Novavax Inc (NVAX) May 13, 2026 Conference Transcript

with Novavax. My name is Alex Stranahan. I cover Smid Biotech at Bank of America, and I'm the analyst covering Novavax. And it's my pleasure to introduce and be joined here by John Jacobs, president and CEO of Novavax, as well as Jim Kelly, chief financial officer. Guys, thanks for being here again. Thanks for having us here. It's always a pleasure.

Yeah, great.

Looking forward to the conversation. Maybe just at a high level, you've completely executed the pivot from, you know, a vertically integrated COVID vaccine company to a technology platform business, essentially, built around partnering MatrixM. Obviously, you've got the Sanofi milestones and royalties from COVID. But I guess, what are the most important proof points that demonstrate the new strategy is working? And are there any aspects to your strategy you believe the market may be underappreciating?

Thank you for the question. We couldn't be more excited about where we're taking the company right now. We launched this new strategy Alec, as you know, January of last year, you know, the first proof point really is that there's remarkable level of interest that we're seeing in our technology from third parties who understand the vaccine and even the oncology immunotherapeutic space really, really well. So some of those proof points include the Pfizer deal, which we announced in January of this year. So that was about a year into launching the strategy. We have a lot of different irons in the fire, a lot of attempts to get new partnering going and having a lot of success behind the scenes on progress there, Pfizer being the first fully announced license deal, and you saw all the metrics around that, and then followed by, just in the first trimester of this year, four additional MTAs, these material transfer agreements, where we provide matrix for clinical research to potential partners who prove out in their own laboratories, much of which we've shared with them already behind the scenes from our own experiments and generating data with our R&D team, which is the precursor step to maybe having a potential deal, a licensing deal coming from that. And in fact, one of those new MTAs was with a top 10 pharmaceutical company globally, but also a globally ranked oncology company. And they're going to be studying antibiotic-resistant bacterial infections, viral infections, as well as a myriad of oncology targets using MatrixM. And we would look forward to potentially turning that into a significant licensing deal. We also have some smaller biotechs that are innovative that have signed MTAs with us that could turn into licensing deals on the oncology side. And overall, you know, we finally, this earnings call shared the cumulative results of the last 17 months or so under this strategy. Through partners and with Novavax, we're currently under assessment or the potential to assess 30 plus unique fields across infectious disease and oncology with our matrix adjuvant through the hands of partners. And that represents over 50% of the projected global opportunity in infectious disease and oncology vaccines as projected by McKinsey and Evaluate Pharma by the early 2030s. That's quite remarkable. And even more remarkable is amongst those 30 plus fields that are unique, many of them have more than one potential partner assessing in these high value competitive markets. So really excited about the probability of success that might afford the company as we move forward with the strategy and what it means regarding level of interest. Your second question was, what might be underestimated or not fully understood yet about the strategy? And a couple of things. I think first and foremost, the strategy enables Novavax, when successful, to pull forward revenue in cash, whereas it might take five, six, seven, eight years or more to do that if we were doing a traditional approach of everything on our own from the lab all the way through successful clinical development to launch and having to maintain the infrastructure and the cost to do so before you earn $1. In the construct of the type of deals we're forming, we're eligible for upfront payments, milestones for clinical development efforts of partners. If a partner were to put three or four or five assets into clinical development, we have the opportunity to earn along the way milestone payments for their efforts, even if some of those efforts don't succeed. For those that do, even larger potential milestones upon approval and sales, and potentially decades of royalties to come without the cost and the infrastructure needed to carry that, that may be underappreciated. And also the fact that this allows us to amplify the potential impact of our attack. And our employees actually are really passionate about this, and they chose Novavax for a reason. They could choose to go somewhere else if they want to. They're good and smart people. We believe our tech has the chance to leave quite a legacy for human public health. And we can really amplify that impact, not only from a value perspective, but from a human perspective by leveraging the capital of these other companies. There's no way Novavax on its own could have brought forward 30 plus assessments on these fields and cross oncology and ID by ourselves.

And you've described a compounding dynamic where partners who initially explore matrix M under the MTAs consistently come back requesting expanded access and additional fields or a full license. I guess, what specifically are partners seeing in their preclinical experiments that is the biggest driver for conversion?

Jamie, you want to comment? Well, certainly. And as I describe this, I think one of the first things I would emphasize is the proof is in the actual new agreements or MTAs we describe. So for For example, most recently, we mentioned we had some MTA existing collaborator who came back to us and said, hey, based on our internal experiments, we want nine more. We want the right to experiment in nine more. So we're watching that happen. What we do in our cycle with these potential collaborators is we quite often will take data in our own labs with their antigens alongside our matrix M and say, this is what we're seeing. They, in turn, say that's great, but you know what? I want to do it myself, and that's fine. That makes perfect sense. And they run those experiments themselves, and as a part of the validation process, and as they bring more scientists internally and get them involved, their interest expands. So that's what we're seeing.

So by the time we get to a deal, Jim, it's based upon some fundamental data and initial early research that's been done to support potential of success there. the potential to unlock potentially billions in value, depending on the market being targeted, where it might not have been possible before with that potential partner.

That makes sense. And I guess as you're expanding the matrix on the number of LICEs, is there a template that's formed, or is it flexible based on the partner's needs?

How are you sort of structuring? Certainly flexible based on the partner, but I think what you see are those core components that are part of the deal, Alex. So those components could include upfront payments, milestones for clinical development. Again, we'd like to pull and intend to pull cash and value forward on the timeline where it might've taken many years for Novavax and a high level of spend to get there if we did it all on our own, monetize this technology now, and then in the future have a larger pool of potential resource to pull from assuming success. So upfronts, milestones for clinical development, milestones for sales and approvals, and then royalties, usually for more than a decade, a couple of decades plus. So very exciting. Yeah.

In fact, that royalty term that you've seen us apply now twice with MatrixM, initially within the Sanofi agreement, and most recently with Pfizer, where we are receiving, and I'll use the Pfizer example, high mid-single digit royalties for 20 years, right? 20 years from the first sale on a country-by-country basis. that's profound, right? And the amount of value, we tried to map and outline that type of value that can be created. The shorthand for it is for each billion in sales on average over a 20-year period, we receive a billion in royalties. So if you sell two billion, you get cumulative two billion, three and three. That's exceptional. And being able to have market leaders like Sanofi and Pfizer do the experiments and determine that this deal structure is worth their while says a ton about the value of the technology.

Yeah. And I think an important point to mention is that these are non-exclusive access to Matrix Zone, too many. You can license the same management to multiple partners targeting even the same disease. I guess, what's the thought process here to follow this approach to partnering Matrix Zone? Probability of success.

Yeah. Right. So so if we have, let's say, in a hypothetical, you have a large competitive marketplace and we had three partners in this hypothetical example competing in that particular space, all three of whom start clinical programs with our matrix M on their targets, on their assets. We could earn up fronts from all three, regardless of who succeeds in the end, even if none succeed in the end, potential milestone payments for the clinical development pathways for all three along the way. If even one of them succeeds, larger sales milestones and royalties for potentially decades to come, let's say all three succeed in one example. In that example, if there are three, maybe there's a force that didn't do a deal with us for some reason. Maybe they'll come to the table after that when they see what Matrix can do. But let's say there's four or five assets out there in a particular space and three of them are with Matrix. Well, then that three out of four, good odds. We happen to be sitting in Las Vegas, though I'm not a gambler, but I don't think you'll find 75% odds anywhere in that kind of example. So we like the increased probability of success, Alec, the ability to embolden everyone in a certain space for the best possible outcome for patients and for value.

And you mentioned that these are potentially decades-long royalty streams. I guess when you think about the long-term IP mode that you've built around MatrixM, how do you maintain this and even build upon it over the coming years?

Certainly. With respect to the first comment about the 20-year royalties, that's irrespective of IP. Just to be clear, we get that no matter what. Then when you say, all right, what's the competitive mode? As you put it, three key factors, IP, trade secrets, and then this safety database, an ever-growing safety database, over 30 million individual patient exposures. really tough to replicate. So in terms of the IP, we have existing or pending patents out through the 2040s. And then on the trade secrets front, that's one of the critical things in biotechnology. And we're making sure that we guard that appropriately, because we believe that is going to be one of the core important mechanisms, right, to have that competitive mode. And it is because we have these in place, that's the reason why you're seeing these deals being done the way they are with the 20-year.

Yeah. Yeah. And John, you mentioned the recent MatrixM and MTA with a top 10 global pharma company. Looking forward to finding out who that is. But it's also a global leader in oncology. Yes. Right. What does MatrixM offer, I guess, mechanistically in an oncology context.

Without getting into details there, and eventually that will become apparent to everyone who that is and what they may be working on, the chance to enhance immunity. And we believe potentially turn cold tumors warm or warm tumors hot. And so this is quite exciting. And how they do that with their particular assets is going to be a guarded secret for a while. And I'll let Jim add a little more commentary here. But I think one thing that's important to understand is in this new model, there's less that we're able to share about that type of thing because we're under NDA with these potential partners and partners. So we're going to guard their confidential secrets very carefully. Our credibility is part of our currency right now in the new Novavax. And so there's a lot we'll know that we can't tell you. That's the case in any public company when you're having the style of, but certainly more so even in this case until it can be unveiled. Jim, any other thoughts on matrix and oncology?

Well, I think that while we'll go into a little bit mechanistically here, the reality is it is when you see the large oncology players seeking to use matrix M, you are being told it has relevance and utility, potential. And so really looking forward to advancing these discussions. So what's happening in an oncology? John, you know, that's exactly right. It's about making tumors recognizable, right? And how that antigen, right, cross-presentation works, type of immune response, and can you create that anti-tumor immunity? That's it. That's the end game. And MatrixM, we believe, has the ability to enhance that effort. And so you're beginning to see partners who are asking themselves that same question, how might we leverage MatrixM in that environment?

And that's an area of significant projected growth in immunotherapeutics and vaccines in the future. The vaccines market's already 57 billion or so and growing to over 60 by these projections from McKinsey and others. But there's a large, larger growth engine relatively in that immunotherapeutic and vaccine space and oncology as well. So the ability to potentially play across both of those in a $100 billion-plus market and to have over 50% of that combined market now under the umbrella of potential assessment through partners in this new strategy is pretty exciting.

Yeah. And, you know, obviously we'll have some pretty important card flips in that space with Indies Moran and others coming up. So maybe shifting gears to the Sanofi partnership, COVID, the kick. You signed the Sanofi agreement back in 2024. It's crazy to think that it's already been two years. I remember when we were on the stage when you had just announced that a couple of years ago. Yeah, that's right. I guess it's right around this time. Yeah, exactly. I guess, could you maybe remind us of the full scope of that agreement and the key next steps in Catalyst?

Yeah, and I think, Jim, you can cover that really well. But one thing right before we get there, perhaps, is to make a note of we were at the time where Novavax was right before that deal out, right? We had our own global infrastructure, fully integrated company with commercial teams spending hundreds of millions of dollars a year on infrastructure and manufacturing and strain change selection and Salesforce and marketing and retail negotiations and all of those things. And we're really, really struggling as a small biotech taking on these large companies like Pfizer and the like in this arena to sell our COVID vaccine. And by doing the Sanofi deal and putting our precious Nivaxivit in their hands, we were able to monetize that asset for Novavax to the tune of over $800 million to date on that deal for our COVID vaccine. In addition, we were able to significantly reduce our expense platform to the tune of hundreds of millions of dollars on top of that each year for the last two years. So if you think about the scope of that, we monetized our COVID vaccine to the tune of well over $1 billion in costs not expended plus cash, non-dilutive cash, into the company instead of trying to do that ourselves. So imagine then what type of market share would we have had to achieve as a small innovator against these other competitors who were well-attrenched and ahead of us in the market in order to cover all of those expenses and generate that kind of revenue. I think a pretty important move on our part to do that. And now we see Sanofi leaning in with the compare data starting this season, really being a first full cycle. We're under a licensure, a BLA in the U.S. market. They can do full retail negotiations and begin, we believe, to methodically penetrate that market. But, Jim, regarding the overall scope of the Sanofi deal, anything you'd want to add on the potential that still remains, which is quite remarkable ahead?

Certainly. So three pieces to that agreement, the Nivexavid, the ability to use Nivexavid in combination products like Kik. And then finally, real broad utility and use of matrix in new vaccine development. So on Nivexavid, beyond the royalties, right, royalties, high teens, low 20s, that's fantastic. We have a remaining milestone, 75 million that we're eligible for upon the completion of a manufacturing tech transfer. So that's a nice outstanding item. And in our catalyst map, you've got both of those, the fall performance and, of course, the milestone achievement. Then, as you look at the combination products, we've got the ability to earn a high single digit, low sub team royalties on a combination product that we think could be just an incredible player in a large market. And just to clarify, flu market, about $6 billion globally, COVID five to six. And, you know, this combination market, what's it going to be? Is it going to take a third, a half of those independent markets and put them into one? You know, the market research would show that there is a high desire for a combination product. sanofi when it comes to the premium priced um enhanced flu vaccines they got two-thirds market share that is the exact type of market that you'd be looking for when you combine that franchise with the vaxavid so we are thrilled to be uh a partner with with sanofi really look forward with where they're going there in terms of milestone catalyst okay 125 million eligible upon the initiation of a phase three in either the U.S. or Europe. And then a $225 million upon U.S. launch, right, and sale. All right, so where are we? So far, they announced their phase one, two data, great R&D day back in December, where they showed exceptional results, positive, and the conviction, high probability to show non-inferiority against the independents taken independently, meaning like for example you're familiar europe just approved the combination vaccine on immune immunogenicity okay that would lead you down the path to saying hey sanofi's feeling confident that they've got data that would be supportive of that type of path so we're awaiting hearing next steps we think that even the update from sanofi on their intended next steps for u.s and europe are going to be important catalysts and then that's the monetary implications on the back end You have some milestones. And then this matrix M component, 200 million in development and sales-based milestone per new vaccine and single digit royalties for 20 years. So this could become the backbone, for example, of some of their development efforts.

And that's a less discussed element, Jim, of that Sanofi arrangement and partnership that we have, right, Alec? Because the focus has been rightfully on the near-term opportunities there, driving COVID into the marketplace, potentially initiating those clinical trials for KIC in the U.S. or Europe where we would be eligible for the $125 million milestone in that initiation, etc. That's very exciting. What we haven't talked about as much and is worth a refresh is that third leg of the stool, if you will, in the Sanofi partnership. We talk a lot about these new MTAs in the 30-plus. Sanofi has unfettered access to Matrix. They don't tend to discuss their preclinical pipeline quite readily in the public domain, but you can imagine they're interested in Matrix and know what it can do. And it's not necessarily included in what we've already shared on Total Fields covered on what they're doing with it. But to Jim's point, any new assets they would bring forward to full development and start to sell were eligible for $200 million or so. in sales milestones, and then royalties for decades to come. So that's pretty exciting on the longer-term potential of that deal, let alone what's right before us here with COVID and Kik. So it's almost like an MTA kind of pre-baked. Baked into it, and really the first of them, if you will.

In a recent example, the pandemic flew. So Sinofir recently picked up a BARDA contract, bringing their H5M1. They brought in MatrixM. So another example of that, when you're looking to innovate and you want to get a great vaccine, give serious consideration to layering on it.

And that was an amendment we made to the agreement. We had not originally included the ability for them to put matrix into their flu vaccine for a pandemic purposes. They came back and asked us after learning even more about the adjuvant. We granted that and made that amendment that we believe helped facilitate the win of that grant.

Yeah, that's great. And on the combination vaccine, I think the M-Combriac's approval in the EU probably is good incentive for Sanofi to try to protect their flu mono franchise in the EU. It also gives them good precedent for what it will take to be approved. And I think we'll see what happens in the U.S., right? I think Moderna is still figuring that out. We'll see if their flu mono gets approved and then how the regulator approaches their combo as well. And you have your own combo. You also have rights to the Sanofi one. So you guys have optionality there. Yes, we do. Maybe on the commercial setup with Sanofi leading the charge this year, the phase four compare study, you know, ran actually Nuvaxivate head-to-head against Moderna's next spike. With stat sig on all the pre-specified endpoints, fewer side effects was the key takeaway. Anyway, does Sanofi use that in their advertisements this year? Now, they can, right, since it's been published. How do you think that feeds into their commercialization strategy?

If and how they apply that data, whether it's this year or later, what is being tipped here in terms of commercial positioning is the great tolerability profile of Nivexivit. I mean, it's crystal clear, right? When they highlighted the results, STAT-SIG, right, no question, much better tolerability profile, but importantly, twice as many participants said, I would definitely take this Nivexavid again next year as compared to the Moderna. So that's a critical point. And then this echoes what we saw when we ran our own study of Nivexavid against Pfizer and BioNTech. Again, great profile of Nivexavid, much better safety reactogenicity. So that's core to the position. You've got a proven, efficacious vaccine, but in the end, consumer choice and tolerability have got to matter.

I was actually in this room yesterday, and I was talking to someone who very proudly told me that he was one of the original adopters of Nivexavid. He was part of the clinical study, and he patted his arm and huffed his chest. He was excited to have been part of that. Great to hear. So you definitely have some stickiness, it seems like, with the product. I want to ask one question on the rest of the pipeline, I think on the early stage of the pipeline, including C. diff. And then we can maybe talk about the cogs and expenses and sort of how that's tracking going forward to close out. What is your R&D investment strategy at this point? How do you balance internal vaccine development versus generating data for partnerships? And what would you consider advancing a candidate yourself to late stage or to market?

It's a great question. First of all, we've made it clear that our strategy has two key pillars, and one of those is out-licensing our tech. The other is that R&D engine, that innovation is critical. So we're not just a company that is out-licensing something we've already got. If so, we could even reduce further. We've already greatly reduced our costs and have a new target. Jim can talk about that when we get into the financials. But we're maintaining core capabilities in R&D Alex. So the purpose is to rotate into preclinical development a series of targets. So we started at the beginning of last year with the launch of the strategy with VZV or shingles, RSV, right, and C. difficile. Very important. We were pleased, very pleased, with the results in all three, preclinical, pre-IND. What we've selected is C. diff to move forward for potential human trial. We're in tox studies now. We intend to meet with regulators on the IND, and it could be as early as 2027 in the clinic with that asset. So why C. diff? And why not RSV and shingles if that data was good? Our goal is to bring the maximum value inflection. So RSV is already a crowded market. A lot of companies are working on an RSV if they don't have one out there already. The market is currently capped at a certain value based on boostability and other factors that have played into that on the regulatory front. And we believe we've already reached that point of reasonable value inflection in our own strategy and that if Novavax did choose to spend our precious dollars in human trials, we wouldn't get the return you'd expect from bringing our own RSV forward because we wouldn't intend to build a commercial infrastructure around that and launch it. it's for partnering purposes. It's already set to where it needs to be. Same thing with shingles. But with C. diff, what you see is Pfizer out there, and we really hope they succeed. We have confidence in Pfizer. They're a current partner. We're not disclosing what they're working on, but we do hope they succeed and build that market. And we could be the second product in that particular market. And if we were, and we thought we have something that's clearly differentiated, and we think we have something that could, has the potential to be differentiated and better should it continue to succeed and meet what we've seen already in the lab, that's a very interesting play. That could have significant value inflection. And you see companies like CureVac, companies like Vaxite, for instance, right, who have the next mousetrap coming along in an established larger marketplace with big players. So it's that type of an opportunity that we would seek to bring into human trial because that could be a significant value pivot and is well worth the investment to go into phase one with. It puts us in a better position to partner it. If that data turns out even better than we might expect to see it, perhaps we keep that a bit longer and continue to invest in that. Any other thoughts, Jim, on R&D strategy?

You know, in the end, it's as you described it, it's just incredible market opportunities. Very selective. Very selective, but with a differentiated asset. And every time we generate data in a differentiated way of individual asset, it has a ripple effect through all of our partnering. And so we're seeing that every time we're running experiments. The agreements and value creation you've seen to date could not happen without the R&D effort that continues to create this data.

And our understanding about the value of our own tech continues to grow with these experiments. So it's a feedback loop where what we learn in the preclinical arena feeds the business development discussions, creating new ideas and opportunities for partnering, new data sets for those partners to take a look at and adjust their own experiments with. We also get the data that these partners or potential partners through the MTA collaborations are generating, and we're not allowed to share that, right? We're under MDA with those partners, but we can see the data that a Pfizer or a Sanofi may be generating through some of these arrangements where appropriate, and that helps to fuel our own insights on the tech as well. So maintaining those capabilities matters in R&D for us. Right, right.

And I guess when we think about the, you know, the 2028 vision, you've talked about the non-GAAP expense target, $150, $200 million, that's more than a 50% reduction versus last year. You've got it to non-GAAP profitability potentially as early as 2028. So I guess what are sort of the aspects contemplated within that and how is everything tracking versus your expectations?

Yeah, it's been an incredible journey over the last few years. And I know you've heard us and John talk on our calls about since the peak of the pandemic, you know, this target would take us almost 90 percent down in our R&D and SG&A. When it comes to our balance sheet, the unwind, right, in this transition, fully integrated, billions of doses a year, you know, over $2 billion reduction in our current liability. So we fundamentally changed the company. Our cash runway, we said we got cash runway into 2028, and that's before any new cash flows from deals coming into the company. So then also in 28, as early as 28, non-GAAP profitability, you know, the key levers on that, and just to give you what a breakeven could look like, we're targeting midpoint of the range, 175 million R&D and SG&A. And I'll just stock-based comp, assume that's 25 million or so. So you've got about 150 million breakeven. You're looking at key contributors from Nivexavid loyalties, right? You're looking at Sanofi advancement of milestones and even royalties, potentially, on the KIC programs, and then additional opportunities for milestones and upfronts from our new deals. And you're seeing, especially this year, you saw the $30 million upfront and you're seeing the activity. You've got a potential to have contribution across all of these. And those are the levers that we're looking at as we look at 2028. But frankly, that's an interesting time and milestone. What we want to do is throw off cash as a company with a lean operating model across a diversified top line that is orders of magnitude higher than our cost structure and create exceptional shareholder value while we're developing vaccines that matter for people.

Very proud of our team on that success, Jim, because it's my prior company. We built something up. I was the third employee hired, and we took the company public and launched a billion-dollar neuroscience asset there, and it was quite a successful ride. I found now, coming to Novavax the last three years, having to unwind a company from $1.7 billion SG&A and R&D expenses down to 90% less than that by 28 is our projection. while maintaining our talent, not having turnover that was any greater than industry average on the people. We want to keep maintaining our capabilities while delivering that rapid declination in size, scope, scale, selling factories, parking lots, planters, lab equipment, right? Saying goodbye to people that had a passion for this company. That's hard to do. You know, if you can't do it, you can't be a leader, but if you ever enjoy it, you shouldn't be a leader and really hard to say goodbye to these great people, but we did it and we delivered on our prior obligations all along the way and put the company in a position based on that to launch this new strategy and now drive toward long-term value creation. And we're really through that first chapter and a half of that pivot. And well on our way now, we hope everyone sees by the progress we've made in this new strategy, the exponential increase in our technology from third parties who in this space. We're always conservative and careful not to overpromise. It's biotech. It has risk. But we can promise our full effort and continued diligence on driving down this path for long-term value creation. We've got an amazing tech. We want to share it with the world. We intend to do so. Right.

Very well said. And I think that's a great note to end on. So please join me and thanks for joining everyone for the time. Thank you, guys.