Okay, thank you for joining us here today for our fireside chat with Vaxcyte. We have three members from the management team here. So we have Grant Pickering, CEO, Jim Wassill, COO, and Andrew Guggenhime, Chief Financial Officer. So with that, why don't we start with a broad level question for those of you that don't know the story. What is your company's strategic vision, and where are you now, and where do you want to be over the next several years?
Well, Louise, first of all, thank you for hosting us. We're delighted to be here today, and yeah, if you're new to the Vaxcyte story, we have become known for our pneumococcal conjugate vaccines. Our company is focused on developing novel and improved bacterial vaccines. The pneumococcal conjugate vaccine space has been one of the foundational vaccine categories, and, you know, for us, we're just now recently in receipt of our VAX-31 phase II adult data, which we were thrilled to release shortly after Labor Day, and we were able to show that we can not only increase coverage from today's standard of care, which is a vaccine that covers 50% of the circulating disease, and our VAX-31 vaccine has an opportunity to protect against 95% of the circulating disease.
Super successful outcome in our phase II study, expanding coverage and actually showing improved immune responses relative to that 20-valent vaccine that's out. So, we think we have an opportunity to bring this 31- valent vaccine to the market and create a leading franchise in this current $8 billion category. And we think our platform has an opportunity to not only produce even broader spectrum vaccines to the extent warranted, but also develop additional novel bacterial vaccines going forward. So we're very excited about the prospects and looking forward to building this organization.
Okay, great. Before we get into specifics, I did wanna ask you, how was your vaccine platform developed, and why can't some of these other companies do what you're doing with adding all these serotypes?
Yeah, so the foundational technology was invented at Stanford University. What we're able to do is to site-specifically join these two discrete immunogens that drive immune responses against these bacteria. So what has been the hallmark of this class is you can actually take the outer coat of these bacteria. You can actually just use that outer coat of the bacteria and get some modest immune responses, but they're not durable. This was the first class of vaccines that came out in the nineteen eighties. What became the next generation and much more successful form of the vaccine is to take an immunogen that has actually T cell epitopes on it, join it with those sugars that form the original class, and then you get T cell help, and you get durable and much more robust immune responses.
What we figured out with our technology that came out of Stanford is we could site-specifically conjugate those two immunogens in ways that we could use less of the one component, because too much of it begins to distract the immune response from your intended protective response. And so, that technology formed the basis of what we were able to do with our conjugates. We're doing a lot of the same as what has been done conventionally, but our technology allows us to dial in the immunogens in ways that drive the right immune responses and have produced not only broader spectrum vaccines, but better immune responses to those vaccines as well. That's where it started, and that's a similar playbook that we'll be applying to additional bacterial conjugate vaccines for the company going forward.
Okay, great. So given your positive VAX-31 readout, how do you think this changes the treatment landscape for PCVs? There are others on the market. There are others in development. What does it mean for your company?
I mean, it exceeded even our own expectations. We spent a lot of time trying to set expectations for this VAX-31 program. We had been in receipt of already really stellar data with our VAX-24 program that had read out over the course of 2022 and 2023 across two different phase II studies. We thought there could be some fallback in the magnitude of immune responses, which is the same thing everyone else had seen. But we were beyond thrilled to see, even though we added seven more conjugates to get to the VAX-31, we saw the same sort of magnitude of immune responses.
So we're really getting into unprecedented territory here in this class, and we have an opportunity to transform what has been a marketplace where there are two major companies out with two different vaccines that are available in infants and adults, but each of them present a set of trade-offs that has not enabled the key decision makers to make a clear choice on which one to recommend. And we think we have now an opportunity with VAX-31 to present a vaccine that could give them the opportunity to have exactly what they're looking for. So yeah, it could mean having a category-leading vaccine in what is a really important and highly coveted class.
Okay, great. So one of the things that people have discussed is a potential preferential recommendation from the ACIP, and it looks like it's on the table, given your data, but historically, the FDA has not liked to make preferential recommendations. So what do you think that your product and your data addresses that others have not been able to do?
... Yeah, if the ACIP grants a preferred recommendation, you know, it's basically an overnight flip. We've seen this play out with Shingrix most recently when it replaced Zostavax. And so, we definitely, at this stage, it's only after phase II, but the data that reads out in phase II is precisely the same thing that you look to read out in phase III. So yeah, we think we do have the makings of a product that could warrant a preferred recommendation. But Jim, you've seen this play out in a number of cases over your career in vaccines. I think we have a lot working for us one way or the other. Do you wanna expound on that?
Sure. Thanks, Grant. So the history here is that if you have two similarly indicated products, even if there are differences in efficacy, that you don't get a preferred recommendation. Where you do get a preferred recommendation is where you get broader coverage. GARDASIL had more coverage than Cervarix. GARDASIL eventually claims a preferential recommendation. Cervarix gets withdrawn from the market. Same thing with the quadrivalent flu at the time versus trivalent. So this has been the trend here, and we did not see it universally for PCV20 versus PCV15. But in that case, even without a preferential recommendation, the market looks at broader coverage and goes exclusively. And then when I say exclusively, Pfizer has about 97% market share in the adult market right now versus Merck's 15-valent, which is 3%.
So from that perspective, if we get a preferred recommendation, I think we have a very good opportunity to do so, because as Grant said, our unprecedented data of broadening coverage, maintaining coverage of the historically circulating strains, while increasing coverage of the more prevalent strains, and at the same time, increasing immunogenicity, is, I think, a very compelling position for the ACIP to evaluate a preferential recommendation.
Okay, great. I think one of the things that the ACIP looks at also is manufacturing capacity and the ability to supply the market. So where are you with your manufacturing build-out? How much have you spent? How much is left to spend? Can you go through that?
Sure, I'll take that. Yeah, manufacturing, Louise, as you pointed out, is critical in this space, not only to have the supply to deliver the doses, to generate the kind of revenue opportunity that exists here, but important for the recommending bodies to instill in them the confidence that we can deliver for the market. So we have been working with Lonza for the better part of the last seven or eight years now, really in anticipation of what we're now embarking on at this point.
And so we are currently operating with Lonza, and as I said, have been for the last eight years, and plan to support a launch in the adult market out of the current facilities out of which we are operating with Lonza today, and facilities that would give us the capacity to satisfy the adult indication, which is principally a U.S. market and a one-dose market. What you referred to, we expanded that relationship with Lonza last year, and then in the fourth quarter of last year, broke ground on a new custom suite within an existing Lonza building that would support the second approval, which we would anticipate, which would be for the infant indication, which is a much larger market given it is a global market and is a multi-dose market. And so that facility construction is underway now.
We've guided to that. We anticipate the cost for that to be between $300 million-$350 million, and a build that would occur, again, as I said, started in the fourth quarter of last year, expected to be completed, either early part of 2026 or the later part of 2025, at which point we'll begin to make product to stockpile inventory in anticipation of that infant indication launch.
Okay, great. Another question I had for you is on the growth in the adult PCV market. My understanding is that's where all the growth is because of several opportunities. One of them is to bring the age down from 65 to 50, having a booster dose, and then also recommendations outside the U.S. So can you talk through that and maybe help us size the patient population and sales dollar or something in that-
Yeah.
You know, vicinity?
Sure. So we'll begin in the U.S., where there's been several discussions at the ACIP and at the CDC to move the recommendation down from 65 to 50. If they do that and move it to 50, then it's my understanding that they would still want to maintain the 65-year-old dose to make sure that you get a booster and that you have high titers. As you go into, you know, your older age, you have a much higher risk of pneumonia, so they'll want to give that boost. The reason they're wanting to move that down to fifty is that the vast majority of adults in fifty to 64 have an at-risk condition for pneumococcal pneumonia. I used to quote 30%, but the ACIP and the CDC last meeting said it's between 30% and 50%.
The issue is when you have an at-risk recommendation, penetration is about 15%-20%. So why not make a universal age-based recommendation? One out of every two adults between 50 and 64 has an at-risk condition, and you can increase coverage to 60%-70%. So, there will be a discussion at the upcoming ACIP meeting. The likelihood, I think, of a vote occurring in the October ACIP meeting is low, but I think by February or June, their subsequent meetings, they'll be ready after a discussion to vote on whether or not to move it down. In the last meeting, there was clearly a lot of support from ACIP members to move it down. So I think it's not a matter of if, it's just when. Now, the other opportunity for growth is ex-U.S.
A lot of countries have not made adult recommendations, and the reason they didn't was that Prevnar was out for so long in the infant world. The main carriers or transmitters of this disease are the infants. About 40%-50% of infants have pneumococci in their nasopharynx. They transmit it to grandpa, grandpa gets sick. So if you immunize the infant, and the infant doesn't have it, then grandpa doesn't get it. So there was a 40%-50% reduction in adults in many countries by just immunizing in infants. Now, we have a different scenario. The adult vaccine is coming out two years before the infant.
It would take five more years for herd immunity to develop, so that would be seven years in which adults would continue to get the disease, and you'd still get one out of every two adults would still get the disease anyway. So countries like Germany have just made a recommendation for the first time for PCV20 down to sixty years of age. We expect it to expand in other countries as well.
Grant alluded to the market today being about $8 billion, that you look at various projections out there, expectations that the size of the global market will increase to $12 billion-$13 billion over the next several years. It's these drivers that are expected to to drive that growth. The infant market is pretty well saturated, as every baby born around the globe gets this vaccine. So the infant market growth is principally a function of price when you introduce broad-spectrum vaccines in the adult market for the factors, that we just discussed.
So assuming everything goes as planned, you get approved, you get a preferential recommendation, how do you plan to launch your product versus entrenched players in the market? How much will it cost you? How big of a sales force do you need?
Yeah, well, our plan, we very much are planning to launch this product on our own, certainly in the major markets that comprise the overwhelming share of the revenue opportunity around the globe, and we're doing that work today, as you might imagine. In the U.S. market, yes, there are established players, but as Grant and Jim have talked about, whether in the context of a preferential recommendation, which we think VAX-31 well deserves, or even in the absence of it, right, the share goes to the broadest spectrum vaccine. So there are other factors at play that make the commercial lift not as substantial as you might think.
In the U.S., if you look at other companies in the space today, and it's our view that we'll have a sales and marketing organization, plus medical affairs, that'll total three to four hundred individuals. Again, the sales effort is very much aided by having the broadest-spectrum vaccine that we would anticipate having out there. By law, insurers are required to cover it. So the sales lift is less than you might think. The reimbursement lift is less you might think, and we think we'll be very well able to compete in the context of the U.S. opportunity. Outside the U.S., there are different forms of healthcare. We think the size of an ex-U.S. commercial lift would be probably comparable in number of individuals to what you would see in the U.S.
We will be thoughtful about determining the countries in which we would commercialize on our own and the countries in which we might benefit from having a partner, but that's not necessarily a decision we need to make today. We're more focused on getting, obviously, this phase III trial stood up as we all the while continue to plan for the commercial launch strategy.
Outside the US, which countries or regions of the world would you go at it on your own?
Yeah, look, we're still making those determinations, but, you know, I think it's fair to assume that in many of the European countries, we would commercialize on our own, and we may not have time today, but there are reasons, and for that in many countries where the commercial lift is quite manageable, the countries, for example, that have socialized forms of medicine. There are other territories, China perhaps being the most prime example, where you need substantial feet on the street, and it can be helpful to have existing relationships. That's a country that is more likely, frankly, where we would seek to find a partner rather than commercialize on our own.
Okay, got it. So why don't I stop there and see if anybody has any questions on the adult vaccine? Go ahead.
Can you talk to me about your patent portfolio?
Yeah. So we have via our license through Sutro, you know, obtained all of the rights that support the cell-free protein synthesis platform that was originally invented at Stanford and then layered upon through the licensor, which is Sutro Biopharma. And so the patent estate that we have covers the whole cell-free protein synthesis approach, covers. There are certain composition of matter aspects to it. So the unique thing that we do with the site-specific conjugation is we insert non-native amino acids, which is what allows us to have exquisite preference over where to conjugate the polysaccharides. We have composition of matter on those non-native amino acids. We have composition of matter over the patent, over the vaccine forms that we've been advancing and beyond.
And then, of course, there are quite a number of trade secrets and know-how aspects of executing the production of these, and the patent estate runs into the twenty-forties. But this is a class, and when I say class, I mean vaccines writ large, where generic encroachment isn't really a phenomenon. These vaccines have tremendous durability, and that's primarily because you're talking about biologics that aren't singularly complex. You're talking about thirty-one discrete biologics that are complex, mixed together into a single formulation. So, this is a class for which we think we have durability based on not only the IP, but the inherent complexity to their production.
Anything else? Okay, so-
...
... Yeah, I mean, from a competitive perspective, Pfizer and Merck are the major competitors with products in both adult and infant class. Those are well-publicized. Beyond those two, Sanofi has had a program that they partnered with a company that's based in South Korea called SK Bioscience. They're leveraging the same inherent technology that both Pfizer and Merck are prosecuting, which is the old conventional form of chemistry called reductive amination. Sanofi made a slight tweak by introducing an alternative protein carrier into the mix. That's turned into some complicating features. It didn't work in adults taking that approach. They have suggested they're going to advance a 21- valent form of that vaccine in the infant setting.
And then GSK is taking an alternative approach through an acquisition they made back in 2022, which is a different approach with a novel protein carrier, with a different form of putting these immunogens together. It's not covalently bound. They have a 24-valent program that's been in the clinic for some time. So that's another company that, of course, we're keeping an eye on. And then beyond that, there have been some forays that really haven't gotten any meaningful traction trying alternative approaches.
Okay, so why don't we move on to your infant vaccine and what the data from the adult for VAX-24 and VAX-31 mean for your infant vaccine? What kind of competitive advantages do you see that you have? How are you expecting that data to turn out?
Yeah. So the pneumococcal conjugate vaccine space has been very predictable. This class of vaccines was originally developed in infants exclusively, and then when the second-generation vaccine in the form of Prevnar 13 was developed, they looked at it in adults using the exact same formulation that they had gotten approved in infants, and they obtained approval for Prevnar 13 in adults back in two thousand and fourteen. What they found was, as they went from the seven-valent form to the 13-valent form, the immune responses started to get lower, and when they graduated from Prevnar 13 to Prevnar 20, they got lower once again.
But nonetheless, they've still been able to successfully develop the same formulations of these vaccines, initially in infants, then in adults, and then more recently, you study them in adults first and then in infants. And in every case, they've successfully developed the exact same form of the vaccine in both populations. And so, what we've shown is that with our vaccines, we're getting higher average immune responses, in a material way than they're getting. And when they've taken their adult formulations into infants, they see a further degradation in the immune responses. They drop about 10%, in infants relative to adults, and that's where they start to run into a lot of problems and start to miss the non-inferiority comparisons that are the regulatory hurdle.
Starting at a place in adults where we're already 25% higher than their average immune responses, it means we have a lot more room to maneuver as we think about the responses we'll see in infants. We have a fully enrolled infant study of 802 infants that will read out next year. In the infants, you look at two co-primary endpoints, one after the third dose and the next after the fourth dose. We'll get the data from that first readout in the first quarter of next year, and the next readout later next year. We have high expectations based on the magnitude of the treatment effect we've seen in adults, and we've seen good continuity that gives us confidence that that will hold up as we look to get the infant data.
Okay. Any particular serotypes that would be unique for your infant vaccine versus others on the market currently?
I mean, you know, coverage is king in this class, so, you know, we'll have four more than Prevnar 20, which is the market leader in the United States in infants, and that much more so over the 15-valent from Merck. One thing to note is that outside of the United States, Prevnar 20 was approved by the European authorities, but not using the conventional European dosing schedule. So it remains to be seen how the countries will adopt the mismatch in terms of practice versus what was approved. For the time being, it looks like the competition in Europe will be that 15-valent vaccine. So our 24-valent would have even that much more of an advantage relative to Prevnar 20 in the European theater.
I wouldn't say there's a serotype in particular that we're watching. It's the totality of the coverage that really drives this. Jim, what would you say?
Yeah, I think the only other thing we'd want to note is the epidemiology of the disease in infants and adults are different. Adults, you're looking at pneumonia, and you're looking at invasive disease. You're still looking at invasive disease in infants, but then you have otitis media or ear infections. And so a lot of our goal considering the ubiquity of these ear infections, considering that there is antibiotic resistance developing, not only this strain, but obviously with the antibiotic consumption rates, that if we can create better coverage.
It may not be as much for the invasive disease, but we're gonna do a massive increase in the coverage for otitis media, and I think the ACIP and CDC are aware of that, and so they'll be looking at coverage not only of invasive disease, but now we'll be looking at ear infections as well.
Okay, got it. We only have a couple more minutes left, so I did wanna touch on the rest of your pipeline that you haven't talked about as much. And one of the products I find very interesting is Strep A. So can you talk about that opportunity, how big could it be for you, how you plan to move forward with that?
Yeah, maybe we can tag-team this one, Jim. So, we have a product in our pipeline called VAX-A1, and we've talked obviously a lot about pneumococcal conjugate vaccines. The method of using conjugates to drive protective immune responses against bacteria has been the recipe for success. It was the approach that has been incredibly effective for pneumococci, same with meningococcal infections, and we're taking this same sort of conjugate approach with what we can do uniquely into a Group A Strep vaccine category. So we can site-specifically conjugate a polysaccharide that is species defining. So it's a polysaccharide that is on each of the different subtypes of Group A Strep, so there's a universality to the conjugate that we have.
We're making a singular conjugate with that conserved polysaccharide sequence, conjugated to a disease-specific protein, which is also conserved on the outer wall of the bacteria. We think we have a really promising target. The preclinical data is really compelling. We're very excited about it. We can avoid the key B and T cell epitopes on the protein to site select where we put the polysaccharide. We think it's a great construct, and the immune feature is really, really compelling. Maybe you can talk a bit about that, Jim.
In terms of the disease, you know, for me, I think Group A Strep is one of the most underappreciated diseases. It's in the top ten infectious disease killers worldwide. You know, and traditionally, you think of it as pharyngitis, but, you know, it causes this autoimmune reaction called rheumatic heart disease. Leads to over five hundred thousand deaths.
Per year.
Per year, yes.
Yeah.
In terms of invasive disease, what we've seen coming out of COVID, you know, COVID, when everyone quarantined, we saw disease rates decline. That's great, but then, what you have in the bacterial world is survival of the fittest. So the more invasive strains are now circulating, so you're seeing increased rates of invasive disease, including in the adult population, to the likes of what you've seen for the coverage of Prevnar 13. Obviously, you know, in infants and well, toddlers and in school-entry kids, you have the ubiquity of the pharyngitis. There's, I think the estimate is almost one in five antibiotics written in the U.S. for under 10 are due to Group A or presumed Group A Strep. So you can really reduce antibiotic consumption. You can address, you know, AMR.
You can obviously address a lot of these serious cases as well, and I, you know, I've spoken to the CDC on it, and they're very eager to see our vaccine move forward in clinical trials.
Okay, great. So you have a pretty sizable cash balance. Curious if you could highlight what key catalyst or events that gets you through, and maybe the timing behind that?
Yeah, as you noted, Louise, fortunate to have a strong balance sheet. On the heels of the great VAX-31 data a couple weeks ago, we did a substantial financing. So pro forma for that financing, we now have about $3.3 billion on our balance sheet as of June 30, which gets us through several milestones over the next few years. In the adult indication, based on those data, we're now moving into phase III, and the balance sheet we now have will get us through the readouts from all the phase III studies that will comprise the phase III program, kind of on the cusp of BLA submission.
And then in the infant indication, we are pursuing both VAX-24 and VAX-31 in parallel, and the balance sheet we have today will fund us through both the primary endpoint, the first endpoint, the primary series endpoint, and the booster data endpoint as well for each of the VAX-24 and VAX-31 programs. So that's kind of the key clinical milestones through which we can fund over the next few years, and then, of course, the manufacturing side gets us through the completion of this dedicated suite and well into the period over which we'll be building our inventory levels in anticipation of a later launch.
Okay, great. We've got 57 seconds left, so anything else you'd like to cover before we close? Okay, well, thank you very much for joining us today for this fireside chat. Thanks to the audience for participating.