Good morning, everyone, and thank you for joining us for this next session of Baird's Healthcare Conference. I'm really pleased to have with us Novavax, and with us is Jim Kelly, CFO, and we also have Robert Walker, Chief Medical Officer. Guys, thank you so much for joining us.
Joel, thank you. Thank you very much, and really appreciative of you having us here today. Your timing's excellent, and I'm sure we'll jump into this in a minute with respect to some real-time activity happening at the ACIP meeting today. But, before we get there, thanks again, and thanks for everyone for joining.
Exactly. I think you're right that this is my most real-time meeting of the conference, so this is really exciting for me. But maybe first, before we get to that, I'd be interested just to kind of take a step back and kind of as an overview, earlier this year, you announced three priorities for the company for 2023. Could you kind of remind us of those three priorities and provide an update on the progress made to date?
Hey, certainly, you know, I'm quite sure that you're very most folks are familiar with Novavax, but I'll just kind of restate our a little bit about who we are and what we're driving to achieve. You know, we're a protein-based vaccine company. We have nanotechnology adjuvanted. We've got a COVID vaccine that many folks are familiar with, but we've got an exceptional platform that we think has utility across a large range of vaccines. So what we're doing as a company is we are evolving rapidly from a pandemic-era company to a more traditional commercial company in an endemic setting.
Earlier this year, we announced just key initiatives on that path, including priorities to have and deliver an updated vaccine for this fall season, which is exceptionally important, especially in the United States, as it converts over to a traditional commercial market. 2, resize the company, improve our financial strength, extend our cash runway. This is a part of changing the size and focus of the company to be that more traditional endemic company and put some of those one-time liabilities that we're tied to of building up a supply network for a pandemic. We're slowly but surely, and I say slowly but surely, but we've rapidly done it this year, reducing short-term liabilities by over $1 billion in the first six months of the year.
So and then the third priority is to take that technology platform and create value beyond COVID. And we saw some really good early results on flu and our combination flu-COVID combo vaccine from a Phase IIa study that we announced in May, and we're really looking forward to advancing that program. So those are the three priorities and a little background on the company.
Terrific, and that provides a great framework for the rest of our conversation today. So maybe first, in thinking about the COVID vaccine and the upcoming kind of fall vaccination season, I think yesterday there was an update on the availability and readiness of Novavax's vaccine. Could you tell us more about that and the commercial activities that you've been focused on up until now?
Yeah, certainly. So what you're referencing is today, and actually live right now occurring, is the CDC's ACIP. So this is the Advisory Committee for Immunization Practices. This is their meeting on COVID vaccines. It's literally happening right now. They invited Novavax to speak, and they've brought along the other two manufacturers, Moderna and Pfizer, to talk about our data. Hey, what are we seeing with respect to our vaccine against some of the emerging variants? And they're gonna be voting later today on populations and how vaccines should be used. So that's happening live today, and there'll be updates at end of day.
Yesterday, the announcement was that we are in active dialogue with FDA, so our XBB filing in the U.S. or data in the U.S. is under review, and it's not yet approved, and we've got our commercial supply in market. So we're ready to go. Now, yesterday, Pfizer and Moderna were approved, and so now it's simply waiting for the pull-through on our part in working in collaboration with the FDA. But today is and the coming weeks is just a critical start to the fall COVID vaccine season, and so we're ready to participate.
Yeah. Yeah, so as you mentioned, yesterday, there was an update from FDA that Pfizer and Moderna's COVID vaccine were approved. I think, you know, some were hoping that Novavax might be on that same timeline, but it didn't seem to be. But I'd be really inter-- it seems like there's active dialogue going on with FDA. And I guess, could you tell us more about the remaining steps that between now and what you could anticipate could result in approval?
Yeah, well, certainly. I'll start by, you know, first reiterating what an exceptional partner FDA has been, and I mean along the way, with both us and working with, Pfizer and Moderna on everything from preparing and aligning on strain selections to... As folks know, we're operating under emergency use authorization, so it comes with a much more iterative, I'll call it sort of a rolling data review process, and we work with the FDA week in and week out on that. At this point in the process, while I can't give a time to completion, 'cause, heck, great partner, I never wanna put them on the spot. We're just working diligently with them through any open closeout questions, and we look forward to being ready for the fall.
But just simply not able to, you know, offer much more beyond that, and really thankful of the collaboration we've had with the FDA.
Maybe I can just add that, you know, for the EUA amendment, FDA has asked for all the data to be submitted to the IND first. So we did that, and they reviewed the data, and then they say, "Okay, go ahead and submit to the EUA. We think you're ready." So we've already passed through that, and we're in that post-submit to EUA period.
Yeah.
So.
Terrific. And then, you know, thinking about the fall season in the U.S., do you have contracts in place and any sense of the timeline on when you could begin delivering the doses under those contracts?
Yeah, certainly. So the United States is just such a critical market for us this year, as it's the first traditional commercial market post-pandemic. And so you're exactly right. We've got contracts in place, and most people who know vaccine space, it's specialty distribution, and then I'll call it sort of point-of-delivery, point-of-purchase contracts. So picture half the market in terms of vaccinations occurring, for example, in a retail environment. So here's the status of our contracting. We're ready to, for folks... The number I'd put out or the metric I'd put out there is, people who want to get vaccinated, think about 70% of the individuals who get vaccinated, they're within 5 miles of where we've contracted. We've got ourselves set up.
We got, a supply and market ready to go and contracts in place to enable 70% of people to get vaccinated within 5 miles of their home. So we're ready.
Great. I think with that in mind, it's terrific to hear that readiness. There's also two competitors out there who are also have readiness as well.
Sure.
Could you help frame, you know, how Novavax's vaccine could be differentiated and compete to get market share?
Well, certainly. And I think one of the critical aspects, I'll call it our market relevance, is in all these markets where we'll be, you know, serving public health, we are the only non-mRNA option. And these countries and these regulatory authorities, they want choice. It's good for public health. And so at core of our go-to-market strategy is that we are the non-mRNA choice. And, you know, our market research tells us upwards of 25%-30% preference share when asked. Whether it's individuals or healthcare providers, they've got a, I'll call it a preference share. It's different than market share. They got a preference for a tried-and-true protein-based technology, and that's us.
And so that's the backbone of our go-to-market, I'll call it, differentiation strategy that builds on top of: get the label, get the recommendation, have all the pull-through ready to go, but at the point of vaccination, that's our point of differentiation, in terms of being non-mRNA. And then we do think we have some exceptional product attributes that will build out on our label over time, or seek to over time, that we're hopeful will differentiate it. We don't have head-to-head studies today, but, Bob, maybe you'd like to talk about just some of that medical research we're doing.
Sure.
that we think could differentiate.
Yeah, I mean, so, you know, we're trying to nail down some of the attributes that may help differentiate us out in the marketplace. You know, one of those is reactogenicity. How do we compare to the mRNAs? And so we're collecting that information now, and we're actually gonna be presenting a poster at the ESWI Conference next week that shows some of those data. And bottom line is that we continue to look favorable compared to the mRNAs in terms of local reactogenicity as well as systemic symptoms post-vaccination. That's true with the first vaccination, and it's, and it's true with the booster vaccinations. The other, I think, major differentiator is our formulation presentation, right? So we're refrigerator stable, and we're a one-size-fits-all.
So, we don't have to distinguish between adults or pediatrics or, primary or booster. So it's the same volume, it's the same, amount of antigen, and it's, the same for any age. And then, some of the attributes, I suppose, of our, technology, right, protein plus adjuvant, suggest that the immune response will be different in terms of engaging not just the humoral, but also the T cell side, and the potential duration of that immune response. So those are things that, again, we're not in a position to be able to claim anything today, but we're actively in the clinic chasing those.
Okay, that makes sense. And thinking about market share, you know, even when the 25% of preference share is really striking. And you know, I think even working up to that over time could be really meaningful to Novavax. And I'm just curious, like, you know, I think some people—some investors may have the impression that maybe Pfizer and Moderna get nearly 100% of the market. Are there things in place or aspects that give you confidence that Novavax can get some market share this season, even if it's not quite, you know, 25% or more, where the preference share is at this time?
Yeah, certainly. The point that I think I would draw folks' attention to is that historically, when you look at either our label or our recommendation, prior seasons, we weren't necessarily, in most markets, on par. We weren't. You know, there would be a preferred recommendation for mRNA, and then on as a secondary basis, "Hey, maybe you could consider Novavax." What we're driving to this year is on-par label, on-par recommendations. And so now you're starting to see for the first time, hey, how does a protein-based vaccine compete on a level playing field? Examples of where that level playing field is coming into focus: Germany, Switzerland, some of the European countries are now beginning to put out their recommendations, where they're saying: "Hey, listen, forget about preferencing leaning one way or another. Go get vaccinated.
Novavax is a great choice, on par with others." It's really in that environment where we've seen or we would expect to have, you know, great uptake. We have had some markets and select markets where we've had, I'd say last year, I'd say more aligned recommendations, like in South Korea. That was, that was a good example. But I think the ones to watch this year in particular are, I'd say, Germany and the United States. We're watching very closely.
Terrific. That's really helpful to hear. And I'm curious in kinda examining that preference share more closely and just from a sense that I think oftentimes with vaccines, when a patient goes to get vaccinated, they may not be choosing which vaccine they get. But are there opportunities, whether it be with, you know, patients or providers or somehow else, to actually convert that really meaningful preference share into market share over time?
Yeah. So, you know, it does turn into, A, let's make sure you're there. And so an example might be, making sure for retail pharmacies, you've contracted to ensure your vaccine is there, or in healthcare providers who want to have it in their fridge. And with our vaccine, it can be in their fridge, right? Not the freezer. Are you there? That's step one. And then, what we're doing is, we're doing focused digital advertising, both to consumers and to healthcare providers, to help them think through what it means to have the option for Novavax, so that they can vocalize as a, as a potential receiver of vaccine, that you want a protein choice in that moment. What I would differentiate in COVID versus flu, flu, flu, people tend not to know the different vaccines. But in COVID, they know them by name.
I mean, it's unbelievable. It's just, you know, the world over the past three years has created amazing brand awareness by company, right? The company is the vaccine, and so people know us. And so, as we continue to leverage, I'd say, digital marketing programs, so that individuals are empowered going into that setting to ask for Novavax, to ask for our vaccine, that's the strategy at point of vaccination.
Terrific. Maybe I'd be interested to focus on the emerging COVID variants. There's a lot of focus on how this still seems to be a rapidly evolving virus. Can you talk about how that impacts the rollout of your vaccine, and how well your vaccine is performing against the variants that are currently circulating?
Sure. So, our president of research and development, Filip Dubovsky is gonna be presenting those data momentarily at ACIP. Basically, what you're gonna see is that our XBB.1.5 vaccine, so the monovalent vaccine that's been recommended for this season, induces neutralizing antibodies in both mice and non-human primates to essentially the full spectrum of emerging variants that are circulating today, right? So it's not just XBB.1.5 and 1.16, but these sub lineages, right, EG.5 and FL.1.2.1, and XBB.1.16.6. So the ones that you're reading about and hearing about, that CDC and WHO are actively tracking, we continue to induce very robust responses.
We're very reassured and very optimistic that the vaccine is going to perform equally well in the clinic. These tests have correlated previously in past seasons with vaccine performance, and I think we all expect that that's going to be the case this year as well.
Terrific. Could you tell us about the supply of the vaccine and what's available?
Yeah, certainly. We have vaccine supply in market in the U.S. and also in Europe, ready for authorizations to start shipping. All right, so that's... We're ready to go. Our vaccine, folks might know, we partner with Serum Institute of India. 100% of our vaccines coming from there. That site's been validated and inspected by important regulatory authorities, so it's ready to go. And then, we have manufactured tens of millions of doses. We have ample supply. We're ready for the market demand. So that's our supply chain. That's where we are in the major markets, and then that's what we've reiterated through our financial guidance.
Got it. Yeah, so on that guidance, I believe the full year of revenue guidance is $1.3 billion-$1.5 billion. Could you discuss what's included in your guidance and how Novavax is positioned to achieving it?
Yes, certainly. Hey, so when we gave that guidance, what we said was, "Hey," through the middle part of the year, which is the end of, I'll call it, the Wuhan delivery era, so this is before starting the new variant deliveries, we thought we'd do about $500 million of that guidance. We did $505 million through midyear. We're literally right on track at midyear, where we thought we'd be in setting up for the fall. Midpoint of the remaining $900 million. So that consists of about $125 million remaining on a government contract. This is where I say how great you know the US government has been. $1.8 billion Operation Warp Speed. We're saying there's about $125 million remaining this year, so that's the first 125.
Then on top of that, we've got about $425 million in secured advanced purchase agreements, the biggest of which is Europe, okay? And so that's deliveries in the back half of the year. And so the remaining $350 million US market estimate, and at that kind of number, $350 million US market, we're talking single-digit market penetration. Why? Well, we recognize we're third to market, so you got to come at this with a certain pragmatism and humility. But frankly, we expect to do better over time. We can't wait to compete this year.
Is there a timing that you may need to be approved by to be able to address the market, or is there a point where it gets to be too late, or is this kind of such a rapidly evolving market that it's really hard to pinpoint that?
Hey, certainly. So I'm gonna start first with some of the commentary that we're hearing about COVID, then we'll talk about the flu. Hey, what's their cycle look like? And then come back to what might this year look like. All right. So what we're hearing in the commentary are things like: Hey, listen, you don't want to get vaccinated too early 'cause you wanna make sure you get it in time so you have a good immune response for the season. So we would expect that, you know, the biggest bolus of vaccines is probably gonna be in the sort of October, into October time frame. All right? And then you say, "Well, well, how does that line up with what you see with flu?" Well, flu's already kicked off, right? ACIP already had their meeting.
Traditionally, flu has run from, call it about now through just after Thanksgiving. That's where the vast majority of flu vaccine is, is, is given, okay? Now, let's think about COVID. Well, my goodness, story's yet to be written on COVID, how, how the vaccination cycle is gonna go. We think it's gonna be analogous to flu, but what we know is that people get vaccinated when they get scared, like when there's an outbreak. And if you think back to Omicron, which hit in sort of the Thanksgiving time period in early December, man, that season, people are getting vaccinated all the way through January. So the point is, at a minimum, we expect to be ready for what might have been the traditional flu period, but we have ample supply and market and excess supply should there be bigger demand and extended period.
And so that's how we're, we're viewing it, because frankly, you know, we're still all learning how the COVID market, including its time period of relevance, is gonna play out.
Yeah, that, that makes a lot of sense. So maybe circling back to financial guidance, part of that, as you mentioned at the beginning, is the Novavax's focus on a reduced rate of spend for the year. It seems like you've made some progress over the course of the year to that.
Right.
And could you describe maybe kind of what's been achieved and how that leaves the cash runway at this time?
Yes, certainly. So we entered the year with $2.6 billion current liabilities, and again, this was linked to pandemic era company really driving, right, to build up supply networks. And we knew to transition to a successful endemic company, we had to clean up our balance sheet, and we've knocked out about $1 billion of those liabilities, including a $350 million convert payment to the UK of over $100 million, and then a $200 million settlement with SK Bio that we settled for $65 million cash and a equity investment at $13 per share, which was, you know, an over 70% premium to the prior day close. So we've done really important negotiation and cleaning up of our balance sheet of these one-time items. So we're at about $1.6 billion now.
The biggest component is our Gavi liability, and I tell you, we continue to work through that matter. It's gonna be an important matter to put behind us. And then, if you look at the remaining of the $1.6, you get $700 million for Gavi, $300 million for deferred revenue. Those are upfronts we got from different APA holders in advance of deliveries. And then the remaining $600 million is about $200 million for additional manufacturing and classic AP and other. So, lots of details I just gave you there. Takeaway should be: we've knocked it down by $1 billion. We're approaching more of a traditional balance sheet for our go forward. Key to resolve the Gavi issue. That's it. Oh, cash runway. Mid-year, we had $900 million between cash on hand and $400 million receivable.
We're exceptionally well capitalized going into this fall season, so we're coming at this from a position of financial strength.
Makes sense. Great, so I think maybe for the remainder of the conversation, I'd be interested to address the combination COVID flu vaccine and the potential for that. I think one of the great things about Novavax is there's a long history of vaccine development and having developing a flu vaccine even prior to COVID hitting as opposed to a lot of companies that kind of jumped into infectious disease after the pandemic hit. So in any case, could you provide an update on the potential for a combination for a COVID flu vaccine?
Yeah. I mean, maybe what I'll do is at least talk for a moment about where we see the market going, and then, Bob, if you want to cover sort of the data we've seen today, which is, which is great, we're really excited.
Sure.
You know, what we think is gonna happen in seasonal respiratory is that the market will increasingly go to combination. I mean, it's just... Like, this year, you're hearing from CDC, it's sort of the tri-season of flu, COVID, and RSV. And by the way, when you combine them all together, it's about a $40 billion marketplace globally. I mean, it's an exceptionally important area. So, what we think is gonna happen over time is that, that the market preference and where we're pushing our technology is towards combination vaccines, and we think we may be advantage. We could have some advantage with our technology platform.... to actually put in these different antigens in size to be very competitive. So we've got a platform that I'll say is accommodating, and then importantly, it's not just being able to do it, what's your efficacy look like?
Well, our COVID vaccine efficacy speaks for itself. This early data in flu, really encouraging. So we think we've got both a technology platform that is appropriate for a combination business, and on top of that, we've got really good efficacy that leads us to say it makes sense to continue investing in this. And, Bob, maybe you can share a little bit on the data.
Yeah. I would just also add that, remember, you know, Novavax cut its teeth as a RSV company, and the expertise that resides at the company is aligned with respiratory viruses in general. So, I mean, it this kind of plays to our strengths, this the combination concept for respiratory viruses. So, you know, we prioritize, in terms of our pipeline, the combination of flu COVID vaccine, and we, in a previous earnings call, announced results, preliminary results from our Phase Ia that we did in Australia in adults. And basically, what we did is we compared our flu standalone to our combination flu COVID and to market leaders in the flu-alone space, right? So that was a phase IIa. We were primarily looking at immune readouts and safety.
What we saw was that our flu standalone product actually did better, and it wasn't designed for superiority, so I'd couch these and, you know, these were not statistically better, by the formal statistical definitions, but if you look at the numbers, the numbers were consistently higher compared to the market leaders. Our combination vaccine showed that both the flu and the COVID components produced equivalent immune responses to what you saw when you gave either one alone. That's great news for the combination, and we're now investing further into developing a co-formulated product. Instead of mixing them at the bedside, we'll have one bottle that you just pull from and administer the vaccine. We will recapitulate, we hope, the safety and immunogenicity that we saw in the Phase IIa in a much larger Phase IIb.
And with those data, we can then approach regulators like FDA about the size and scope of a Phase III
Exactly.
that would lead to registration. That's kind of where we are in the process now.
Yeah. In the meantime, we'll watch how others and see, hey, are they able to do what we're doing? So we're monitoring that closely.
It's terrific. You mentioned the comparison with a leading flu vaccine. Which one is that?
Um, I-
It's in there.
Okay.
Yeah.
So we've looked at Fluzone High-Dose-
Uh-huh.
-and Fluad.
Yeah.
We're looking at, you know, the preferential vaccines that are recommended for the elderly.
Right. And that data, if folks want to see it, it's on our website. So you'll see our corporate presentation and this flu data, and you can take a look at all the, as Bob described it, data.
Got it. Yeah, 'cause just the Fluzone, especially Fluzone High-Dose, I think the market share in the U.S. is really very striking.
That's exactly right. And what we, what we note is that, having a standalone flu program could be critical, not just for the obvious reasons that you're- that we're discussing right now with respect to the flu business, but also pandemic. And our ability to have a flu platform that could be, constructive and valuable in a, like, think H5N1 environment, we want to continue to move down that path as well. It could have great utility globally.
Terrific. Well, I'd like to-
Sorry.
Please go ahead.
I'd just mention that our intention is to start the Phase IIb in 2024.
Yeah.
And, also to come back to the combination concept, we hope to build on a COVID flu combination towards maybe a trivalent flu-
At some point.
-COVID-
Absolutely.
-and RSV.
Mm-hmm.
Like, sort of be the next step that we would envision ourselves staying for.
Great. That's a great vision to look forward to, and I know based on what we've seen in the past, Novavax can move quickly, so a lot to look forward to in the slides ahead. Looks like we've reached our time, but so I'll leave it to you. Any closing remarks?
You know, first and foremost, I just want to thank you again for having us. Your timing was excellent. You know, all this long-term vision is combined with near-term execution, and so while we've got a great platform with an eye towards long-term value creation, you're hearing we're resizing the company to be there, we're also hyper-focused on making sure we're ready, we're relevant, and we deliver this fall, and so looking forward to doing so and providing updates.
Terrific. Thank you.
All right.
Thanks much.
Take care.