Jefferies London Healthcare Conference 2025. My name is Roger Song, one of the senior analysts covering SMID-cap Biotech in the U.S. It is my pleasure to have my next fireside chat with Novavax. Welcome, Jim, Ruxa.
Very nice to be here.
Thanks for having us again this year.
Absolutely. Welcome you. Okay, so Jim, if you can, just give us a little bit kind of an overview of the Novavax today. I think it's different from last year for sure. The very big strategic focus for the new Novavax. Why don't you give us an overview?
All right, fantastic. Thanks for everyone for joining us today. For many of you, you may be familiar with Novavax from our most recent history during the pandemic. One of the very few companies that cracked the code actually created a highly efficacious COVID-19 vaccine. You might be asking yourself, how did this company achieve that when so many big pharma couldn't do it? The answer is our technology, our core technology based on subunit protein nanoparticle technology for antigen creation, when combined with what we believe is the most effective adjuvant, Matrix-M. We think that that's been critical to our success, that you will see in the form of both our COVID-19 vaccine, but also in terms of products on the market today, an exceptional malaria vaccine. Our licensed partner, Serum Institute of India, used our Matrix-M in a game-changing malaria vaccine.
We can talk a little bit about that in a minute. When you think about our company and chapters, and that's something we outlined, and John Jacobs, our CEO, outlined on our most recent earnings call, you have that chapter, which is the pandemic chapter, that seeking to address a world pandemic is a huge deal. Transitioning the company to be an endemic-based vaccine manufacturer, a different story. As we executed across that chapter, partnering with Sanofi, the world leader in vaccines, to take that COVID-19 vaccine, NUVAXOVID, and drop it into their portfolio of market-leading respiratory and other vaccines is the absolute right move, both for patients to have access, but also for Novavax in terms of the economic interest. That is just the first piece of a groundbreaking partnership we have with Sanofi.
In addition to that, and during what we're calling really a transition period, we're reducing our cost structure, strengthening our balance sheet, and then seeking through additional partnerships and advancement of our pipeline to truly highlight this game-changing technology. That is the next few years. That is what we're doing. We're sort of assisting Sanofi to execute commercially while we in parallel advance our technology and partner. The end game, which is a few years out, is to drive profitability of the company. Think about a diversified top line, multiple partners, a lean infrastructure, and then an emerging, both in our hands and in the hands of our partners, portfolio of projects moving forward and vaccines that are game changers. That is the unlock, the full unlock for the value creation.
Excellent. I think that's a good kind of setup for the growth strategy across different prongs of the strategy. Maybe we are still going to start with the commercial part. I understand you are partnered with Sanofi right now, which is a major player for the vaccine and then the leader, one of the leaders. Sanofi has been guiding the 2025-2026 season. It's the learning year. As the first year they start to do this, how should we interpret that? What's the expectation for the first learning year? Then we talk about the coming years.
All right, excellent. What I like about your question is when we think about the layers of value to unlock here, you've got sort of layer one is the Sanofi agreement. Layer two is additional Matrix deals. Layer three is our early stage emerging pipeline, currently unpartnered, but with great opportunities to partner. When we unpack the first layer, which is the Sanofi agreement, think at a minimum about three layers for that one. You've got the ability to commercialize our COVID-19 vaccine beginning this year. I'll come back to your specific point around the COVID market and sort of their transition year. Part two is the ability to take NUVAXOVID, our COVID-19 vaccine, and combine it with their market-leading flu franchise with not just one, but two. They have two combination products in development.
By the way, for folks who are watching the evolution of the combination flu and COVID-19 markets, and I'm going to point to an Air Genesis report from World Vaccine Congress, you're talking about a market that could be as big as $8 billion a year. We've got the market-leading flu vaccines, high-dose Fluzone and Flublok, where Sanofi has just announced that they have positive phase I, II data, and they're working with agencies to advance those programs and the pivotals. Now, under that part of our agreement, we're eligible for up to $350 million in milestones and then royalties, high single digits to low teens. Exceptional opportunity for value creation. Three, under the Sanofi agreement, is the ability to leverage our Matrix-M in their portfolio. There will be certainly many opportunities to do so.
A recent announcement was that Sanofi received a BARDA agreement with their H5N1, their pandemic flu vaccine with our Matrix. You're beginning to see that layer of the agreement come to fruition as well. I'll answer the specific question around the market, and then Rux can give some updates on the CIC market and then the H5N1. That's an exceptionally big deal. In terms of the market and Sanofi's work with COVID, the 2026 season is their full launch season. This year, it's a transition year. When we look at the 2026 season, we see the following.
We see the ability to do the full cycle of contracting in the U.S. market, which occurs in the January through April time period, with in hand, Sanofi, we put all these items in hand this year, a BLA, which we got in June of this year, and at least six months dating. You had to have both those things in hand to be able to go ahead and do those negotiation contracts. That is going to mean that in the coming contracting cycle is when you're going to see the full strength of Sanofi's commercialization effort come into play for the 2026 season.
That is why for this season, 2025, they've said, listen, transition year, we're just going to do some spot marketing efforts, make some of the vaccine available through outlets, and really use it as something of a learning year to prepare for 2026.
Excellent.
All right. Rux.
Rux, yeah.
Yeah, just a few words. For those who don't know, CIC means combination influenza COVID vaccine. Sanofi has just announced positive data from their phase one two, both for Flublok and Fluzone high dose. For both of the programs, the FDA granted to Sanofi the fast track designation. That entails a much faster review of the dossier when that would come to plan. For the BARDA, as Jim was mentioning, that is a big deal because while for the moment human-to-human transmission have not been actually described for the current H5N1 strain of flu, for global health security purposes, having a stockpile of vaccine is really absolutely necessary. Having Matrix, so our adjuvant combined with Sanofi's pandemic flu, actually offers both companies to capitalize on the strengths of the technologies.
That's a little bit of nuance to what Jim has been saying.
Yeah, yeah, absolutely. I think three layer for the Sanofi and then from commercial and the CIC and then even earlier pipeline. Just to also remind the investor how that will impact your balance sheet. I think the CIC is $350, but I think Matrix-M is also an additional.
That's exactly right.
That's exactly right. Under the agreement, Sanofi made a $70 million investment in our company. We received $500 million upfront. In addition to that, $700 million eligibility for milestones split equally across both the COVID performance and also the combination. Exceptional value on upfront and investment and milestones. This year alone, we earned $225 million in milestones. Really proud on the execution against that. In addition to the milestones, as you move forward, royalties. You have the ability to have high teens, low 20s royalties on the COVID sales globally. On the combination vaccine, COVID plus flu, you have the ability to have high single digits, low teens.
While a lower number, what we'd remind folks of is that flu vaccine, that franchise, the market-leading franchise, $3 billion plus for Sanofi, the expectation is that's got a high percentage migrate over into a combination setting. We'd have the opportunity to have royalties on that. We're thrilled. That's an exceptional opportunity for not just cash through upfronts and milestones, but long-term durable growing royalties. What we're seeking to do as a company, and this is the value creation on a cash flow basis, is to drive a lean cost structure as those royalties come in and grow so that we can be capital independence and grow shareholder value.
How about the Matrix-M? That's an additional M.
That's exactly right. Forgive me for not hitting that harder. The Matrix-M is a non-exclusive right that Sanofi has. We purposely made it non-exclusive because we believe Matrix-M as an adjuvant can be the engine of innovation across the vaccine industry. An industry that currently in 2024 was $57 billion. McKinsey study noting it could go as high as $75+ billion by 2030. This adjuvant we think could be a critical driver of innovation for new vaccines or improving existing vaccines. Okay, in terms of the economics there, mid-single digit royalties for up to 20 years from launch on any new vaccine developed by Sanofi with our Matrix-M. In addition to that, up to $200 million in milestones each new product. We couldn't be happier with both the partnership and the structure of the agreement.
In terms of science, Jung, I have to mention that in our own labs, we have tested Matrix-M in combination not only with different antigens for us and for some of our partners, but with different vaccine platforms. We have noticed that breadth of immune response, enhancement of immune responses, indicators of durability of protection across different platforms. This is, as Jim was mentioning, with the non-exclusive license to Sanofi, opens the door of other deals, other actually collaborations where we can be the engine of innovation behind different new or improved vaccines.
Yeah, that's a perfect segue to the next layer of the growth driver, which is the partnership and then using the Matrix-M. I believe you have a couple of relatively recent master contracts. Just to get access to your technology and then use that in the testing in the lab. Just remind us of what's that and then any updates from those relationships and then how likely they will materialize into the formal partnership.
Hey, sure. A couple of points there. The first one I'd make is that you heard me mention before a growing vaccine industry going up to $75+ billion . What we recognize as we work with Matrix-M across different modalities and in different vaccine categories is that it has such high utility that if we try to control it 100% and do it all ourselves, we'd actually thwart innovation, right? Because we'd have limitations to capital and the ability to advance. By making Matrix-M available on a non-exclusive basis to others, we really see an ability to be, it's almost like an Intel inside strategy where you're going to be the key driver inside to drive innovation. Maybe I'll say Nvidia chip instead, right? Make it a little more current. That's exactly what we're seeking to do.
You say, okay, I wonder if some of the major pharma players are familiar with what Matrix can do. The answer is they all know, right? The data that either we're generating ourselves is out there and they can see it. We often do these proof points where we've shared, oh, here's what the data looks like. It's our business development sales brochures, right? For them to go in. Nobody's going to believe you unless they tinker with it themselves. You're correct. We have two top 10 pharma who are under MTAs who are doing just that. They're taking Matrix and they're tinkering with it in their labs. The way BD works, at least with disclosures with us, we'll tell you when we got something, right? I can't give an update, but this is corridor strategy.
We have every expectation that there's going to be Matrix deals, not just with the ones that I just mentioned, but multiple over time. We are really looking forward to that. In terms of, I mentioned two major pharmas, vaccine players, MTAs, plus you add to that Sanofi, plus in addition to that, we also mentioned we're working with an oncology player with a new innovative approach to oncology vaccines that we think could be a game changer. We are not going to be an oncology company, but we might have an adjuvant as precedent for using adjuvants in that setting. We think there could be an opportunity to unlock that part of the business. Maybe Rux, maybe you'd want to speak about what we're doing there.
Yes, so we have made comparisons with other adjuvants that are currently used in vaccines. We have compared, for instance, Alum with Matrix. For those who are scientifically inclined, Matrix is actually fostering a very balanced immune response. Alum, TH2, so predominantly antibody responses, which are very good for specific applications. With Matrix, we see a balanced TH1, TH2 response. You have CD4 positive cells, you have CD8 positive cells. We thought that the type of immune response that is generated adjuvating with Matrix can be used not only for vaccines that are suitable for infectious diseases, but also for oncology vaccines.
To the point, we are actually working in collaboration to generate proof points with somebody else's peptides, yeah, somebody else's technologies, plus our Matrix and other formulations, including we are envisioning tweaking a little bit Matrix because now we know how to do it and generate more a type or another of immune response. Really making it tailor-made to the needs of that particular vaccine. It is very exciting. There is a lot of AI machine learning also involved in all this modeling work, but that is something that aside from our infectious disease early programs, it is very appealing.
In terms of market sizing there, in addition to the $75 billion size ID, right, vaccine market, this oncology market we're speaking about, it has grown to over $40 billion. Now you've pushed the combined over $100 billion. As I mentioned, hey, we're not going to be an oncology company, but for a targeted low investment, we can do a proof of principle here and let's figure out if there's an unlock.
Got it. Yeah. I think this is new information to a lot of people, including myself. You do have an earlier pipeline. That is mostly focused on the infectious disease and then sugar and then the flu and the RSV. Are you actively working on this oncology with your partner or is that something you take internally as well?
Yeah, on the, and we should talk about both, of course, both the guiding principles around early stage and what we're doing, plus this work that we're doing in oncology. We've got a specific partner we're working with at this time on this proof of principle. Some really fascinating work. Look forward to sharing some updates with you. I think you've heard from us in coming quarters. We're going to be walking through both the latest information of our preclinical early stage programs. It would be inclusive, for example, of some updates on this oncology collaboration as well.
Excellent.
As we think about what we're working on in our early stage, I'm going to start with maybe the end market in mind and then kind of dial back to, hey, where are we in terms of working on it? What we recognize is that there are many markets out there with exceptional high unmet need. We do a combination of, I'll call it markets with economic promise, but also high unmet need. I need only point to our licensed partner Serum in the R21 malaria. That's not a big economic boom, but that is a great, great vaccine for world health. We will continue to kind of keep that mindset as we move forward, right? The ability to do good, do right, and then also play in the important markets, right? Commercial markets.
As we look at some of the early stage vaccines we're creating, it includes categories where, hey, nobody could crack the code, much like COVID once upon a time. Hey, what can we do there? We'll talk a bit about C. diff, a vaccine in that area. Then you look at major markets where you'd say, hey, this is a great market. We got incumbents, but they have flaws and you can potentially do better. Shingles is a really good example. High efficacy, tolerability, kind of tough. What can you do to address that? Then you look at pandemic areas. Areas where, hey, governments may want to be a part of solving problems. I think the H5N1 pandemic flu is a really good example. Then one more category, combinations.
Much like the pediatric market that went through a consolidation and combinations, because frankly, kids just didn't have enough arms, right? You couldn't vaccinate enough. You need only go into any pharmacy today and they ask you, which one of our 18 vaccines would you like to get today? You realize the ability to create combination vaccines matters. It genuinely does. Our platform, protein nanoparticle with our adjuvanted technology, is really good for layering on multiple vaccines. We're able to show we can do this with on par tolerability of the standalone vaccines. The RSV combo is a third example that we're talking about. That's more of the framing, but in terms of, hey, why believe this? Why should we be able to do it? I mean, maybe Rux, you could share some thoughts.
Yeah, so taking it from the top, so C. diff, there have been spectacular failures in phase three. From the very beginning, we decided to take a very different approach. Instead of designing a toxoid-based vaccine, we have used again AI machine learning to identify specific antigens that might confer a higher immune response and a different type of immune response. Obviously, there you are looking at mucosal immunity and something that works well in the gut. There, the unmet medical need is really big, in particular in hospitalized patients. A specific category that is utterly unaddressed. For the next example, which was VZV, so shingles, we have a very efficacious vaccine. The issue there, the unmet need is tolerability. 40% of patients that are getting the first shot of shingles do not go back to get the second shot, yeah, because of this tolerability reactogenicity issues.
We thought that again, we can design a vaccine that is equally effective, but much more tolerable based on the Matrix-M adjuvant. For the RSV combination, we have quite efficacious RSV vaccines there. There, if you wish, unmet need is twofold. Number one, that we do not know exactly the durability of protection, but it is not extraordinarily long. And the vaccines up to now have proved to not be able to be boostable, yeah? At the second administration, you do not get the same return on investment as your prime. That is one issue. The second one, as Jim was mentioning, is that you might be able to combine different respiratory pathogens and create a vaccine that addresses a multitude of diseases. RSV, HMPV, PIV, and this is our desire.
For the pandemic flu, we have a different pandemic flu than our colleagues at Sanofi, but not less interesting. We have preclinical data that we have published that shows that we actually, the vaccine can be delivered either intramuscularly or intranasally. Intranasally means possibility of self-administration, number one. Number two, we have demonstrated, at least in our friends the mice and non-human primates, that intranasal administration results in mucosal IgAs, which translate to lower viral loads. Lower viral loads, if we see them in humans, mean less transmission. In the case of a pandemic, that is one of the essentials when we are talking again about this global health security. We really need something that is efficacious, but at the population level can cover it much better than classical vaccines. That is in a nutshell where we are with our pipeline.
Excellent. I think we went through every growth factor and then drivers. I think thank you for the time with us today. Thank you everyone.
All right. Thank you all for joining us.
Thank you.
Thank you very much.