Okay, good afternoon, everybody. Welcome to the 26th Annual H.C. Wainwright Global Investment Conference. Our next company presenting, or that we're having a chat today, is Novavax, a company that by now hopefully all of you know really well. They have Nuvaxovid, which is one of three COVID vaccines that is in authorization or licensed for commercialization. One thing that I do want to highlight, though, is Nuvaxovid is the only protein-based vaccine that's in commercialization. The others are mRNA-based. With that, I think to begin, you mentioned in your fourth quarter annual results call that you have four drivers of the stock that you're focused on in the long term, and then you also have near-term drivers. Could you walk us through those four drivers, and then what should we expect near term?
Absolutely, and you know, I should first really thank you for having us again this year, Vernon. I really appreciate you here having us here, and we've had just great meetings with investors who, you know, given the time of year, you know, the respiratory season and just, of course, getting our COVID vaccine approved just at the end of August, so much interest, and so it's been great to be out with you. I'm joined by Bob Walker, our Head of R&D, Jim Kelly, CFO, and you know, you're exactly right, four pillars to drive value, shareholder value for our company, and especially in light of a transformative transaction, which was the Sanofi transaction, we announced back in May, which is pillar number one.
You know, billions and billions of potential cash flow from that transaction, and most importantly, what they can do to take our technology and bring important vaccines to patients. Pillar number one, the Sanofi agreement. Pillar number two, our late-stage pipeline. We have our own proprietary flu and a combination flu COVID vaccine that are gonna read out mid-next year, so that's the second pillar. Number three is doing incremental business development deals with our Matrix platform. Again, so much value that can be created to either improve existing vaccines or create new. And then finally, development of our own organic portfolio, and much more on that later this year.
We got a validated platform, planning to do much more, and we plan to do so with a lean operating platform as we continue to drive down costs as we transition from being a commercial-stage global company to one that is focused on R&D and developing value that way.
Yes, and you've been. This is an initiative that was taken on by John Jacobs, who came on Board the beginning of last year?
That's right.
And so they're showing execution, which I think has been totally appreciated. So let's focus briefly on the Sanofi deal. Can you tell us a little bit about the terms and the opportunities it represents for you?
Certainly, and just in a moment, before I hit that, I tell you what, there couldn't have been more change in the last 20-odd months since John joined. I mean, I think you know it. He came in in January of 2023, and almost instantly on that sort of end of February, early March call, mapped out strategic initiatives to transform the company, and we kind of sit here today well down that path, and with humility. You're never all the way there, but we're really pleased with the progress of the last, you know, twenty months. And one of the hallmarks, I think, of this change has been this transaction, which I'm happy to walk through in a lot more detail now.
The Sanofi agreement that we announced back in May has multiple dimensions, and that's why it takes a little more time to kind of be understood, inclusive of initial upfronts and milestones of the transaction itself, so $500 million upfront, a $70 million equity investment. Then you look at how milestones royalties are available to the company for both the COVID vaccine and Sanofi's ability to develop combination vaccines alongside our COVID. $700 million in milestones across both, and then significant royalties across both those programs available to us. The fourth piece, or another piece of significant value creation, is Sanofi has value to our, or access to our Matrix.
So, they can take our Matrix and apply it to their existing vaccines, all except their flu, or develop new vaccines, and we've got the ability to receive up to $210 million in milestones per vaccine and receive royalties on vaccines where they put it together with our Matrix. So those royalties can go twenty years, so significant value creation across this transaction. But importantly, it was done with a market leader in respiratory vaccines. We couldn't have really chosen or scripted a better partner, and so we're thrilled with not just the terms, but also who we're working with.
For those who don't know, I mean, Sanofi is obviously big in the vaccine space. You've probably seen commercials already by now that they market the seasonal flu vaccine, Flublok and Fluzone, and so this is a company that you would want to partner with as far as the vaccine space is concerned. Because in their past, they've also acquired vaccine technology, Chiron.
That's right.
Dating myself here, but, you know, I've known the company since 2004, so there's quite a bit of Wall Street here, in my second career.
And of particular importance to us is that when you look at their portfolios of where they play in respiratory vaccines, they've got the highly innovative, highly differentiated programs that really match up well to how we develop vaccines. And so in particular, we look at the 65+ group, and just that tends to be the premium markets and the types of markets where we play. So that part worked as well.
Yeah, and the 65+ group is the one who usually generate the weakest immune responses to vaccines. So, for big pharma partners present there is going to be very advantageous and synergistic. One thing that I think is really not appreciated adequately is Matrix-M. Matrix-M is an adjuvant. Matrix-M is also a technology, as Jim said. Can you very briefly, I mean, a lot of people do know what an adjuvant is, tell the audience what an adjuvant is and the various uses that perhaps-
You got this.
... Matrix-M could be, expanded and adapted to?
Sure. So, Matrix-M is a saponin-based adjuvant. Some people familiar with the GSK product, AS01, also saponin based, which is an extract of a Chilean tree, of the bark of a tree that grows in Chile. So it's an extract that is then combined with cholesterol and phospholipids, and forms a substance that when administered along with, in our case, a nanoprotein antigen, boosts the immune response. And the type of boosting of the immune response that Matrix-M delivers is both on the humoral side, so the magnitude and the breadth of the antibody responses, but also the T-cell responses, which we think gives Matrix an edge, and is one of the distinguishing factors that we see, both with our COVID vaccine as well as our flu vaccine.
Now, we have looked at Matrix with other competing flu vaccine products that are currently not adjuvated, not adjuvanted, and produced in egg systems, and we see the same types of responses. So we think that we can potentially partner with other flu vaccine manufacturers if they're looking for an adjuvant or looking to, in, for example, induce a T-cell response. This might be a good adjuvant to think about. We've also looked at the ability to for Matrix to boost non-viral antigens, and specifically pneumococcal antigens. So, you know, pneumococcal vaccines are based on polysaccharides. Polysaccharides historically have been difficult to be immunogenic in the populations that need them the most, tend to be the extremes, the babies and the elderly.
And when we combined a market-leading pneumococcal vaccine with our Matrix in laboratory animals, we see the same kind of adjuvantism. So we think that Matrix-M has potential to boost other existing marketed vaccines. It has the ability potentially to be to revisit certain antigens that have or certain infectious diseases where that have not been considered to be necessarily amenable to vaccines, but potentially by revisiting the approach and combining with Matrix, you'll see a different properties. And you know, and then I think there's the world beyond infectious diseases, which we're currently assessing.
I think that later towards the end of the year, when we unveil kind of what our new pipeline will look like and, you know, where we'll be going, I think that there will probably be some opportunities to look outside strictly infectious disease vaccines.
Now, what many investors may not know is those old, protein vaccines that you used to take or still take, that are protein-based, often had an adjuvant in them called alum, which is a different formulation of, aluminum.
Yeah.
So, the idea is not new, but Matrix-M is, and the basic idea is it boosts the immune response. But with a Matrix-M, you perhaps have at least a two X or manyfold boost in that response. And I think that's perhaps, you know, let's see, by year-end when you have the portfolio reveal, how those opportunities are actually going to be best communicated and hopefully further appreciated.
Yeah, I mean, you just reminded me, one of the other aspects is that the, what's called antigen-sparing property of adjuvants.
Yes.
So you can actually, and that translates into better cost of goods, right?
Y eah.
And that's the point I was driving at. So if you can find the right adjuvant, you can actually lower your protein production costs, which is really where a lot of the money gets spent in manufacturing of vaccines. And so even, you know... Anyway, there's other opportunities there to help folks, other partners, for example, reduce cost of goods by looking at Matrix.
And the protein-sparing also sort of has a little bit of quality-of-life aspect to it, because can you imagine, to get more immunogenicity, you can also just inject more protein to get a higher response. But because of formulations, that can actually be painful, and, you know, over time, people may not get their vaccines or, you know, hesitate to finish a course because it's just an injection is painful. So you imagine if you had a volume like I've had for rabies when I got bit by a dog. You have this course of vaccines, and those are huge volume injections. And so, dose sparing is another aspect of the adjuvant technology you have that's underappreciated.
Real quick, on to CIC, which is the combination COVID seasonal influenza vaccine, positive phase II results. Could you tell us a little bit about those plans and, you know, whether you're on track for the phase III immunogenicity trials?
I'll take that one, too, so yes, we're initiating a phase III immunogenicity study, looking at both CIC and our standalone flu in the same phase III-A study, and we're on track to start that in October of this year, and we're expecting our first data readout to be by mid 2025, and that's gonna be a really important data readout for us, right? Because, you know, that's where we're gonna see... It's gonna be very binary, we think. You know, we either, you know, see non-inferiority to the market leader or we don't, and we're fully expecting that, based on the phase II data, we are gonna see non-inferiority-
That's right
... if not superiority.
That's right.
That's gonna, I think, open up the door to partnering discussions where, you know, we actually have an asset at that point that's been proven.
Really important because we're planning on investing up through these data readouts mid-next year, partnering, and then we're seeking to have the partner advance the filing, run the phase III-B post-marketing commitments, and commercialize, and through that partnership, have available upfronts, milestones, and royalties, as a part of continuing to monetize and create value from our pipeline.
Terrific. Now, as you remember that Jim mentioned earlier, one of the pillars that CEO John Jacobs had the company implement was getting costs under control. But yet it's a drug, you know, a vaccine development company, so there's gonna need to be spend. The results so far have been great. I think my model does expect you to at least be operationally break even, sometime next year. I forget which quarter it is. But can you talk a little bit about those initiatives, efforts, and the results you have so far?
Certainly. You know, as folks heard when we started today, hey, we're a pandemic company, and so we scaled up for this global reach to be able to deliver billions of doses. We transitioned the company in the past few years to a post-pandemic model, really cleaned up our balance sheet, cleaned up our OpEx, and now are increasingly emphasizing our R&D roots. So what does that mean mathematically? In 2022, we had $1.7 billion in R&D and SG&A. By 2026, we expect to have less than $350 million, an 80% reduction. How the heck do you do that? A lot of it is, hey, we worked our way through those Operation Warp Speed studies. You know, it was great. The government helped us.
It was such a great help in investing in our COVID platform. Then as we move through this year and the next, this year's our last commercial year, so those roll-offs, the big COVID studies roll off, the commercial front-end investment rolls off. Next year or this year's R&D and SG&A, we expect $750 million. Next year, below $500 million. The year after, below $350 million. So what we're able to do, the other side of this agreement with Sanofi in completing our commercialization efforts, is really resize and reshape the company to get to a more lean, agile operating model, where we can operate within the parameters of the cash flows coming to us through the Sanofi agreement. You know, we're planning to partner, and new cash flows off of flu and CIC.
And then you just heard from Bob the opportunities to partner our Matrix-M, and we think there are vast opportunities there, both for improving existing vaccines on the market or helping develop new ones.
Yeah, I think this is an important aspect of the investment thesis because one of the things the company you know in this implementation is to perhaps in evolution to a commercial stage company, at some point, you want the company to be profitable, right? You can't just be spending on R&D all the time. And, you know, it's a biotech company, so you're gonna plow, you know, profits into the pipeline, so there's always gonna be some spend. But on the return of that investment, I think a company starts to become really attractive, and, I think the homework starts now, if it already hasn't been done, that if the story starts to become operational break even, that for those investors who focus on the cash flow aspect of the story, it is probably a good time to do so, because I think, and my model only actually has the company capturing 10% of the COVID market.
I think it's slightly higher for the combination vaccine because the combination vaccine will be superior to the competition that the company doesn't really necessarily need to cut that more price that high, capture that much more market share to get to what I believe is currently right now an attractive valuation and a price target horizon for those who don't necessarily want to hold the stock long term, which
Yeah
I do recommend. Real quick, since we only have about a minute left in time, could you talk a little about your cash position and perhaps how you might deploy those limited resources into clinical stage activities?
Yes, certainly. And important to emphasize, hey, it's our intent to be a profitable company. Like, there should be no question about it. I'm not guiding just yet on, hey, you're saying, "Hey, what quarter?" Hey, not guiding just yet. But, hey, we're gonna, that's our goal. Our goal and our intent is to be a profitable company, where we've been able to do those types of licensing arrangements that bring cash flows into the company, that fully support our development efforts. And those efforts, we can't wait to unveil as a part of our R&D Day later this year. Important activities that are ongoing include Flu/CIC, that we'll read out by mid-year. We've also said that we've initiated IND-enabling work around both our RSV and H5N1 programs. You know, those are also seeking to become partner-ready.
And then, as we unveil these new pipeline prioritization projects, that's where the funding's gonna go. So much more on that front, as we move forward in the coming months. Can't wait to share more.
So, let's take a little liberty of just one more minute. Can you tell us a little bit about the steps you took and the status of the current launch for Nuvaxovid?
Oh, by the way, thank you for getting there, because how quickly we move on to the next thing.
Yeah.
Hey, the authorization, the EUA that we received from the United States on August thirtieth, we couldn't be more pleased. They have been such great partners with us. We did so in the summer. We're four or five weeks ahead of where we were last year. We're right here at the beginning of the season in the U.S., shipped to retail pharmacy late last week, expecting the ability to have shots in arms this week, a pre-filled syringe, really good contracting work. A lot of credit to our team, retail contracting this year to get us in the pharmacies and availability across the country, so we're there. We're there now.
Terrific. On a personal note, I got my COVID vaccine one week before theirs was available last year. This time, it's gonna be on time, not only because it's earlier, but you know, obviously, the commercialization the authorization is also earlier. So I wanna thank Jim Kelly, Dr. Robert Walker for joining us today for a presentation on Novavax. Hopefully, you got a taste and a bit of insight into what a attractive investment opportunity this company is, and that, if you haven't taken a look before or have, perhaps looked in the past but decided to not take a position at that time, I think now is a good time. The company's evolving in a positive direction, and hopefully, you got that insight from them. Thank you.
Hey, thanks again, Vernon. Really enjoyed being here. All right.
Thanks, okay.
All right.
Thank you, and thank you all.