Dubovsky, Chief Medical Officer, will discuss developments for our COVID-19 program; And John Trizzino, Chief Commercial Officer, Chief Business Officer and Interim Chief Financial Officer will provide an update on our financial results for the quarter. Additionally, Dr. Greg Glenn, President of R&D will be available for the Q&A section at the end of today’s call. Before we begin with prepared remarks, I need to remind you that we will be making forward-looking statements during this teleconference, which are based on our current projections and beliefs. For example, statements relating to future financial or business performance, condition or strategy, including expectations regarding revenue, operating expenses, cash usage, clinical development of our vaccine candidates, timing of future regulatory filings and actions and other anticipated milestones are forward-looking statements. Novavax cautions that these forward-looking statements are subject to numerous assumptions, risks and uncertainties, which change over time and actual results could differ materially from what is described in such statements. We encourage you to consult the risk factors discussed in our SEC filings for additional detail. I’d now like to hand the call over to Stan. For those of you following the accompanying slides, please turn to Slide 3.

And thank you, Silvia, and thanks to everyone for joining us today. As we start this presentation today, we can note that through the development of vaccines and treatments to date significant progress has been made to combat the COVID-19 pandemic. However, we also know that with the continued circulation of variants and the inequitable access to vaccines that persists in many parts of the world, Novavax’s mission to bring NVX-CoV2373 to market as swiftly as possible has never been more important. At Novavax, this week, we took a major step forward in advancing this mission. We are announcing the filing of multiple regulatory submissions for 2373 with our partner Serum Institute. These regulatory submissions encompass global markets, including filings with the Drugs Controller General of India, as well as with regulatory agencies in Indonesia and the Philippines. We view these submissions as the first of many, bringing us one step closer to delivering 2373 to those in need. In addition to these regulatory developments, I’d like to begin today’s call by providing an overview of a few of our major achievements in all areas of our business since the beginning of the second quarter. We announced positive data from our PREVENT-19 pivotal Phase 3 trial demonstrating 90% overall efficacy and 100% protection against moderate and severe disease. Filip will talk more about this shortly. We took major steps in exploring 2373’s boosting capabilities, including positive results announced today from our six-month booster study in our ongoing U.S. and Australia Phase 2 trial. In conjunction with our PREVENT-19 trial, these outstanding data make a compelling case for 2373 to become the universal booster of choice. We also continue to explore heterologous boosting alongside other vaccines in the market by participating in two partner-led studies, the Com-COV2 study and the CoV-Boost mix-and-match study being conducted in the UK. We furthered the global reach of our vaccine candidate finalizing advanced purchase agreements with Gavi for 1.1 billion doses and with the European Commission announced yesterday for up to 200 million doses of 2373. And on the manufacturing front, we continue to work closely with our global partners to progress toward our anticipated manufacturing capacity. We have made significant progress during the quarter to ready our global supply chain for the delivery of 2373, following anticipated regulatory approvals. And today, we reaffirm our guidance to be at a monthly capacity of 100 million doses by the end of the third quarter and 150 million doses by the end of the fourth quarter. In parallel with these developments, we have our eye on the future advancing other candidates in our pipeline that we believe are pivotal in our ability to continuously address the world’s most urgent global health needs. We’re excited to share with you more about these and our many other achievements in the second quarter. Today, our management team will discuss clinical developments for 2373 and our financial results for the second quarter. I will also discuss updates on our supply commitments globally, progress toward regulatory approvals of 2373 and the status of our manufacturing global supply chain. I’ll also highlight our key areas of focus moving into the remainder of 2021 as well as 2022 and beyond. With that, I would now like to hand the call over to Filip to discuss our many clinical developments over the second quarter.

Thanks, Stan. We achieved a number of milestones in the second quarter across the clinical program, and I’ll highlight a few of these in the overall context of our studies. So maybe switch to Slide 5, please. Here we are. So here are the clinical programs that we’ve conducted since the beginning of the development. We start off in the Phase 1, Phase 2 in the U.S., Australia, where we established the dose level, the immunologic profile and the preliminary safety profile of the study. We moved on to a Phase 2 study in South Africa, which is our preliminary efficacy evaluation, as well as defining the overall safety profile and exploring the efficacy and safety in a small group of HIV subjects. We progressed to our first big Phase 3 study in the UK. This is our licensure-enabling study that collected licensure-enabling safety, as well as efficacy data which included a small influenza co-administration study, and I’ll touch base on that data a bit later. Finally, we conducted a large Phase 3 study in the U.S. that defined the safety data, immunogenicity data, as well as efficacy data in the U.S. population. Let’s move on to Slide 5, please. Here’s what to remind you of the design of the PREVENT-19 study in the U.S. and Mexico. This study included 30,000 adults aged greater than 18 years. It was randomized two to one. As you know, we’ve gone ahead and crossed these people over in a blinded crossover fashion. The enrollment in the two-dose crossover is almost complete. Additionally, we expanded this study to include adolescents 12 to 18 years of age, and we enrolled 2,248 of these children. The dosing is complete and the file for safety, immunogenicity and efficacy is ongoing. We have a blinded crossover plan and we should be beginning that next week. So let’s move on to Slide 6, please. Here, what I’ve displayed is the Kaplan-Meier curve for the primary efficacy endpoint. Overall, as you remember, the overall efficacy was 90% as Stan mentioned. From the graph, you can see a couple of other things. You can see the separation of the vaccine and placebo rates began before day 21, before the second dose was given. Additionally, you can see through day 90, there’s no convergence of the right suggesting durability of protection for our vaccine. Finally, I want to remind you that all the severe cases occurred in the placebo group. So let’s move on to Slide 7. Slide 7 contains updated data from when we chatted last. This data reflects additional sequence data from the disease cases in the study. The variants of concern are in red, the variants of interest are in yellow, and those that are neither of concern or interest, more similar to the strains closest to the Wuhan strain, are represented in green. You can see that overall, we had 14 cases in the vaccine group and 63 cases in the placebo group. This was a two to one randomized study, so you can consider the placebo group half of what we would have normally seen in a one-to-one randomized study. The efficacy here was 90% with a lower bound of 83%. Our key secondary endpoint was against strains that were neither areas of interest nor areas of concern, most similar to the Wuhan strain, and here we had 100% efficacy. Importantly, there were no disease-causing strains in green under the vaccine arm for moderate and severe disease, with a 100% efficacy, a lower bound of 87, irrespective of variants or non-variants. There were no patients at all in the moderate or severe disease group under the vaccine column. Finally, we have exploratory analysis against variants of concern, which we saw efficacy of 92.6% with a lower bound of 80%. We recorded a point estimate of 93% with a lower bound of 80% against the B.1.1.7 alpha variant, first seen in the UK. Remarkably, across all these endpoints is the consistency of the efficacy, precision, and the high lower bound. So let’s turn to Slide 8.

Thanks, Filip. Moving to Slide 27, we provide an overview of our supply commitments to-date. There remains significant demand for NVX-CoV2373 globally with vaccination rates varying widely from country to country. We continue to see significant opportunity in ex-U.S. markets to provide supply for initial vaccinations. In high-income countries, we believe our technology well positions us to become the booster of choice. Yesterday, we were pleased to announce the finalization of an advanced purchase agreement with the European Commission for the purchase of up to 200 million doses of NVX-CoV2373. We expect to begin delivery of initial doses following anticipated regulatory approval from the European Medicines Agency, and through this agreement, NVX-CoV2373 is expected to be the first protein-based COVID-19 vaccine available in the European Union. Additionally, we finalized an agreement with Gavi, reaffirming our commitment to fair and equitable access to NVX-CoV2373. The cumulative 1.1 billion doses that we, alongside our partner Serum Institute, committed to the COVAX Facility will be critical in ensuring widespread initial vaccination, particularly in developing markets.

Thanks, Stan. Moving to Slide 30, we issued our second quarter earnings press release, which discusses our financial results for the quarter and we’ll be filing our 10-Q for the second quarter of 2021 today, which includes details on important business and financing events during the second quarter. With that said, I’d like to provide a high-level overview of some of our key financial results for the quarter. Novavax revenue in the second quarter of 2021 was $298 million compared to $36 million in the same period in 2020. This increase was due to increased development activities related to NVX-CoV2373 under the U.S. government and CEPI agreements. During the quarter, we filed an ATM offering in June 2021, which allowed us to issue and sell up to $500 million in gross proceeds of common stock. As of June 30, 2021, no shares have been issued under the new ATM. We ended the quarter with a strong cash position of $2.1 billion compared to $806 million at year end 2020. This increase in cash was primarily due to $1.1 billion in payments received under advanced purchase agreements, the timing of payments to third parties, and the $565 million of ATM funding in Q1.

Thanks, John. Turning to Slide 31, I will lastly highlight our key areas of strategic focus for the remainder of 2021. These include the following: Completing additional regulatory filings and gaining regulatory authorizations of NVX-CoV2373 in multiple markets, readying our global supply chain for commercialization and reaching our anticipated manufacturing capacity of 150 million doses per month, beginning expansive distribution of NVX-CoV2373, and finally, advancing life cycle management of NVX-CoV2373. We believe these near-term priorities are critical in laying the foundation for commercial success in the coming years. As we look towards 2022 and beyond, we believe that the clinical development of NVX-CoV2373, to-date, positions our vaccine to become the universal booster of choice and the preferred vaccine for annual revaccination. Our differentiated technology, as well as our global supply chain, will enable us to support demand in an anticipated booster market in 2022 and beyond, as we continue to develop other areas of our pipeline, both our variant strain and combination vaccine programs will play a meaningful role in our long-term success, enabling us to effectively address the continued evolution of COVID-19 alongside seasonal influenza. Before opening the call to Q&A, I wanted to take a moment to acknowledge and thank the Novavax clinical trial participants around the world. These individuals made a crucial and lifesaving contribution during an unprecedented global pandemic. And now they are the reasons some countries are starting to reopen. I and my colleagues have heard from many of you about your experiences, and we are grateful for your generosity. We know that in some situations, clinical trial participants are being challenged with respect to proof of vaccination. We want these folks to know that we are doing everything we can to advocate for them. This includes working with governments to make the case that those who participate in clinical trials should be considered fully vaccinated from a public health perspective and treated in the same manner as someone who has received a deployed vaccine. We will also do our best to keep you informed of our progress. I want to reiterate that we are working day and night to finalize the requirements for the submission process and I want to personally thank all of the clinical trial participants for their vital contributions to public health during the pandemic. For those who have reached out to us directly, we appreciate your letting us know about your situation. But also, I should thank our entire Novavax team for their continued dedication during an incredibly busy quarter. These tireless efforts combined with the support of our partners globally, bring us significantly closer to delivering our COVID-19 vaccine. And I’d now like to turn it over to the operator for Q&A.

We will now begin the question-and-answer session. And our first question today will come from Kelechi Chikere with Jefferies. Please go ahead.

Yes. Thank you. Congrats on all the progress you’ve made over the quarter. And thank you for the comprehensive update. I guess, my first question, what gives you confidence that you’ll be able to file in the U.S., EU and UK? And I guess, how much risk is there associated with addressing some of those last remaining issues that are the gating steps to those filings? Any color there will be extremely helpful.

Yes. I think the risk reduction is dramatic. I think that it’s a matter of now mechanics of getting all the data – final data assembled and submitted. We’re talking weeks here, not months. So I’m not worried about the future submissions.

Got it. So you believe that at least the timelines that you’ve put forth, you’ll be able to reach those. Is that more or less correct?

I do.

Great.

Look, this is a very big transition for the company. We filed with regulatory agencies in three countries, and we’ve got a complete filing package for those. We’re finishing the additional requirements in the various countries that I mentioned. We’ve listed dates that we plan on making with a lot of confidence.

Got it. Got it. Perfect. Thank you. And I guess my last question, what additional data do you need to generate and to file to support your booster strategy campaign? Does it make sense to – or is there even a possibility that you can include some of the data that we’re seeing here in the EUA filings to the U.S., EU and UK?

Yes. Certainly, we’ve shared this data with some of those agencies informally. Initially, we were planning to file with just the overall primary indication of greater than 18 years of age for the primary vaccination. This data would follow on for our subsequent variation. Hopefully, this data will be in even prior to an official BLA or MAA.

Okay, thank you.

And our next question will come from Mayank Mamtani with B. Riley FBR. Please go ahead.

Good afternoon. Thanks for taking our questions and congrats on the progress being made here. So if I may just ask a quick follow-up on the UK filing that seems to be taking a little longer than maybe that was anticipated. I’m just curious if the Com-COV2 data that is being worked upon also mix and match vaccine data. I’m just curious if you have an update on that and if that data set is playing any role with what is going on in UK. And if you can comment on the CMC side, the first part of that question would be helpful too.

Okay. Well, I’ll take the clinical study portion of the question. There are two studies that are being funded by the VTF, being done by University of Oxford and Southampton. One of them has a heterologous vaccination study that you referenced, Com-COV2. The other is a boosting study where people receive two doses of other sponsor vaccines and are being boosted by our vaccine. Those studies are sponsored by ourselves or sponsored by the universities and we understand that the data will be made available and published in the September timeframe. We look forward to that data as do you. We’ve discussed this data with the UK regulators, and they suggested it would be helpful, but thought that our Phase 2 boost data in conjunction with our South Africa data would really be desirable to include in a label indication.

Great. And maybe if I could ask a specific question on the boost data here, the headline number of 4x on both IgG spike and also the wild type neutralization. How do you see this comparing relative to maybe what we have seen with mRNAs? And then the IgG decay that your kinetics seems quite steep. I’m just curious how should we think about that? Is there anything with the platform or we should expect this sort of decay at six months irrespective of mRNA or protein-based vaccine?

I guess a couple of thoughts and Greg can jump in as well. I’m not sure that measuring the absolute value of either neutralizing IgG at six months is an indication of efficacy at that time point. I think we’ve seen that for some of the other sponsors who started before we did and have data in that regard. We certainly haven’t seen any decay in the Kaplan-Meier curves that I showed you, although, clearly that was only for the first 90, 100 days or so. The other point is that this assay is matter, in different kinds of assays measure different things. Finally, I would say this is not only the quantity of the antibody we induce but also the quality. You saw from the data we showed, where the functional ACE2 inhibition results that our antibody is able to cross neutralize variants or across neutralizes and drug where to be able to block the functional interaction between spike and ACE2. Much like we saw with the influenza study, where we had good cross-protection against drifted strains, I think we’re seeing the same thing. There’s a combination of the absolute titers achieved and how good your antibody levels are. Finally, these titers hit the levels of 200,000 that we demonstrated here, and that’s going to take a very long time for that to decay. We have a much better chance of epitope spreading and cross-variant finding and protection due to the boost data and the maturation of immune response.

That was good. Thank you.

Awesome, and thank you. My final question on manufacturing, maybe Stan, are you able to comment on sort of what might be our monthly run rate say for July or anything on the doses that you may have stockpiled or even like, the shelf life, because I think folks are concerned that this bureaucracy of getting – just getting into the market might be impacting what doses you may have already sitting on the shelf and not getting to people who can benefit from that.

Yes, I think we’re certainly working to make sure that we don’t run into a shelf life problem with the product being made. We have been successful in extending dating from six months to nine months on many of our in-process work. Our expectation is that’s not going to be an issue. We expect fairly rapid licensure, and we expect to be able to use the product we make that we’re scaling up right now. We’re scaling up globally to a rate of 100 million doses by the end of next month. So you can figure out what that rate is to get to that point from 100 million to 150 million. Until the product is filled, we don’t have to worry about dating because the drug substance, the antigen itself is frozen. That’s all on the shelf. We’ve got many tens of millions of doses that are already ready to go by the end of August, when we expect to begin shipping. We anticipate that globally, we’ll have probably over 100 million doses that we can ship. So we’re doing well on that issue.

Fantastic. Thanks for taking my question and congrats on the progress again.

And our next question will come from Charles Duncan with Cantor Fitzgerald. Please go ahead.

Okay. Thanks, Stan, and team for a comprehensive update and taking our questions. I had kind of a broader question to start with, and that is regarding an annual boosting campaign. I guess, I’m wondering if you could lay out how you think that would look and what you think the strongest source of competitive advantages that you may have. Is it in distribution or efficacy or tolerability or an ability for your vaccine to work nicely in the sandbox, if you will, with other vaccines such as influenza?

Well, maybe I can take a crack at that from the medical side. And like Stan said, pretty much all of those attributes contribute. I think we’ll see as additional data emerges, whether the exact profile of various vaccines is when they’re given either in homologous boosting or heterologous boosting. I think we will have an advantage there. I think we’ve demonstrated that when we boost with our vaccine, we get very broad protection against all the variants we tested against. To be clear, I mean, our immune response is strong against all the variants we've tested. So I think we’re in good shape there as well. I suspect that as we go forward, we’re going to have additional data, which is going to speak to the pathology of our vaccine and how long we can use it and similar effects. Stan, would you like to add anything?

Yes, I would just add, Charles, there are a variety of factors here. I think you heard in today’s presentation that we’re confident in the benefit and value of our boost strategy. However, there are still many considerations in terms of the global health policy positions regarding what that timeframe will look like for vaccination. So we’re obviously collecting all the available information from the data we have and are looking at the data from other manufacturers. We’re in communication in the U.S. and globally about how healthcare policy will support a boost strategy and the data supports that we are prepared for whatever that might entail.

Could you imagine a six-month boost or a 12-month or annual boost?

Yes. We see significant value in a six-month boost strategy as confirmed by the data. However, we’ll have to wait and see what ACIP and others say about that.

Okay. And then quickly going onto the MHRA meeting that you – I think you mentioned later this month or next month, what is this specific question that you’re looking to get addressed at MHRA or is it a check-in meeting prior to completing your application for approval in the UK?

Yes. We hope this will be the final meeting where we would submit the application after that. We’re looking at the final questions they may have leading to a filing in September.

Last question regarding influenza. I’m quite interested in seeing that move forward. I think it may be interesting to see a combination vaccine, and I guess I’m wondering when you consider the results that you have with the quadrivalent vaccine, what do you think was the driver of the influenza response? Was it Matrix-M? And could you speculate on what the response might look like when you combine 2373 with NanoFlu?

Yes. We have two sets of data now. One is a very efficacious COVID vaccine with Matrix-M, and previously, as you know, we had really good success in older adults with our NanoFlu vaccine. In this trial, this is a licensed vaccine given during the administration. It demonstrated that you could get a very good flu response and COVID response simultaneously. We’re looking forward to advancing this combination vaccine. We expect that this fall, we’ll be starting our combination flu COVID vaccine with Matrix-M. We know Matrix-M has good features and can create a better quality and quantity immune response. Our data has indicated successful administration against respiratory vaccines.

Okay. Thanks for that color. Looking forward to the upcoming regulatory updates.

And our next question will come from Vernon Bernardino with H. C. Wainwright. Please go ahead.

Hi everyone, thanks for taking my question and congrats on the tremendous progress. I know it’s been a long journey, and I’ve been there with you along the way. I know you just announced the submission for EOA in India, Indonesia and the Philippines, but can you give us an idea of how long the regulatory process takes in those countries? And do you have any insight into how many doses have been already distributed by other vaccines in those geographies and perhaps by the time 2373 becomes available in India, Indonesia and the Philippines?

I can speak to Indonesia. They have had about 70 million doses distributed to date. A lot of those vaccine doses are for the Sinopharm, which is the inactivated vaccine. Countries have expressed significant interest in trying to have a booster with a vaccine like ours. We’ve been approached by their government as our partner Serum Institute has been approached by Indonesia because of their ongoing struggles with the Delta variant. When I looked at the data we had today with boosting, it was very encouraging to see how effective our immune response is against Delta. We can’t predict the timing of these regulatory processes very easily. However, we’re hoping something will happen fairly soon, but right now we don't have a prediction for timelines.

Okay. And as a follow-up to that, I know that you’re managing factor through into 50 million doses and SII where manufactured the balance of the 1.1 billion, how much of those doses will be going to the three countries?

Currently, we don’t know the order in which they want to buy dosages for the COVAX Facility, so that information isn't available to us.

And our next question will come from Eric Joseph with JPMorgan. Please go ahead.

Hi, good evening. Thanks for taking the questions. I guess with respect to the equity bonds with EMA and MHRA, could you speak to what extent the submission packages or requirements differ from those already submitted with a service to India, Indonesia, and the Philippines? I’m curious to know whether you’re seeing European regulators move the goalposts at all, given that it’s taking longer to complete those submissions. And then Stan, you sound very confident on the authorization path for meeting the opening in the U.S., following the potential approval of the mRNA vaccines. I’d like to know if there’s any feedback specifically from the agency that makes you comfortable with that window opening through the fourth quarter.

Yes. There are many factors that influence this, but my confidence in my statement is generated by a news article, Peter Marks quoted in a Bloomberg interview this week. When asked about the continuation of emergency use authorizations, he mentioned that we still don’t have an approved protein-based vaccine. This gives me a lot of confidence. On the regulatory issues, the only difference between what we’re filing with everybody else and what we’re intending to file with MHRA and EMA is finishing up some comparability work between lots. I think the actual studies are done and we're assembling data to submit to the MHRA.

How are you planning to update investors as it relates to those package submissions?

When we get an approval, there will be a press release. Additionally, when we file with major agencies like MHRA and EMA, we’ll announce that in a press release.

Okay. And maybe just one follow-up, just trying to understand a better understanding of the language in your most recent filing here. As it relates to your agreement with the U.S. government, you mentioned wanting to see FDA alignment on your analytical methods before conducting additional U.S. manufacturing. I’m curious if that suggests some kind of authorization before continued U.S. production, and if that will have any impact on the originally planned delivery of a 100 million doses under the original work speed agreements.

Yes, that’s sort of the source of some of the delay with the FDA. The U.S. government is our partner in developing this vaccine, and they are the gatekeepers for submitting to the FDA. This means that there has to be some negotiation regarding whether our validation activities meet their standards before we approach the FDA. There will always be a time lag with such approvals. We need FDA concurrence that our assay is fully validated, and that’s where the time differences arise.

Would this have any impact on the originally planned delivery of a 100 million doses under the original work speed agreements? And the originally expected delivery...

Sure, it does because the original timetable called for starting to deliver those doses in the fourth quarter and through the second quarter of next year. I think that probably we won’t get many doses shipped in the fourth quarter, and it will just push it back to the first and second quarters. However, we have product stockpiled. So it will come in a rush once we get FDA approval.

Okay, great. Thanks for taking the questions, guys.

And this will conclude our question-and-answer session. I’d like to turn the conference back over to Stan for any closing remarks.

Yes. This has been a huge transition quarter for the company. I mean getting regulatory submissions in is huge. We’re on the verge of product approval. We believe we have demonstrated additional demand for the product with the EU filing and we’ve got great data that shows our vaccine is effective against the various strains. We’re very optimistic, and we look forward to reporting to you next quarter. Thank you.

The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect your lines at this time.