Ladies and gentlemen, thank you for standing by. And welcome to the Novavax Fourth Quarter and Full Year 2022 Financial Results and Operational Highlights Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] After the speaker’s presentation, there will be a question-and-answer session [Operator Instructions] Please be advised that today’s conference is being recorded. I would now like to turn the conference over to your speakers today, Erika Schultz. You may begin, Ma'am.

Good afternoon, and thank you all for joining us today to discuss our fourth quarter and full year 2022 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. Please turn to Slide two. Before we begin with prepared remarks, I need to remind you that this presentation includes forward-looking statements, including information relating to the future of Novavax, its key strategic priorities, operating plans, objectives, and prospects. Each forward-looking statement contained in this presentation is subject to risks and uncertainties that could cause actual results to differ materially from those projected in such statements. Additional information regarding those factors appears under the heading cautionary note regarding forward-looking statements in the slide deck we issued this afternoon, and under the heading risk factors in our most recent form 10-K and subsequent form 10-Q filed with the Securities and Exchange Commission and available at www.sec.gov and on our website at www.novavax.com. Please turn to slide three. Joining me today for the first time is John Jacob, our new President and CEO. John will provide an update on his first few weeks at Novavax as well as provide an overview of our near-term priorities as we plan for the long-term path to success. Additionally, John Trizzino, Chief Commercial Officer and Chief Business Officer will provide an update on our commercial activities, and Dr. Filip Dubovsky, President of Research and Development will discuss our various strategies and clinical developments. Finally, Jim Kelly, Chief Financial Officer and Treasurer will provide an overview of our financial results. Rick Crowley, Chief Operations Officer will also be available for the Q&A section at the end of today's call. I would now like to hand over the call to John Jacob. Please turn to slide four.

Thank you, Erika. And thank you everyone for joining us today. I'm pleased to be together with all of you for my first earnings call with Novavax. I'm excited to have the honor of helping to shape this new chapter in the company's history in partnership with our Board, our leadership team, and all of our employees. After spending 25 years in the pharmaceutical industry, and having led the growth of several different organizations to become mature commercial entities, there are a few key factors that drew me to Novavax, including their validated and innovative technology platform, which has produced a differentiated and effective COVID-19 vaccine, a pipeline of additional assets, and their adjuvant matrix M that together offer the potential to create significant value for the organization. There is a fully integrated set of capabilities, ranging from discovery and manufacturing to commercial execution on a global scale. Importantly, Novavax’s people and company values have cultivated a mission-driven culture dedicated to improving global public health. Today, I would like to share a few insights from my first five weeks at the company and outline our near-term priorities before handing it over to additional members of our leadership team to discuss our results from the previous quarter. Since joining Novavax in late January, I've spent my time listening and learning about the business and gaining perspective from key stakeholders across our organization. In these initial weeks, I gathered some early insights and gained an initial picture of our current business, our capabilities, and our challenges. These early interactions have made it clear to me that we need to focus our entire organization on a few key priorities, which I believe will give us the best chance for success in 2023. Importantly, they have also reinforced to me the remarkable technology, capability set, and talent that we have as a company and the opportunity we have to build long-term value by leveraging the foundation that has been laid to date. While the significant investments made to build the company over the past three years were necessary for Novavax to deliver our first commercial product during a complex global pandemic, we are now seeing a more traditional commercial market emerging as the pandemic settles into an endemic phase. This new emerging commercial market will require the company to adjust our level of investment and our plans to better align our efforts with this opportunity. In fact, the leadership team and I have already taken decisive actions together during my first few weeks with this in mind. These actions are intended to focus our efforts on the things that we believe are most important to our near-term success while at the same time reducing our spend and resource commitments in areas that may no longer be aligned with those goals. I'd like to take a few minutes to share with you these priorities and some of the actions we've already taken since my arrival. Priority one, deliver a competitive product for the upcoming 2023 fall vaccination season. We are a global company, and our intention is to deliver an updated COVID vaccine that aligns with public health recommendations. Additionally, we intend to make this product available in smaller dose vials, which we know is important for our customers. Together, these factors are intended to help ensure we are well-positioned to compete as markets move from advanced purchase agreements to a commercial orientation over time. Importantly, globally, we do not yet have full clarity on strain selection for the upcoming fall vaccination season, which will be an important factor for us as we update our vaccine. In the U.S., for example, we are working in partnership with the FDA to inform them about what we will need to deliver our product, including the timing of strain selection and the nuances of our own manufacturing process as a protein-based vaccine. Let's move on to priority two. Reduce our rate of spending, manage our cash flow, and evolve our scale and structure. Since my arrival, we have taken immediate steps to reduce our rate of spending and better align our investments with our near-term priorities. I have already taken an important initial step to evolve our structure by modifying the organization of our executive leadership team, which we discussed in our earnings press release. These changes will allow us to better align our internal resources, operate more efficiently, and help position us for long-term success. Highlights of these changes include the appointment of Elaine O'Hara as our new Chief Strategy Officer who will focus on business and corporate development, portfolio strategy, and alliance management. In the coming months, we will be assessing our global structure in more detail with these priorities and long-term value creation in mind, and look forward to sharing any additional potential changes with you during future calls. You will hear more today about how we are reducing and streamlining our investments from Jim Kelly later in the call. Finally, priority three, leverage our technology platform, capabilities, and portfolio of assets to drive additional value beyond the COVID-19 vaccine alone. Beyond our COVID-19 vaccine and the near-term opportunity for the fall '23 vaccination campaign, we have a differentiated technology platform, a global footprint with a fully integrated capability set, and a portfolio of promising assets including a COVID-19 influenza combination vaccine in Phase 2, with data expected mid-year, that presents significant opportunity for value creation. It is our intention to unlock the potential of these assets and capabilities, both in the near term and over time, via strategies including business and corporate development. This could include the potential for out-licensing, partnering, co-promotion, and other related activities. So let me close my opening comments by saying that in the coming months, we are committed to maintaining a strong focus on the priorities I shared with you today with the goal of strengthening our position as a company in the near term, and putting us in a good position for future growth and success. I would now like to hand it over to the team to discuss our results in more detail, beginning with John Trizzino, to provide an update on our commercial activities.

Thanks, John. Please turn to slide six to discuss commercial updates. As John has discussed, we're beginning to see the COVID-19 market evolve and stabilize as we transition from the pandemic to the endemic phase of COVID-19. We expect COVID vaccines will remain an important part of annual seasonal immunization schedules to address waning immunity and protect against emerging variants. In the U.S., the government's decision to end the public health emergency in May signaled the intent to move away from government purchasing and toward a commercial market for the second half of this year. Taken together, we believe these market dynamics create a significant long-term opportunity, with a potential global market size of greater than $15 billion annually over time, which we anticipate that the U.S. and EU, our priority markets, make up approximately $10 billion per year of this total projected opportunity. To capture our share of this potential opportunity, we are leveraging the strong foundation we built in 2022 to advance key commercial goals that will support our path to long-term success. These activities for the 2023 vaccination season include enabling reliable access to our vaccine, leveraging our commercial footprint and priority markets in the Americas and Europe to drive demand, utilizing our global manufacturing and supply network, and delivering a differentiated product profile. We believe the relationships we've built with customers and key markets through the launch of Nuvaxovid will help facilitate a smooth transition to the commercial market. Additionally, in the U.S., we recently updated our agreement with the U.S. government to deliver 1.5 million additional doses of our COVID vaccine, which maintains access throughout the country ahead of our intent to deliver an updated vaccine for the fall season. Outside the U.S., we currently have $2.1 billion in committed advanced purchase agreements remaining and expect to deliver doses against this commitment through 2023 and 2024. Our focus is on positioning Nuvaxovid as a critical protein-based option, as well as working to generate additional pull through in all target markets. Our efforts are focused on building brand awareness, improving access, and differentiating our product to build demand and support pull through efforts. We are working to assess our manufacturing needs and modifying our global manufacturing footprint consistent with our contractual obligations to supply and for anticipated demand, especially in the U.S. for our COVID vaccine. These efforts are intended to provide us with increased flexibility to supply our priority markets in line with seasonal demand. Lastly, our competitive product profile is grounded in our validated technology platform, and our clinical data demonstrate our vaccines' high efficacy, strong durability of immune responses, protection against infection, and well-characterized safety and reactogenicity profile. I'll now hand it over to Filip to discuss our strategy for developing various strain vaccines and ongoing clinical development.

Thanks, John. Please turn to Slide 8. Today, we remain focused on developing our COVID-19 vaccine, including against variants, while also evaluating our influenza and combination vaccines. Beyond these three clinical assets, we are rationalizing our preclinical pipeline to align our resources with programs that we believe will drive significant value for our business. This includes pausing the planned clinical development for our adult RSV program until a strategic pipeline assessment is complete, and we are confident our other priorities are fully resourced. Our ongoing COVID-19 studies are focused on gathering data to improve and expand our label as well as strengthen our policy recommendations. The studies include evaluating different dosing schedules for both immunocompromised and immunocompetent participants to support a more flexible vaccination schedule. They are designed to provide data that can be used to expand our label and support policy recommendations. Additionally, we are monitoring public health platforms for the emergence of new variants. When concerning variants emerge, they will be incorporated into our variant development platform to expedite our response. For our COVID and influenza combination vaccines, we initiated our Phase 2 study in Australia and New Zealand in December. This study will determine the specific formulations that can be advanced into late-stage development for both influenza and the combination vaccine. We expect initial results from our Phase 2 trial mid-year, and if the data is positive, we will expect to pursue options to continue advancing the program into a Phase 3 trial. With that, I'll hand over to Jim Kelly to discuss our financial results.

Thank you, Filip. Please turn to Slide 12. This afternoon, we announced our financial results for the fourth quarter and full year 2022. For the fourth quarter of 2022, we recorded total revenue of $357 million, a 61% growth over the fourth quarter of 2021. For the full year 2022, we recorded total revenue of $2 billion, a 73% growth over the prior year. The growth in each period resulted from our Nuvaxovid product sales, which offset a decline in grants, royalties, and other revenue, reflecting Novavax's transition to a commercial stage company. Additionally, we ended 2022 with $1.3 billion in cash compared to $1.5 billion as of the end of 2021. We recorded a net loss of $182 million for the fourth quarter and $658 million for the full year, which is an improvement compared to a net loss of $846 million and $1.7 billion for the comparable periods in 2021. We initiate an organization-wide effort to assess our capabilities and more closely align our investments and activities with the top business priorities. Through this initiative, we have implemented measures to reduce and control our operating spend. Our intent is to lower our SG&A and R&D expense to $370 million or less in the first quarter of 2023, based on anticipated impacts of our enhanced spend controls. We are seeing an emerging seasonality in the demand for COVID-19 vaccines globally, and we do not anticipate any new vaccine sales for the first quarter of 2023, but we do anticipate vaccine sales beginning in the second quarter and the majority of our Nuvaxovid sales to occur in the second half of 2023. With that said, I'd like to turn it back over to John for some closing remarks.

Thank you, Jim. Looking ahead, I'm excited about our opportunity this year and believe that we have a significant opportunity to create value over the long term in Novavax. We recognize that we'll face some significant challenges on our journey from here and the near-term road ahead will be tough. However, we commit to putting forth our best effort and conducting our business with the highest standards of integrity as we work hard to reshape our ways of working, reduce our spend, and refocus our time, energy, and resources on our top priorities. We look forward to sharing updates and additional details on our execution of this plan and our long-term vision in our first quarter 2023 earnings call. I will now turn it over to the operator for Q&A.

[Operator Instructions] Today's first question comes from Roger Song with Jefferies. Please go ahead.

Great. Thank you for taking our question. A few questions from us. The first is about liquidity. Maybe the team can give us a little bit more granularity in terms of the top line versus the OpEx spend. On the top line, we are hearing you have $20 million -- I don't know about the EU kind of APA -- revised APA. And also, you have the $2.1 billion APA remaining to deliver in 2023 and '24. How should we think about the 2023 revenue in general? And also in terms of the OpEx, how flexible your OpEx will be based on the top line revenue, understanding you're cutting costs overall? And I have a follow-up after that.

Hi, Roger, John Jacobs here. Thank you for joining and thanks to everyone for joining our call today. Just a couple of comments, and I'll hand it over to Jim Kelly to add some additional context, our CFO. But as you mentioned, we have just over a $2 billion book of business globally outside of the U.S. that the company will be optimizing between 2023 and 2024. In addition, the U.S. represents an exciting and relatively new opportunity for Novavax as the company didn't fully penetrate the U.S. market in the past. We are excited about the additional opportunity that the U.S. marketplace offers us regarding potential revenue. And Jim, Roger also had some commentary about OpEx; maybe you want to add some more context to that answer for now.

Certainly. And thanks for your question, Roger. One of the things that we shared was our expectations around the trajectory of spend into the first quarter. That's certainly something we provided. We look forward to delivering an updated vaccine in the fall and bringing that product to people around the world.

Just to clarify, the $20 million doses in Europe are part of that $2.1 billion book of business outside the U.S. And did you have a follow-up question, Roger?

Thanks, yes, I understand. In terms of the variant-specific vaccines, regulators and public health agencies globally are looking for. Just curious about your current CMC capacity or the speed of the production? What is the timeframe you're looking for to be able to meet the strain change specific U.S. requirements? Thank you.

Great question, Roger. We know it takes longer to develop a protein-based vaccine than an mRNA vaccine. But there are things we can do to speed up our timeline, and we are taking decisive action with that intent in mind. First and foremost, that's partnering with the FDA very closely in conversations between our team and FDA senior and technical leadership. Additionally, we have a fully integrated capability set that allows us to bring forward multiple variants and bring those variants to scale in our CMC process. So we can hedge our bets ahead of the curve in anticipation of variants that may be selected.

Roger, it's a good question. We are actively producing variants of interest based on information from public health authorities. We anticipate having a pool of inventory ready at the time of the decision being made. This allows us to maintain an appropriate timeline from inception to commercial, getting a jump start on the process by creating inventory and stockpiling materials ready for fall.

And our next question today comes from Alec Stranahan with Bank of America. Please go ahead.

Just a few from us. As a follow-up to the previous question on the vaccine turnaround, do you have any additional info on the spring versus summer strain selection? I know this was sort of a topic of debate at the most recent meeting. And just from a technological perspective, how accurate would it be to have multiple strains in development? What would be the historical hit rate when comparing past flu seasons? And one more question on innovation outside of COVID. Are you looking to in-license something interesting out there?

Filip, do you want to take the question on strain selection?

Sure. Most regulators globally are working toward an annual vaccination schedule. We're beginning to select strains around summer time or a bit earlier for deployment in the fall-winter seasons. COVID is changing more rapidly than influenza, so while some variants appear to be stable, there’s a recognition that we need to stay proactive in our development efforts.

To clarify, we are rationalizing our portfolio, supply chain, and global footprint to align with emerging opportunities. RSV programs are part of our evaluation, and we are assessing the best opportunities as we move forward.

We're aware of the competition in the RSV space, but we also have reasons to be competitive. We're currently deciding which programs to push forward while ensuring we have the resources required for other priorities.

And our next question comes from Georgi Yordanov with Cowen Company. Please go ahead.

Thanks so much for taking our questions. Congratulations on the new role, John. You've talked about the opportunity to offer a differentiated product to the market. Can you discuss the key aspects of differentiation that you would like to market? Additionally, what is your ability to communicate and market these differentiating aspects, given that we lack clear head-to-head studies?

John Trizzino, would you like to take that question?

Yes, certainly. The differentiation of our vaccine lies in its protein-based formulation and the associated comfort and familiarity it brings. The refrigerator stability of Nuvaxovid and understanding the ongoing studies highlight the market's desire for alternatives to mRNA vaccines also positions us well. Clearly articulating these attributes through targeted communications will be vital.

Just a couple of follow-ups. Regarding the strategy of manufacturing multiple strain vaccines at risk, what would be the impact of that on your gross margins? How suitable is this strategy in the long term?

COVID is different from flu in that new strains evolve rapidly. Therefore, the only way to keep up with this is to manufacture variants of interest at risk and have a stockpile. This approach is sustainable provided we continue to have the global supply chain in place.

The amount manufactured at risk for this strategy will not impact our long-term cost structure as it is designed to facilitate a smooth transition for strain change.

Regarding the COVID and flu combination studies, we are excited in anticipation of the midyear results. These results will inform our strategy moving forward on how we advance the product in the next stage of development.

And our next question comes from Eric Joseph of JPMorgan. Please go ahead.

Hi, good evening. Would like to get a sense of where you might see operating efficiencies on the R&D side? Are you appropriately sized on the manufacturing side? What’s the relationship with the Serum Institute?

We are rationalizing our global supply chain, and that includes evaluating our manufacturing capabilities to align with emerging opportunities both for COVID and future prospects.

Regarding the $2.1 billion remaining in advanced purchase agreements, we expect to satisfy those APAs during 2023 and 2024 and don’t see a sunsetting.

The Serum Institute and our operational capabilities work in tandem, providing flexibility in how we manufacture future variants while minimizing risks.

Thank you for your time and your energy today. We look forward to providing additional updates as the year proceeds. Thank you.

Thank you. The conference call has now concluded. You may disconnect your lines at this time, and have a wonderful day.