Novavax Inc (NVAX) 2020 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the Novavax Third Quarter 2020 Financial Results Live Q&A Conference Call.

(Operator Instructions) Please be advised that today's conference is being recorded.

(Operator Instructions)

I would now like to hand the conference over to your speaker, Ms. Silvia Taylor, Senior Vice President of Investor Relations and Corporate Affairs.

Please go ahead.

Well, good afternoon, and thank you to everyone who has joined today's call and webcast.

Yesterday, we hosted our third quarter 2020 operational highlights and financial results conference call.

Unfortunately, due to technical issues, we were unable to conduct a Q&A session.

The purpose of today's call is for the investment community to pose questions related to our third quarter 2020 financial and operating results.

As a reminder, a press release announcing third quarter results and an audio archive of yesterday's call are currently available on our website at novavax.com.

In addition, an audio archive of this conference call will be available on our website later today.

Before we begin, I need to remind you that we will be making forward-looking statements during this teleconference that could include financial, clinical or commercial projections.

Statements relating to future financial or business performance, conditions or strategy and other financial and business-related matters, including expectations regarding revenue, operating expenses, cash usage and clinical developments and anticipated milestones are forward-looking statements within the meaning of the Private Securities Litigation Reform Act.

Novavax cautions that these forward-looking statements are subject to numerous assumptions, risks and uncertainties which change over time.

Joining me today are Stan Erck, President and CEO; Dr Greg Glenn, President of R&D; and John Trizzino, currently Executive Vice President, Chief Financial Officer and Chief Business Officer and newly appointed to become Chief Commercial Officer and Chief Business Officer.

I would now like to hand the call over to Stan.

Thanks, Silvia, and thanks to everyone joining us this afternoon.

We truly appreciate everyone dialing in again today, following yesterday's technical difficulties.

As we detailed yesterday, we made significant progress in the quarter, continuing through today.

Novavax has accelerated its expansion in every functional area.

With the ongoing and strong enrollment of our Phase III clinical trial in the U.K., we are now just months away from Phase III efficacy data for 2373.

We are planning to initiate our Phase III trial -- clinical trial in the U.S. by the end of November.

We are also enrolling well in South Africa, in our 4,400-subject Phase IIb efficacy trial.

Both the U.K. and South Africa trial should be fully enrolled by the end of this month.

And as you heard on the call, we are making great progress on activating 8 commercial-scale manufacturing sites in 7 countries.

We expect to have global manufacturing scale in excess of 2 billion doses by the end of 2021.

And with that, I will turn it over to the operator.

(Operator Instructions) Our first question will come from Eric Joseph with JPMorgan.

My question yesterday would have been to follow up on your opening remarks and, Stan, kind of get your thoughts on the high efficacy rate that we saw yesterday with Pfizer's top line data with their COVID vaccine, just to get a -- also get your sense on what -- having seen such a high efficacy rate, where that places expectations with 2373.

And to the extent those efficacy -- that efficacy rate is durable with subsequent analysis, I guess, from a health and safety standpoint, from an epidemiological standpoint, is there much room for improvement above 90% efficacy rates?

And -- well, where do you see the potential points for clinical differentiation with 2373?

Yes.

All good questions.

As, I think, I opened up yesterday's earnings call, I congratulated our colleagues at Pfizer.

They had a great trial.

They had a great result.

Good for them.

It's good for them, it's good for the world health, and it's good for the industry.

A couple of points to make.

They, like we, are all targeting or using the S protein, the spike protein to prime the immune system.

And if that hadn't worked at all, there would be certainly a cloud over that strategy.

And I think that, that removes any doubt that the S protein is a good target.

We, of course, make the S protein.

We make it at high levels.

And so we take a look at what does their success imply about 2373.

Let me just walk through the 3 or 4 differentiating factors between our vaccines.

We're both using S. We have generated immune responses, both antibody responses -- neutralizing antibody responses and T cell responses.

They have generated antibody responses in their human trials.

It turns out our levels of antibody -- neutralizing antibodies are higher than theirs.

So when they have been able to demonstrate efficacy with their antibody levels, we have high expectations for our results.

Because of higher -- and then we also have T cells.

Nobody quite knows what the impact of having T cells are, but it can't hurt.

And so that's good.

The second thing we have is a very stable product.

We know our vaccine -- based upon our current vaccine but even probably more telling is from our previous vaccines such as Ebola in the past, that we have a very stable product at refrigerated temperatures and even at room temperatures.

And so it makes our vaccine a bit easier to distribute globally.

And we also have -- it's a very scalable product.

As I just mentioned, we have a manufacturing process that scales, and we are scaling it globally.

So I think it's -- it bodes well for our vaccine, and we look forward to the results we're going to get from it.

Got it.

And I guess just in thinking through time line for the North American Phase III study, how should we be thinking about accrual or time to full accrual there?

Should we be expecting something along the lines of the patient enrollment for the mRNA vaccine programs?

Or maybe you could kind of relate it to your U.K. experience.

And do you see any tailwinds, actually, quite frankly, from sort of the positive vaccine data with Pfizer's vaccine making its way to the headlines?

I'm sorry, I didn't catch the last part of your -- the second half of your question.

Do you see any tailwinds for accrual in your Phase III coming from the positivity of the Pfizer vaccine?

No.

I think people will be terribly excited to enroll trials where you have a spike protein vaccine, I do.

I think we have had no trouble.

And let's start with the U.K.

The U.K., we have -- we started about 5 weeks ago and maybe 6 now.

And we have now vaccinated over 9,000 people, and we expect to have that fully enrolled at a level of 15,000 people this month.

So in November, we'll be done enrolling with our Phase III trial.

And to be clear, we expect that the outcome of that trial, the results from that trial can be used for global licensure.

So we think it's a very important trial.

And in the U.S., we -- as I mentioned in the beginning of this presentation, that we continue to expect the U.S. trial -- Phase III trial to start in November.

And we don't expect accrual problems given -- I think, as you pointed out, given the good news on vaccine efficacy.

And so I think there'll be a lot of people lining up to get a vaccine in a clinical trial.

Our next question comes from Mayank Mamtani with B. Riley.

Congrats on all the progress, and too bad about the glitch yesterday.

And again, a great week for biotech innovation.

So maybe just building on the correlation of immunogenicity with vaccine efficacy.

Would you be able to say what minor or major changes you are able to put in place for the Phase III U.S. study?

And I'm thinking about the event rate, which is changing here in the U.S., and also your statistical design in the U.S. study, maybe what you started with a month ago and maybe where we are today given the -- all the information that you know today.

Mayank, it's Greg here.

I think I sort of understood where you're going in -- I mean, I think that right now, the company is feeling very good about where we are with the U.K. study.

Recruitment is going well.

It's a very intense disease transmission setting.

And we've got interim analysis built, and you can review the protocol.

So the chance of success in the interim analysis based on what we can see should be high because our -- as you know, our new responses, especially our neutralizing antibodies, are really quite good.

So you would expect our vaccine to perform at least as well.

And one other feature about our -- the data we've generated in the nonhuman primate study, which is relevant here, we seem to be able to block infection in the nose.

And so that's actually -- so remember we immunized the animals IM, 2 doses, challenged them in the lungs and the nose with the virus and then see if we can recover virus in the nose.

And there, we were seeing the induction of sterile immunity, which is really very good, and it's possible that could manifest itself as blocking transmission in the trial.

So I think that that's -- that may be something now that we might look for based on the very high efficacy we're seeing with the spike protein-based vaccine.

Great.

And maybe a couple of follow-ups to that.

So just clarification, have you said how many subjects in the U.K. study have received a second dose?

And then the other question is, as you think about transmission and think about sterilizing immunity, are you thinking about exploring concepts like Ring Study where you can look at family members of people -- of subjects taking the vaccine and try to better understand transmission?

Is that something you can build in your Phase III protocol?

Actually, interesting you brought that up.

That was discussed pretty early on, but these trials are -- these clinical trials are really complicated so I think -- and very intense in their surveillance.

So what you are going to see is we will be able to take a serum sample before immunization and then about 6 months into the trial.

And as you know, if someone has even an asymptomatic infection, they typically will make an immune response.

So we're not going to catch everyone through our swabbing and surveillance.

We will definitely have some people who we don't catch but -- with the swabbing procedures.

But what we should see is that everyone is captured by the serology.

So that will give us a chance to make an assessment as to whether or not we're blocking infections, and I think that will be important.

And there are many countries, for example, I could think of a few like New Zealand, for example, where they haven't had a lot of disease.

They'd be really eager to have a vaccine that might have a chance of blocking infection.

So that will be an interesting feature of our vaccine, I hope.

Great.

And update on the U.K. study, second dose subjects, what proportion...

Yes.

I don't know that we know a lot.

I mean we started in October.

I'm not sure we're really giving too much guidance on that.

And I think we're on track to finish.

We're fully recruiting everybody by the end of November.

So then 28 days after that, everyone will have had a second dose.

But you can imagine that there are, as you say, a lot of people now who are -- have entered in a period in which they've received 2 doses.

They're past -- a week past that date, and so surveillance has begun for the collection of endpoint.

So we're deep into that.

And one way to know kind of when that's complete is I expect us to finish the recruitment by -- that would be the first dose, obviously, by the end of November.

And then 28 days later, we should have everybody dosed and in surveillance.

Great.

And just 2 more for me.

So on the cohort of patients, subjects you have for 2373 and the marketed flu vaccine, just kind of what is the objective of studying that?

I understand it's a smaller cohort.

So what are we trying to learn from that, that informs your path forward for 2373?

Yes, yes.

Thank you.

That's a good question.

So that is designed to make sure that there's going to be a scenario where people are still getting their flu vaccine, and we want to make sure our vaccine does not interfere with the immune response to the flu vaccine and vice versa.

It's possible that there could be some interplay interaction.

We don't think it will be insignificant.

And so in those subjects, we will also measure their ATI responses as well as the anti-spike responses.

So 400 for an immunogenicity study should give us a really good sense of whether or not there's some interference there.

So that's going to be really helpful because we're immunizing people who should also be getting their flu vaccine.

That will be a question we can answer with data.

Very helpful, Greg.

On the financial modeling side, maybe for John.

There was this onetime noncash item of $122 million.

John, how should we think about these items as we go forward?

And if you can also layer on how, relative to expectations, is your recording of non-dilutive funding from a reimbursement standpoint tracking?

And what should we think of fourth quarter and first quarter?

Because as you can imagine, the numbers are a little all over the place with consensus.

Yes.

Mayank, I'm actually really glad you asked that question because it's something that I was trying to highlight in yesterday's script relative to our cash burn and expenses that we're incurring.

So as you can imagine, there's financial reporting requirements, our accrual-based accounting.

And included in that is $122 million related to embedded lease accounting, which is noncash during this period of time.

And as I mentioned in the script yesterday, if you really take a look at total operating expenses, not including that charge for the period, you really see a nice alignment between operating expenses and grant or funded revenue, right?

Keep in mind that a significant amount of the funding that we've received has almost exclusively covered our operating expenses during this period.

So we're being funded to support all the development work that we have.

So we are recording our revenue as it's incurred and recognizing that revenue and the same with the expenses.

So those expenses and revenue earned are lining up really nicely.

We should expect to see that continue through the next quarter, those matching of funded revenues against the expenses.

As you get into next year, you're going to see a little bit of a shift in that, but we don't give too much guidance on revenue or operating expenses at this point.

Fully recognizing as we become a commercial organization, that's likely going to have to change.

But as it stands right now, I think what you're seeing is funding and significant support of all the development work that we're doing.

Great.

And my final question, again, staying with you, John.

There was some confusion around a number of filings that were put out, including some shelf filing.

So can you just, for the audience, explain what those filings were, the purpose of that?

And if that has anything to do with raising capital?

Yes.

So as we've explained in our earnings calls before, we do a lot of the housekeeping at the end of the quarter.

So the Q's getting filed, we felt it appropriate to add to our ATM filing to have that out there at the ready when we need to raise cash.

We typically don't give guidance on when we're raising.

But I think that, that ATM filing is consistent with what we've done in previous quarters and it is prudent for us to do that as a publicly traded company.

Our next question will come from Charles Duncan with Cantor Fitzgerald.

I'll try to be relatively brief.

I did want to have a follow-up question on the efficacy bar.

I guess I'm wondering, given that you have seen relatively good, potent stimulation of antibodies at least in early, early studies relative to convalescent sera, I'm wondering if there are any patient cohorts in which you're particularly intrigued with relative, I guess, efficacy and/or tolerability.

Could you see perhaps efficacy that is relatively better in terms of immunocompromised patients, say, with HIV or maybe having immune senescence and other, I guess, patient cohorts at risk?

Yes.

Thanks, Charles.

Good question.

We haven't seen much -- we've just seen very, very little top line information from the spike protein from Pfizer.

However, those are really important populations, and we do have recent experience with those populations with our flu vaccine.

So there -- that is the principal problem, that you're giving the vaccine to the immune senescent or older population and they're really developing very relatively poor immunity.

So by adjuvanting a nanoparticle, we induce really good functional immunity as well as very good functional CD4 vector memory cells.

And those are things that are likely to drive improved protection.

So I think that's been a theme of our vaccine, our flu program driven by kind of a theme of our platform program, which is an adjuvanted nanoparticle vaccine.

So I would hope -- I would expect -- and we shall see.

I would expect our vaccine to perform quite well in that population.

And as you know, in South Africa, we have a cohort of HIV-positive stable patients.

And in all the trials, we're targeting about 25% of the population to be older adults with comorbidity.

So we'll be collecting that data.

But based on our very positive experience with our flu vaccine, I would think that, that could be a key feature of an adjuvanted nanoparticle vaccine.

And Greg, if I may just follow up.

Is there a trade-off behind -- or between, say, reactogenicity and efficacy?

I guess when you consider benign reactogenicity or good tolerability, is that at the cost of actual, call it, potency, especially in an immune senescent patient?

Would you imagine that older patients may show less reactogenicity because there's less efficacy or perhaps because they are not all that concerned about, call it, the challenges of being vaccinated?

Yes.

So let me start at the beginning with the first part of that question.

One of the great features about our vaccine that we found in our Phase I and II trials is we do not have a dose-limiting toxicity.

But at the same time, we don't seem to need more vaccine to give a higher response.

You can see that in our New England Journal paper where the difference between the 5-microgram dose and the 25-microgram dose is -- in terms of immune response, you can't differentiate.

And then I'd just point to the fact that when you look at the convalescent sera, which should be sort of defining the peak response, at 5 micrograms, we're at the peak response.

And so we do not have a dose-limiting toxicity to our vaccine regimen in terms of antigen dose.

The mRNAs did face that.

They -- this is super dated today, but in the development, you could see that they had to back off on the dose and so they did not hit the peak of the dose response curve with the immunization.

And so I think that's a positive feature of our vaccine, is the safety profile is being seen even with the maximum antigen dose.

So it seems to me that we are giving that population, in the case of what's in the New England Journal, healthy adults, kind of the maximum possible immune response they can get to spike protein, and that's really a positive feature of our vaccine.

So there's always some drop-off when you go to older adults in the immunity, and I would expect the same to be true here.

But again, based on our experience with the NanoFlu and adjuvant NanoFlu, we should have a really good response to our vaccine.

So the question you asked about reactogenicity, it's sort of debated amongst clinicians as to whether that's a feature of immune senescence or just people -- older people are more tolerant.

I think it's somewhere both.

Older people tend to complain less, but it's very well known with vaccination in older adult population, they tend to complain a lot less of local and systemic adverse events.

That's helpful.

And last couple of questions, one on formulation.

I know there's a consideration about distribution, and Stan actually referred to it in terms of comparable -- or comparison to other vaccine technologies.

I guess I'm wondering, as you think through your -- the distribution of your COVID candidate, are there challenges given that you have really -- and you have the antigen component, you have the adjuvant component.

Is -- does that present a challenge in terms of distribution and even preparing for administering the vaccine?

And then I just have one quick follow-up for John.

I'll let John answer that because he's had a lot of experience distributing vaccines.

Well, one first significant difference is the formulation, right, is that we're not sure what the other protein-based adjuvanted vaccine is doing.

But we're not going to have a bedside mix upon administration, which is maybe what you're alluding to, Chaz.

So I think that's important.

One is -- I don't think we can underestimate the significance of the logistics of a frozen product.

I think there was some conversation that took place today with Pfizer about, while we're happy for them and they've got an approved vaccine and it's 90%-plus effective, the logistics challenges of shipping a frozen product, storing on site, when they can use it is going to provide some significant challenge to them and certainly benefits to our product in the way that it's shipped and how it's used at the physician office or at the pharmacy or at a vaccination clinic.

So 2 big issues there that are full in our favor.

That's very helpful, John.

My last quick question is regulatory.

You recently announced fast track designation.

And I get that in therapeutics land that, that's a positive.

But it would seem to me to be of limited utility here because I can't imagine that the agency is not tracking what you're doing.

So I'm wondering what is the practical implication of having fast track designation.

And what kind of information was provided to the agency?

Or how was that decision made to make that designation?

I think you're kind of right there.

I mean there isn't a tremendous advantage, but there's things like rolling submission, et cetera.

I think it's a recognition that our program is important to them, and they don't give the fast track out lightly.

But they're paying a lot of attention to us.

I think it's been very positive.

That recognition, for me, is a good validation that they think our program is important.

And so I will say they are being exceptionally helpful in terms of responsiveness, and the fast track just sort of guarantees that there's things like rolling submission, et cetera.

So we take it as a nice validation, and so we're gratified that they like our program enough to give us that kind of attention.

Yes.

And to our knowledge, not everyone has it.

Last question regarding the U.K., the conduct of the U.K. trial.

When you look at that on a blinded basis, how do you feel about the case rate?

Is it consistent with what you had anticipated, just general case rate?

But then also severe disease case rate, are you picking up that?

And is it consistent with your assumptions going in?

Yes.

So I can't really talk about our specific case rate in the trial.

I can tell you that we know a lot in the U.K. The information around surveillance is very, very robust.

We are in a good place.

We are seeing lots of disease.

If you get a swab in the U.K., you're very likely to meet what we would consider our primary endpoint criteria.

So it's a fairly high bar once you get a swab.

And then they're seeing a lot of hospitalization.

They're packed.

We are right in the middle of the areas that are extremely busy with a high case rate.

So I'm feeling very good about our ability to collect cases.

And I think you can see Pfizer, they profited from this recent upsurge.

And they were telling the story that they went from 60 to 90, more or less, and sort of they get unblinded.

So if you're in the right spot at the right time, you can very quickly accumulate cases.

I think we are in the right spot at the right time in the U.K.

Our next question will come from Vernon Bernardino with H.C. Wainwright.

Congrats on the progress.

Charles asked a lot of the questions that I had as far as the distribution and the challenges there.

But one thing I wanted to confirm is as far as the expected way that a clinic, for example, would get the vaccine once it's at the stage where it would be in distribution.

Are -- so you're not expecting bedside mixing, but are there going to be 2 vials where one has the antigen and one has adjuvant?

Or will they be mixed together and will already be in solution?

I just wanted to know what is the form, the vial, for example, that is going to be seen once it is at the point of being used as a vaccine.

Vernon, it's John.

It's preformulated in a 10-dose vial, so there'll be fairly ease of administration at the site.

And yes, no 2 vial, no premixing at the clinic, preformulated and ready to go.

Okay.

Terrific.

That is going to be a tremendous advantage.

And then one question, we didn't get too much update as far as the NanoFlu program.

I know you put a team together and you're ready for its commercial stage.

But what is the status of the NanoFlu program?

Yes.

So this is Stan.

So we just put the team together, and we're trying to figure out the best way forward given the fact that we're in the middle of a pandemic.

And so there's issues that you have to have manufacturing capacity.

But now there's new -- there's potentially new strategies for running efficacy trials or running harmonization products.

And we're going to take a little bit of time and figure that out over the coming months.

But the goal is to get it back into manufacturing, scale up, do the CMC things that we needed to do yet to get a BLA.

And we'll report on that in the coming months, but there's going to be a lot of activity in 2021 on flu.

It kills me that we had the best clinical data I've had in my 40-year career in a Phase III pivotal trial for flu, and it's been languishing because of COVID.

It's one of the casualties, but we're not going to let it be a casualty for long.

We're going to get it back into the fold.

Yes.

I know, I know.

Greg's been waiting almost that long, too.

And can you remind us again how much antigen is actually in the NanoFlu vaccine?

Yes.

It's 60 micrograms per dose -- per strain, sorry.

And it's only 1 dose, right?

One dose.

And it's adjuvanted with Matrix.

It's a great vaccine.

Yes.

If you were to combine it with the corona vaccine, how would you actually do that?

No, it's an interesting question because, remember, now we have a vaccine -- we have 2 vaccines that are respiratory vaccines.

And they both have Matrix in it, so the formulation doesn't change.

And it may be as simple as just adding an antigen.

We may have to play around with what -- the actual flu.

There's a lot of things to think about, one of which is do we want to keep 60 micrograms for the flu and 5 micrograms for COVID.

We've also got the possibility of matching it with RSV.

You could have a 3-way combination, and that'd be a great annual flu -- annual respiratory vaccine.

So there's lots of possibility here.

Yes.

ACIP would go nuts.

And then in your preclinical studies, have you seen any synergies when you've combined NanoFlu and 2373, for example, as far as the immune response such that you could get away perhaps with either like a 25-microgram single dose?

Or -- yes, that would be probably best.

I believe, Greg, that's the experiment to be done.

We haven't done that yet.

Yes, I think that you're hitting on a good topic though.

We need to do a little bit of dose exploration here to see where we might go at this and maybe the dose schedule, too.

So those are 2 things that we're going to consider for the combo.

Now we're going to have fun with that this year.

And we do have a follow-up question from Mayank Mamtani with B. Riley.

I had a formulation question, but that's been addressed.

But maybe on the question around commercialization, maybe, John, related to your new role coming onboard, how are you thinking about -- in context of everything that we are seeing, military-style distribution, logistics, and given your time lines might not be that far behind where Pfizer and even Moderna are, assuming the U.K. study as gating point, how are you thinking about commercialization just internally beyond the government contracting and all the other kind of stuff?

Well, thanks, Mayank.

As you can imagine, there's really 2 parts to this commercialization story.

One is the pandemic period, which is pretty straightforward.

OWS has outlined their distribution strategy and how they're going to be controlling the process, taking it through McKesson logistics in order to move it out to predetermined sites and the prioritization.

ACIP, the Advisory Committee on Immunization Practices, is already in the mix and probably will be weighing in on prioritization, whether that be to older adults, first responders, health care providers, et cetera.

So the good news for the innovator and the manufacturer, Novavax, is that when -- as soon as ready, we're going to turn that product over to them, and they're going to make sure it gets to where it needs to be.

We, during this pandemic period, don't need to worry about the logistics and the prioritization, which takes a significant burden off of our shoulders and allows us to focus on clinical trial activity and pathway to licensure.

Post pandemic is a completely different story, and it's difficult to determine exactly when that switch flips to normal commercial distribution channels.

It could be this time next year.

It could be later in '22.

But there, again, there's some -- there's well-established mechanisms commercially.

I think flu is a great example of that, annual flu vaccinations.

There's no distributors, no vaccinators, policy, payer strategy.

The purpose of my new responsibilities is to make sure that we're commercially ready not only in the U.S. but globally and understand vaccine distribution and logistics and selling and payer and policy strategy.

So we're ready to go.

And would part of that, John, be trying to build Novavax into a Pfizer?

Or would we -- should we think about you collaborating with other peers that might be more active in certain geographies from a collaboration and a multi-product respiratory franchise standpoint?

How are you thinking about that longer term?

I don't know, maybe Pfizer is aspiring to be like Novavax, Mayank.

Maybe we -- all joking aside, I think that -- we believe that from a commercialization standpoint, we know what needs to be done to bring that product to market.

Of course, we'll always be open to whatever partnering opportunities are in our best interest, whether that's ex U.S. or other territories.

So we always leave that door open.

But until that opportunity presents itself, we're ready to go, ready to commercialize the product.

I'll bring up one other point since you mentioned Pfizer, and this was asked earlier.

That OWS logistics network is being bypassed by Pfizer because of the frozen stability issues.

And so they're taking on the responsibility of moving their product around on their own for that specific purpose.

Yes.

That's a good point to highlight.

Ladies and gentlemen, thank you for participating in today's question-and-answer session.

I would now like to turn the call back over to management for any further remarks.

Yes.

Thanks, everybody.

Sorry, it took us 2 days to get through this, but we're happy to answer the questions.

We'll be in touch as events unfold.

Thank you.

Ladies and gentlemen, this concludes today's conference call.

Thank you for your participation.

You may now disconnect.