Vaxcyte, Inc. Q4 FY2023 Earnings Call

Good afternoon, everyone. My name is Bo and I will be your conference operator today. At this time, I would like to welcome everyone to the Vaxcyte Fourth Quarter and Full-Year 2023 Financial Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer period. And just a reminder, today's call is being recorded. Now at this time, I will turn things over to Mr. Andrew Guggenhime, President and Chief Financial Officer of Vaxcyte. Please go ahead, sir.

Thank you, operator, and good afternoon, everyone. I'd like to welcome you to Vaxcyte's earnings conference call to discuss our 2023 results and to provide a business update. I'm joined today by our Chief Executive Officer, Grant Pickering; and our Executive Vice President and Chief Operating Officer, Jim Wassil. Earlier this afternoon, we issued a news release announcing our results. Copies of this and our other news releases, latest corporate presentation and SEC filings can be found in the Investor & Media section of our website. Before we begin, I'd like to remind you that during this call we'll be making certain forward-looking statements about Vaxcyte, which are subject to various risks, uncertainties, and other factors that could cause actual results to differ materially from those referred to in any forward-looking statements. For a discussion of the risks and uncertainties associated with these statements, please see our press release issued today, as well as our most recent filings with the SEC, including the risk factors set forth in our Form 10-K for the year ended December 31, 2023, and any subsequent reports filed with the SEC. With that, I'll turn the call over to Grant Pickering. Grant?

Thanks, Andrew, and all of you on the call and webcast, thank you for joining us today. 2023 was another remarkable year for Vaxcyte, officially marking our 10th year of thoughtful and methodical research and development by the entire Vaxcyte team and our partners. We are driven by our mission to prevent or treat infections caused by bacterial diseases, including invasive pneumococcal disease for IPD. This past year, we continued to make significant strides in advancing our potentially best-in-class pneumococcal conjugate vaccines for PCVs: VAX-24 our lead 24-valent candidate, and VAX-31, our next-generation 31-valent candidate. And we remain focused on providing the broader spectrum of coverage against IPD for both adults and children. Last year was highlighted by the successful completion of our VAX-24 adult Phase 2 program following our stellar initial proof-of-concept data in late 2022 in adults aged 50 and 64; we reported data in April 2023 from a separate Phase 2 study in adults 65 and older. It not only confirms the prior proof-of-concept study results, which showed even greater immune responses compared to Prevnar 20 on a relative basis. These data further validate the potential of our cell-free platform and carrier-sparing approach to deliver broader spectrum PCVs. The findings from our adult Phase 2 program support a potential best-in-class profile for VAX-24 and demonstrate how our novel cell-free technology platform has the capability to overcome the limitations of other conventional approaches. These results and the foundation we have carefully created have us well-positioned to advance our PCV franchise to potentially disrupt what has consistently done a crucial vaccine class, societally, and financially. Following the VAX-24 adult Phase 2 program completion, we made important progress with regulators. This included a successful end of Phase 2 meeting with the FDA regarding the clinical design of the VAX-24 Phase 3 program, as well as encouraging feedback on CMC-related matters as we plan for future potential BLA submissions. In addition to the positive developments for VAX-24, we were pleased to initiate the adult clinical program for VAX-31. With this important step, VAX-31 is now the broadest spectrum PCV in the clinic. Following the FDA's acceptance of the adult IND, we initiated the Phase 1 portion of a Phase 1/2 study in adults 50 and older in November. This strong momentum in this study continued into 2024 as we announced the start of the Phase 2 portion in early January and completion of enrollment less than a month later. I am incredibly proud of our many achievements, particularly across clinical, regulatory, and manufacturing for our PCV programs. And we now look ahead to several important milestones. For the adult indication, our VAX-24 program is Phase 3 ready, and we are in the final stages of manufacturing the product needed for several of the potential Phase 3 studies, including the pivotal non-inferiority study. In advance of the potential initiation of this VAX-24 study in the second half of this year, we expect to announce the topline safety, tolerability, and immunogenicity data from our VAX-31 adult Phase 1/2 study in the third quarter. This timing and the overlapping timeline for the completion of the VAX-24 and VAX-31 adult Phase 3 studies provide us the opportunity to make a strategic decision regarding which adult program we now move into Phase 3, following the VAX-31 data readout. As we advance VAX-24, we intend to initiate the pivotal non-inferiority study in the second half of this year and the balance of the Phase 3 studies, which are shorter in duration than the non-inferiority study in 2025 and 2026. If we advance VAX-31, we expect to initiate the full complement of the Phase 3 studies in 2025 and 2026. Regardless of which program we move forward with, we expect to initiate the final Phase 3 studies in 2026. And subject to the results of these studies, submit a BLA shortly following the completion of the last study. VAX-24 remains a potential best-in-class candidate covering more serotypes in any pneumococcal vaccine on the market or in U.S. clinics today. And VAX-31 has the potential to further increase coverage to approximately 95% of IPD circulating in the U.S. adult population. Beyond expanded disease protection, VAX-31 is designed to also maintain coverage of previously circulating strains that are currently contained via ongoing vaccination. This is critical since previously controlled strains have rebounded in prior instances where vaccine coverage was withdrawn. This puts us in a unique position relative to other sponsors for applying the conventional PCV approach and are forced to make sacrifices in an attempt to cover nearly circulating strains. We estimate that the adult pneumococcal vaccine market today is approximately $2 billion of the total $8 billion annual global market and is positioned to be the fastest-growing segment. Growth in the U.S. market is expected to accelerate due to the potential shift in universal adult vaccination from age 55 down to 50, which would both expand the market and open up the adult regimen to a prime-boost schedule, nearing the infant market. Outside the U.S., we expect to see other countries begin to routinely recommend adult vaccination, as evidenced by the recent recommendation in Germany to vaccinate adults 60 and older. While the adult market is expected to grow significantly, the infant segment continues to represent the largest portion of the global pneumococcal vaccine market at an estimated $6 billion in the sales annually. We believe VAX-24 has a potential best-in-class profile for this vital population. And we are thrilled to be nearing the completion of enrollment of the second and final stage of our VAX-24 infant Phase 2 study. Based on our progress, we expect the topline data from the primary immunization series by the end of the first quarter of 2025, with the topline booster data to follow by the end of that year. In contrast to the adult program, the VAX-24 infant clinical program is substantially ahead of the VAX-31 infant program. And we intend to advance both of our PCV candidates in this population. We expect to provide guidance on the potential timing for a VAX-31 infant IND following the readout of the VAX-31 Phase 1/2 adult study later this year. Bringing the broadest PCVs to both infants and adults represents an opportunity to significantly reduce invasive disease across the entire population, which drives our efforts every day. Given the magnitude of the opportunity of our PCV franchise, we continue to invest in further solidifying our manufacturing foundation to enable robust large-scale manufacturing. These investments are intended to support the potential global commercialization of our PCVs for both the adult and the infant populations. Our expanded relationship with Lonza and our decision to exercise our option with Sutro Biopharma, both of which we announced late last year, are reflective of these efforts. In addition to our PCV franchise, we continue to advance our earlier-stage vaccine candidates including VAX-A1 to prevent Group A Strep, VAX-PG to treat periodontitis, and VAX-GI to prevent dysentery and shigellosis. VAX-A1 and VAX-GI, as well as our PCV programs target diseases that are significant contributors to antimicrobial resistance or AMR. AMR poses a serious global health threat, and if no action is taken, drug-resistant diseases are expected by the WHO to be a leading cause of death by 2050. While AMR is a complex crisis that no single solution will fully address, vaccines represent an important part of the solution. We are proud to develop vaccines to help fight the diseases that have become increasingly resistant to treatment with antibiotics. And we look forward to sharing more updates on our earlier-stage pipeline over the course of the year. From a financial perspective, we substantially strengthened our balance sheet, raising approximately $545 million in net proceeds in a follow-on financing last April, and then added another $816 million earlier this month. Pro forma after this most recent financing, we had over $2 billion in cash and investments as of year-end. This financial strength provides us the capital to fund the company through several important milestones over the next few years, which Andrew will highlight later.

Thanks, Grant. I'd like to start by reiterating my commitment to developing broader coverage vaccines to treat pneumococcal disease. Despite the widespread administration of effective vaccines, the global impact of disease remains significant and is associated with high case-fatality rates, antibiotic resistance, and meningitis. In the U.S. alone, the standard of care pediatric and pneumococcal vaccines cover only approximately 30% to 50% of circulating diseases. As a result, the public health community continues to affirm the need for broader spectrum vaccines to prevent IPD. We designed our PCVs to expand coverage and still include all of the serotypes covered by the current marketing vaccine that were most prevalent when these vaccines were originally developed. The ability to both add newly circulating strains and maintain pressure on previously circulating strains is critical from a global health perspective. Based on the totality results from the VAX-24 adult Phase 2 program that Grant referred to earlier, we believe we have the opportunity to set a new bar for pneumococcal vaccines by delivering broader coverage and higher immune responses relative to conventional PCVs. Following the completion of the Phase 2 Adult Program, we had a successful end of Phase 2 meeting with the FDA, focused on the VAX-24 adult Phase 3 clinical program. We believe there is agreement with the FDA on the clinical design of this program, including the approximate overall number of subjects, the primary and secondary endpoints for the pivotal non-inferiority study, as well as confirmation that the planned immunogenicity analysis are sufficient to support licensure and an efficacy study is therefore not required. Regardless of whether we advance VAX-24 or VAX-31, we expect either Phase 3 program to include up to five studies to support licensure and the broad label. Additionally, as part of the ongoing safety focus discussions, we received encouraging input from the FDA regarding the VAX-24 adult licensure requirements. We are afforded this dialogue under the VAX-24 adult Breakthrough Therapy designation and expect to seek additional CMC-focused input from the FDA as it continues to prepare for an adult Phase 3 program for either VAX-24 or VAX-31 and future BLA submissions. For VAX-31, we are thrilled to see that our Phase 1/2 adult study progressed from IND acceptance to enrollment completion in approximately three months. In total, the study enrolled 1,015 adults, aged 15 or older and is evaluating safety, tolerability, and immunogenicity at three doses. Low, middle, and high compared to Prevnar 20, which I will refer to as PCV20. Similarly to the criteria for the VAX-24 adult Phase 2 program, the VAX-31 study will compare the opsonophagocytic activity or OPA and IgG responses compared to PCV20 for the 20 serotypes in common. And for the 11 serotypes you need for VAX-31, the study is evaluating the percentage of subjects to achieve a fourfold rise in OPA titers, which is the established precedent and a basis for approval. Based on the preclinical data for VAX-31 and clinical data for VAX-24, particularly the mixed-dose arm for both adult Phase 2 studies, we are optimistic about the prospects for the VAX-31 data. Recall that in the mixed-dose arm from the VAX-24 study, we simulated the amount of carrier protein that is in the VAX-31 middle dose. We believe those immunogenicity results give us a preview of what we might expect for VAX-31. If we see results for VAX-31 that are comparable to those from the mixed-dose arms of the VAX-24 study, in which all the three serotypes hit the non-inferiority endpoint, we believe that would be a very positive amount. Going to our expectations for VAX-24 Phase 2 adult program, for the VAX-31 study upcoming readout focuses on the OPA geometric mean ratios for each serotype rather than the confidence intervals. Because this Phase 1/2 study will be smaller in size than the Phase 3 study, you can expect the confidence intervals to be wider. It's very possible that several may cross the 0.5 non-inferiority threshold. Yes, the GMRs are 0.6 or higher for each serotype in the study. Prior Phase 3 studies have shown that these ratios are adequate to achieve the non-inferiority threshold. When considering the historical precedence for broader spectrum PCV candidates, our focus has been on the important societal benefits of extending disease protection, which is also helpful in line for all prior PCV programs that have been approved. Regulatory authorities have accepted generally lower overall immune responses and some met non-inferiority endpoints versus the standard of care. We believe, however, based on our VAX-24 data that our carrier-sparing platform has the potential to change this historical pattern by both extending coverage and maintaining immune responses. With VAX-31, we expect to increase disease coverage by 45% compared to the standard of care in adults today, which is significantly greater than the increase in recoveries presented by prior programs. As our adult programs continue to advance, we are also pleased with the progress we've made with our VAX-24 program in infants. VAX-24 has a potential best-in-class profile in this population, and we are excited to be nearing enrollment completion for our infant Phase 2 study. Given the size and global nature of the infant market, we are particularly excited about the primary and booster data readouts expected in 2025. We believe these milestones along with the VAX-31 adult data readouts expected in the third quarter of this year will further define the full potential and magnitude of the PCV opportunity for Vaxcyte. We look forward to sharing important updates on the progress of our PCV franchise this year. And I would now like to turn the call over to Andrew.

Great. Thanks, Jim. On the financials, with respect to the income statement, the details of our fourth-quarter and full-year 2023 results and the reasons for the variances to the comparable 2022 periods are reflected in our 10-K filing and summarized in our press release. The year-over-year increase in R&D expenses was driven primarily by higher manufacturing expenses related to the planned adult Phase 3 clinical trials and potential future commercial launches of our PCV programs. Both R&D and G&A expenses also grew, as we invested in our team to support our recent and anticipated growth. The acquired manufacturing rights expense of $75 million for the fourth quarter and full year 2023 was related to the exercise of the option with Sutro Biopharma, of which $50 million was paid in cash in the fourth quarter. The 2022 expense for the same item was related to the upfront consideration incurred in connection with the original option agreement entered into Sutro. I would also note the contribution of the interest income line as a function of our higher cash and investment balances and the higher interest rate environment. As we look forward, we expect an increase in 2024 R&D and G&A operating expenses over both full-year and Q4 2023 annualized levels, particularly within R&D. This expected increase is primarily a function of our investment to make the required clinical trial materials for a potential VAX-24 or VAX-31 Phase 3 Adult Program, which will consist of multiple trials, and to continue manufacturing activities to support the potential future commercial launches of our PCV programs. While we expect substantial annual growth of our R&D expenses, we do expect the amount to vary by quarter depending on the timing of manufacturing activities. For G&A, we expect the expense growth to be generally steady by quarter. At this time, we do not anticipate any future acquired manufacturing rights expenses. Separate from income statements in the fourth quarter of last year, we commenced construction and buildout of the dedicated manufacturing suite at Lonza to support the potential global commercialization of our PCV programs in connection with the agreement we entered into with them in October. We expect this buildout to take approximately 2 to 3.5 years at a capital cost over this period of approximately $300 million to $350 million. As of year-end 2023, we had incurred $86.5 million of capital and facility buildout expenditures that were reflected on our balance sheet in two separate line items, property and equipment, and other assets. A detailed breakdown can be found in our 10-K filed today. For the remaining construction and buildout cost of this dedicated manufacturing suite, we expect the majority will be incurred in 2024 and the balance in 2025 and perhaps into early 2026. Most of the associated costs will be reflected on our balance sheet and won't run through the income statements until the buildout of the suite is complete and manufacturing activities commence. There will be a separate component of smaller operating expense over the buildout period that will be reflected within R&D expenses. Turning to the balance sheet and cash runway, as Grant noted, we continue to maintain a strong financial position ending in 2023 with $1.24 billion in cash, cash equivalents, and investments. This excludes the $816.5 million in net proceeds from the follow-on month offering completed earlier this month. Going forward, we expect that our balance sheet will be sufficient to fund our operating expenses and capital expenditure requirements through a number of important milestones over the next few years, including the VAX-31 adult Phase 1/2 study top line data expected in the third quarter of this year. The VAX-24 infant Phase 2 study primary series and booster dose readouts expected by the end of the first quarter and year end 2025, respectively. The initiation of anticipated Phase 3 studies for the adult PCV program we elect to advance, which a VAX-24 would include the non-inferiority study in the second half of this year and the remaining studies in 2025 and 2026 or if VAX-31, the full complement of studies in 2025 and 2026. The expected top line data from the Phase 3 pivotal non-inferiority study whether we advance VAX-24 or VAX-31, and the expected completion of the buildout of the dedicated manufacturing suite to support the long-term commercialization of our PCV programs.

I will now turn it over to Grant for closing remarks. Thanks, Andrew. Before moving to Q&A, I would like to acknowledge the entire team at Vaxcyte and our partners. 2023 was an extraordinary year of validation for VAX-24 and our pipeline. Over the next year we look forward to several upcoming catalysts that will further define the profiles of our PCV franchise and I am confident in our ability to execute and further scale our business in 2024 and beyond. We look forward to sharing further updates as the year progresses, and I appreciate your interest in joining us today. With that, let's take some questions.

Thank you very much, Mr. Pickering. We'll go first this afternoon to Jason Gerberry of Bank of America.

Hi guys. Thanks for taking my questions. I guess, firstly, just as we think about this decision between VAX-31 and VAX-24, you're ultimately measuring yourself against VAX-24. So wondering if you can kind of frame what success looks like? And in the end would showing kind of like a net incremental coverage of three or four strains as measured by statistical NI or good enough point estimates or a fourfold rise collectively across the spectrum. Does that sound like to kind of what a bar for success looks like? And then secondly, have you guys explored ways to reduce protein carrier in the 31-valent approach? And the reason I ask is, for some reason, if this iteration of VAX-31 doesn't make the cut-off, just wondering if there are ways to potentially go back to the drawing board and to optimize. Thanks.

Yes. Jason, thank you for the question. So yes, as we look forward to that data, that we expect to see in the third quarter, I mean, we're quite optimistic. The way we're looking at this program is a combination of the empiric evidence generated to date combined with the circumstances. So from any empirical data perspective, certainly we have not only of course compelling preclinical data with VAX-31, but also the VAX-24 data that's been generated across the Phase 2 program that's readout already with a particular emphasis on that mix dose cohort, where we were able to already test the cumulative amount of protein carrier that we would expect to have put into the clinic with VAX-31. So for us, we're really looking, as you pointed out, at a couple of different endpoints. So this is a non-inferiority comparison to Prevnar 20 across those 20 conjugates. And then there are the incremental 11 where it said, slightly different endpoint where you're looking at a fourfold rise over baseline. So for us, the data that we generated with the VAX-24 cohort demonstrated even at that mixed dose level, really good comparative results across the 20 that are in Prevnar 20, and then the incremental 11, you know, four have already read out, the next seven will come with this study. And so, yes, for us, I think we're feeling good. The data is going to be here in the not-too-distant future. And as you mentioned the idea of adjusting the ratio, that is certainly something that has been at our disposal historically. We do have a level of precision with our chemistry that permits us to adjust the ratio of sugar to protein in ways that we don't believe anyone else can. We've used that to great effect to date with greater sugar than proteins than convention, a lot of that carrier-sparing conjugates. But for the foreseeable future, we don't think we need to go back to the drawing board on that, but that would be something we could always look at down the road. For us, we've been able to show that adjustments in dose yield improved immune responses. So the first order, if necessary, would be more likely to come in the form of adjusted doses. But again, as you know, Jason, this is not perfection that's required. The whole focus of this class has been to preserve coverage over historically circulating strains while looking to expand coverage to newly circulating strains. And in that trade, it's been recognized that even with lower immune responses, that's an okay trade-off. Fortunately for us, at least for VAX-24, we didn't look like that was going to be required to push coverage. We'll see what the VAX-31 data looks like, but I guess the point is, perfection is not the requirement. We've seen a few missed strains being considered a good trade-off, at least in the eyes of the regulators. And I think ultimately that's been a good decision, and we'll see what data comes out of this study in the third quarter.

Great. Thanks so much.

Thank you. We'll go next now to Roger Song at Jefferies.

Great. Congrats for the progress. A few questions from us, I limit to two. So the first one is, with this 31 data in 3Q, you probably need another end of Phase 2 meeting with the FDA. The question is how much you can leverage from your VAX-24 end of Phase 2 meeting package for that meeting. Because your timeline is basically, you're going to start a Phase 3 in 2025 and 2024. I think, if you move forward with the 31, particularly around the CMC because that's something since holding you back for the 24 at this moment. Thank you.

Thanks, Roger. This is Jim Wassil. And I'll try and answer that question for you. I think you're very perceptive in your question. We're hoping to leverage a lot of the study designs that we propose to put forward with our end of Phase 2 design for VAX-24 and use the very similar design for VAX-31. Obviously, we'll look at the data from the Phase 1/2 of VAX-31. We'll do a reanalysis from a statistical perspective. We'll power the studies appropriately to ensure that we maximize the probability of success in our non-inferiority study and our other Phase 3 studies. But essentially, the proposal that we put forward in VAX-24 will be very similar in terms of the overall study design that we'll see for 30 months.

Got it. And how about the CMC portion of the 31?

Yes, the same thing as well. We're using very similar manufacturing processes, if not exact manufacturing processes, in some cases between the 24 polysaccharides and 31, as well as the drug substance. And of course, the carrier protein is still the same carrier protein. So a lot of similarities between 24 and 31. So whatever we learn from feedback from the FDA or from a CMC perspective, from 24, we believe is applicable to 31 as well.

Excellent. Maybe just a follow-up question for the 31 higher dose you mentioned on the call, the mixed dose from this third 24 is mimicking the middle dose for 31. Maybe just any color you can provide related to the high dose for 31, particularly in terms of the carrier protein, how much higher and what are the key serotypes potentially can be dosed higher, if you can give us some color around that. Thank you.

Yes. Hey, Roger, Grant again. Yes, we've been a little bit more coy with regard to the doses we did provide a bit more detail here just for competitive purposes. But we want to make sure that we come out of this Phase 2 experiment with a clear dose to advance to Phase 3. So here go the bracketing with lower and higher doses. We haven't gotten into explicit detail, but there is a pretty tight window of dosing that's been historically applied in the pneumococcal conjugate vaccine space, so we wouldn't do anything that would be radical there. But we're not going to go into the explicit details of what those are, at least for the time being, and that will be decided at the time we review the data.

Understood. Thank you. Thank you for taking the question.

Of course.

Thank you. We'll go next now to Salim Syed at Mizuho.

Hey everyone, this is Eric Ladington filling in for Salim. I appreciate you taking our question. I'm interested in your thoughts on the potential outcomes for the discussions on V116 at the upcoming ACIP meeting and how that relates to your decision between VAX-24 and VAX-31. Also, what does this mean for the comparison in Phase 3 trials? Thank you.

Thanks, Eric. Jim Wassil here. So I'll answer this by saying I think many of us know already, February 29, ACIP, Merck's V116 will be on the agenda. I think at that meeting we'll get a better idea of the current thinking of the ACIP pneumococcal working group. The pneumococcal working group will most likely present epidemiological data, health economic data, V116 clinical data. And then they'll make a proposal to the ACIP regarding how to recommend V116, assuming they get FDA approval. So I don't think I'd want to speculate on this, especially since we've got going to have a much better idea by the end of this week what the ACIP position will be. I will say that I want to highlight V116 is only applicable in the adult population and it takes a different approach than our PCV program, in order for them to reach 21 strains. Due to the limitations of their technology, they had to remove nine strains that have been traditionally included and approved PCVs. So with VAX-31, we do have a potential to further increase coverage to approximately 95% of invasive disease. And we're doing this by adding additional strains and maintaining coverage of previously circulating strains. So we'll wait and see, we'll see what the outcomes are. I think VAX-24 will have a strong position regardless. Obviously, VAX-31, which contains for the most part, all the strains in both vaccines, will be in a strong position to increase coverage and really take a strong position if it gets approved.

Got it. Thank you.

Thank you. We go next now to Dave Risinger at Leerink Partners.

Yes, thanks very much. So, first I wanted to say congrats on the corporate progress. And I appreciate the updates. I guess, I have two questions for Grant and Jim. First, ACIP-preferred recommendations are rare but Vaxcyte to be particularly well-positioned for a potential preferential recommendation for VAX-31. Could you just comment on that notion and provide your perspectives? And then second, could you elaborate more, Jim, on your comment about potential prime boost opportunity in adults? Thanks very much.

Yes, thanks. Thanks for that Dave. Appreciate the acknowledgments and Jim is kind of our ACIP guru. So why don't I hand it to Jim and see if he can respond to that question?

Certainly, the ACIP has the authority to extend a preferred recommendation. In the past, their decisions have been somewhat limited, with the most recent case involving Shingrix over Zostavax for the Shigella vaccines. There has been more restriction in the pneumococcal conjugate vaccine area, but it does happen, as seen with Prevnar 20 under certain conditions. Many analysts are speculating on the ACIP's response, noting that any margin of improvement must be significant in terms of efficacy or coverage. However, if there is a chance to increase the coverage of a single vaccine to as high as 95% while still addressing previously circulating strains, we believe that profile could justify a preferred recommendation. If everything continues on track, we will see how they respond to the V116 profile. We think there is potential for us, but V116 will provide additional data. We also heard that Merck hoped for a preferred recommendation opportunity, but that seems to be changing based on recent information. As Jim mentioned, we should have a leading indicator by the end of the week.

In response to your question about the prime boost, there has been discussion at the ACIP regarding whether to begin immunization at age 50 rather than the current recommendation of 65, especially following the approvals of the 15-valent and 20-valent vaccines. There appears to be considerable support for this change because data indicates that approximately 28% to 30% of adults currently fall into an at-risk or high-risk category for pneumococcal diseases, particularly pneumococcal pneumonia. This includes not just individuals with asplenia, malignancies, HIV, and severe immunosuppression, but also those with more common conditions such as severe asthma, COPD, diabetes, and chronic liver disease. The expectation is that the percentage of at-risk individuals in this age group will continue to rise. Historically, recommendations for at-risk populations have not been effectively implemented. Thus, there has been discussion about lowering the recommendation to age 50, which would imply a potential need for a booster at age 65, suggesting a prime at 50 and a boost at 65. This topic is likely to be revisited in the next ACIP meeting.

That's great. And just a follow-up if I may. Could you talk about your Phase 3 plans in adults? And your age strategy?

Well, from a FDA licensure perspective, the adult label is usually extended at age 18 and up. So we'll be looking for the same sort of broad label that's been obtained with other pneumococcal conjugate vaccines. So the next look then is at the ACIP as to how they grant the universal recommendation. But from a licensure perspective, we'll be looking to have an across-the-spectrum sort of indication, but then it's a question of usage. And as Jim said, when it's universally recommended, the uptake is much greater than when it's restricted to at-risk populations.

Yes. I would like to add that due to the interest in at-risk groups among 50 to 65-year-olds, we will ensure that we have a sufficient number of enrolled participants from these at-risk groups in our clinical studies to support the FDA. The ACIP also intends to consider moving down to 50 years of age based on clinical data to assist with their decision.

Hi guys, thanks for taking my question. Among the new serotypes you're adding to VAX-31, there is one in particular, which has a bunch of literature on it suggesting it's very unique and perhaps difficult to manufacture. I'm referring to 35B. Can you speak to your confidence in the manufacturing as well as early immunogenicity data you saw in preclinical models of 35B in particular? And secondly, is it your expectation that Pfizer's broader spectrum program 24, 25-valent is using a second carrier protein beyond CREM-197? Thank you.

Yes, maybe I'll answer the second one first and then Jim will address the 35B question, Umer. Thank you for both of those. So… Regarding the fourth generation program, it's challenging to determine their exact strategy. Based on their disclosures, they are exploring various changes to extend beyond a 20-valent vaccine. However, their recent earnings report suggests they may add incremental strains to the existing 20 strains in Prevnar 20. The focus then shifts to whether they will introduce a unique protein carrier, different chemistry, different linkers, or another formulation, but details are limited. It appears they haven't provided extensive information on this yet. The idea of using an extra protein carrier has been attempted by other companies, such as GSK's initial pneumococcal conjugate vaccines and more recently with Sanofi's combination of diphtheria toxin and tetanus toxoid. However, these efforts have faced challenges, as evidenced by Sanofi's decision not to pursue the adult indication, leaving uncertainty about the efficacy of this approach. Nonetheless, we can't confirm if that's the direction they are currently taking.

Yes. Traditionally, we limit our comments on some of this due to proprietary issues, but I'll say that 35B is an important serotype. It's one of the more common circulating strains in adults, and it's probably the most significant contributor to otitis media in the U.S. today. So we are very keen on making sure that it is manufactured appropriately and that it works well in VAX-31.

Thank you.

Thank you, Umer.

Thank you. We go next now to Seamus Fernandez at Guggenheim.

Great. Thanks for the question. So wanted to just talk a little bit about pediatric and what expectations, how you'd like to kind of set expectations for the three dose data. I know that is something that Merck has sort of pitched as part of the vaccine advanced story. Just interested to know, I know that breadth is likely to dominate. But a three-dose regimen has been quite successful overseas. So interested to just know how you guys are thinking about the opportunity for actually perhaps a superior profile at your third dose versus the Prevnar 20, 23rd dose, just because a number of those serotypes appeared to miss at three doses and then really required the fourth dose to catch up. So just interested to know how you're thinking about that and its importance from a market perspective longer term. And then just the second question is on whether you choose VAX-24 or VAX-31 in the adult vaccination program. Are you confident that you won't be required to study versus V116 or is that something that could be decided after the ACIP recommendation in June? Thanks.

Thank you for the question, Seamus. Regarding the infant indication, it’s an essential part of the market, consistently accounting for three-quarters of sales in that space. For the three-dose series you mentioned, I wasn’t entirely clear on your perspective until you elaborated. In the U.S., we utilize a three-plus-one approach: three vaccinations within the first six months, known as the primary series, followed by a fourth booster dose the next year. In Europe, they restrict the primary series to just two vaccinations, with the third dose administered the following year. This means it's a three-dose approach in Europe compared to a four-dose one in the U.S. As you noted, having fewer doses results in greater pressure on immune responses. When Pfizer studied Prevnar 20 in infants in both regions, the absence of one dose had a significant impact. In the U.S., there were six serotypes that did not meet the non-inferiority standard compared to Prevnar 13 after the primary series. It’s understandable that providing only two vaccinations with a vaccine that yields lower immune responses would have a noticeable effect. The Phase 3 study results in Europe showed that 11 common serotypes failed to meet the non-inferiority standard after the primary series, raising serious concerns. Nonetheless, the European CHMP recently recommended approval for Prevnar 20, making it interesting to see how that evolves despite the non-inferiority issues. In adults, our VAX-24 data indicates we are generally achieving higher immune responses compared to Prevnar 20. If this trend continues, it could enhance our advantage, particularly in the three-dose regimen as opposed to four doses. We will need to observe how the European authorities respond to this situation. Our study for VAX-24 in infants, which will report results in 2025, follows the conventional three-plus-one model. If we confirm higher immune responses after the primary series, it may provide us with a competitive edge against Prevnar 20 in Europe. The results will be evident next year. Regarding your question about comparisons with V116, I believe you initially referred to VAX-24 versus VAX-31. However, since V116 will be limited to adults if approved, we are focused on that target population. We anticipate that discussions with the ACIP later this week will help clarify the approval status of V116. By the time we have data for VAX-31, we should have a clearer understanding of how it will be recommended in relation to Prevnar 20. With that information, we’ll better assess appropriate comparisons for either VAX-24 or VAX-31, especially VAX-31. So, it's a matter of waiting to see how this develops. Jim, do you have any additional comments?

No, I think that is there. I think that if there is a non-preferential recommendation, then I think it will be up to us to choose which of the competitors we can choose to use in the Phase 3.

Yes. Thanks, Seamus.

Thank you. We'll go next now to Louise Chen at Cantor Fitzgerald.

Hi, thanks for taking my question. Wanted to ask you on your global manufacturing capacity and how this gives you a competitive advantage. And then what kind of capacity will you have once you complete this buildout? And second question I wanted to ask you was, just on the infants. Are you going to also choose either VAX-24 or VAX-31 for infants? What are you thinking here? And what is your VAX-31 adult data are going to give you as you think about the infant opportunity?

Yes, thanks for the questions, Louise. Yes, so as it relates to the manufacturing buildout from a competitive perspective, it's really table stakes, if you will, if you can supply these vaccines at the appropriate capacity then how can you expect the ACIP among others, to make a broad recommendation for your vaccine? So, for us, it's been fundamental to unlocking the full value of these vaccines, is to stay ahead of that sort of capacity so as to have not only the ability to deliver but the sort of profile that would warrant a preferred recommendation ideally. And so that's been absolutely crucial to this whole story. And I think we've been able to stay ahead of that. We're in a position to launch out of existing Lonza infrastructure where we've been making these materials to study clinically. And then late last year, as you all know, we made the strategic decision to invest in a dedicated facility at Lonza. And as you requested, the way we're thinking about that dedicated facility is one that would be able to satisfy the global demand from the developed world for either VAX-24 or VAX-31 in both of the adult and infant indications. So we do really expect that one to really deliver for us to maximize the sort of opportunity that we think is at hand. And then to your question about VAX-24 versus VAX-31 going forward, I think it's really an indication-dependent conversation. So for us, we find ourselves in a position where both VAX-24 and VAX-31 have an opportunity to reach the market on the same timeline. So with the right VAX-31 data later this year, naturally, it would make sense for us to move to deliver the most broadly protective vaccine that we can, and ideally that would be VAX-31. If not, we know VAX-24, it looks really good as well, and so we'll see that data before anointing which one to advance. That said, in the infant market, we're already well ahead with VAX-24. And so for us, we're contemplating either or both of VAX-24 or VAX-31 in the infant indication, just because we know we can bring VAX-24 to market faster based on the path we're on today. So it's a little more nuanced in the infant indication because of that sequencing.

Hi, thanks for taking our question. Just a couple of quick ones on the preclinical programs. You briefly mentioned those, but could you just give us a quick sense for which one you think could enter the clinic first? And in particular on Strep A, curious if you'd give us a quick outline of a competitive landscape there and what you think the commercial opportunity in that indication is?

Sure, thanks, Joe. So, as we stated, we've three other pipeline projects, we've got Group A Strep periodontitis and Shigella, all three are moving forward in early-stage preclinical development. We haven't guided to when they would go in the clinic. But yes, the one that I believe is most advanced at this point is the one that you mentioned, which is Group A Strep. The Group A Strep vaccine, I think has a very important role. I think it's one of the most underappreciated diseases. There are over 500,000 deaths due to Group A Strep that occur every year due to rheumatic heart disease. But it's a ubiquitous disease causing pharyngitis, mainly in school entry kids as well as young toddlers. If not treated aggressively with antibiotics, which means that there's a significant amount of antibiotic prescriptions associated with this disease. And also subsequently, you would expect growing levels of antimicrobial resistance have led to increasing importance of finding a vaccine to prevent against this. And there is recent economic studies that say that medical and indirect costs are around $5 billion a year. So a vaccine that can have some degree of efficacy, a reasonable amount of efficacy could significantly have direct medical costs to offset. So I think you'll see a commercial opportunity here in school entry kids, potentially toddlers. And then the one area I haven't mentioned is there is high rates of invasive disease in older adults as well. So we could see a very similar type of recommendation, in fact, a little bit more because you're immunizing school entry kids as well, that you see with the PCV. So we're really excited about this program.

From a competitive standpoint, it's not as active in the PCV space as we've commented on.

Yes, there's minimal activity. There are only a few academic centers and one pharma company that are currently looking at a Group A Strep vaccine. So, minimal competitive environment as well.

Great. Thank you for taking our questions.

Thank you. And ladies and gentlemen, it appears we have no further questions today. So, that will conclude today's Vaxcyte fourth quarter and full-year 2023 earnings conference call. Please disconnect your line at this time and have a wonderful day. Thanks for joining, everyone.