Novavax Inc (NVAX) 2020 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the Novavax First Quarter 2020 Financial Results Conference Call. (Operator Instructions) Please be advised that today's call is being recorded. (Operator Instructions)

It is now my pleasure to introduce Associate Director of IR, PR, Erika Trahan.

Thank you, operator. Good afternoon, and thank you to everyone who has joined today's call to discuss our first quarter 2020 operational highlights and financial results. A press release announcing earnings is currently available on our website at novavax.com, and an audio archive of this conference call will be available on our website later today.

Joining me today are Stan Erck, President and CEO; John Trizzino, Chief Business Officer and Chief Financial Officer; Dr. Gregory Glenn, President of Research and Development, will be available for our Q&A portion of the call.

Before we begin with prepared remarks, 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 in clinical development 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.

I'll now hand it over to Stan to get the call started.

Thanks, Erika, and thanks to all of you listening to this call. First and foremost, given the ongoing COVID-19 pandemic, I sincerely hope everyone on the call and all of your respective families are well and safe. I'll start the call today by discussing the historic funding from CEPI for our coronavirus vaccine candidate that we just announced a few minutes ago and provide a brief status on our activities around NVX-CoV2373. I'll then provide a recap of the positive Phase III results for NanoFlu that we announced back in March, following a quick update on our ResVax program. John Trizzino will then provide a financial overview. After that, Greg Glenn, John and I will be available for questions.

As a prelude to my remarks, I just want to say that our accomplishments so far in 2020, including our progress in our influenza and COVID-19 vaccine program, are the most impressive in the company's history. So let's get started.

Beginning with our coronavirus program, we are thrilled that CEPI has chosen to invest up to $388 million of funding in support of 2373. As CEPI's CEO indicated, this arrangement represents CEPI's single biggest investment to date. The CEPI funding will allow us to advance our candidate through Phase II. It will also support the rapid scale-up of the vaccine antigen and our proprietary Matrix-M adjuvant, the critical components of 2373. In addition, this funding will allow us to dramatically increase our large-scale manufacturing capabilities.

As we previously announced, we identified 2373, which will incorporate Matrix-M to enhance our immune response and immediately begin testing in preclinical studies. Our studies have shown that 2373 is highly immunogenic in animal models, including mice and nonhuman primates. High levels of spike protein-specific antibodies with ACE2 human receptor binding domain blocking activity and SARS-CoV-2 wild-type virus neutralizing antibodies were observed after a single immunization. In addition, the already high microneutralization titers seen after 1 dose increased eightfold with the second dose. It is generally accepted that high-titer microneutralizing antibodies are evidence that a vaccine is likely to be protective in humans.

We are now launching our Phase I/II trial -- clinical trial of 2373. In a few days, we will initiate a placebo-controlled, observer-blinded Phase I portion of the clinical trial in approximately 130 healthy adults in Australia. Key assessments include dosage amount and number of vaccinations. The Phase II portion of the trial will likely begin in Australia and the U.S. Importantly, we are just a couple of months away from human clinical data as immunogenicity and safety results from the Phase I are expected in July.

As I mentioned earlier, the additional funding from CEPI will have a significant impact on our ability to quickly begin manufacturing. It will now be possible for us to begin manufacturing the vaccine with a target of manufacturing 100 million doses by the end of 2020 and with a goal of escalating production to 1 billion doses in 2021. I should point out that these production goals are based upon two key assumptions. Those assumptions are regarding the actual dose of the approved product and the manufacturing yields that we actually achieve at large scale.

We previously announced an agreement with Emergent BioSolutions to provide contract development and manufacturing services, including supplying Novavax with GMP vaccine product for Phase I and Phase II clinical trials. We are also exploring larger-scale manufacturing capabilities globally. Details of those efforts will be forthcoming in the coming months. The significance of this funding cannot go understated nor can our appreciation for CEPI's vote of confidence in our technology platform and progress.

I'd also like to reiterate my thanks to everyone at Novavax. It has been an enormous undertaking to get this program up and running since January. But we have made immense progress in a very short period of time to make this vaccine a reality.

Now let's move on to Novavax's most advanced program, NanoFlu, our recombinant quadrivalent seasonal influenza vaccine. While COVID-19 has grabbed the world's attention, we believe that NanoFlu will also be a game-changer for the prevention of influenza. The Phase III data we delivered validates its potential. Given our detailed March update for the program upon announcement of the Phase III results, I'll just provide a high-level recap today.

To put it simply, we achieved every single one of our goals in the Phase III trial. The trial included 2,650 clinically stable adults, 65 years of age and older at 19 U.S. sites. It was randomized one-to-one between NanoFlu and Fluzone and subjects were given a single vaccination. The data we presented to date has been the 28-day results. The trial's primary objectives were to demonstrate noninferior immunogenicity of NanoFlu compared to Fluzone Quadrivalent using the day-28 ratio of geometric mean titers and the differences in seroconversion rates. Our primary objectives also included the overall safety of NanoFlu. We've measured immunogenicity by HAI assays using egg-derived reagents. We achieved the primary endpoints for all strains included in the vaccine. NanoFlu was well tolerated and had a safety profile comparable to Fluzone Quadrivalent.

The secondary endpoints were to evaluate the immunogenicity using both egg-propagated virus and wild-type reagents for all 4 vaccine homologous strains and select drifted strains at day 28. And for these endpoints, NanoFlu demonstrated significantly higher geometric mean titers in seroconversion rates than Fluzone Quadrivalent across all 4 strains included in the vaccine, and NanoFlu also demonstrated significantly higher geometric mean titers in seroconversion rates than Fluzone Quadrivalent for 4 drifted H3N2 strains, not included in the vaccine but circulating this year.

We believe this is validation of NanoFlu's ability to overcome issues related to egg adaptation and antigenic drift, which are major issues with current vaccines. We look forward to providing additional detail from the study in the near future, including the cell-mediated immunity responses, the T-cell responses and microneutralization data. We believe these data will differentiate NanoFlu from leading licensed vaccines. NanoFlu has fast track status from the FDA, and we plan to use the agency's accelerated approval pathway. We will conduct our required CMC activities in parallel with compiling the immunogenicity and safety portion of our BLA. We will communicate additional time lines once we have finalized our plan.

Before I turn the call over to John, a quick update on our ResVax vaccine. We continue to believe in our ResVax vaccine. We're the only company to have demonstrated potent efficacy in clinical trials in both the older adult population and by vaccinating pregnant women to protect their infants. While not meeting the prespecified primary endpoints for the Phase III trials, we observed that the vaccine had significant effects on hospitalization and pneumonia in both trials, which provides critical insights on the continued need for our RSV vaccine. We believe that we can design an affordable pathway to a licensed product over the coming years and are designing new clinical trials that we believe could take us to a licensed product. Now that we have a strengthened balance sheet, we will continue to invest in this program.

Now let me turn the call over to John.

Thanks, Stan. Today, we announced financial results for the first quarter of 2020. For the first quarter, we reported a net loss of $25.9 million or $0.58 per share compared to a net loss of $43.2 million or $2.11 per share in the first quarter of 2019. The reduction in net loss was mainly due to reduced R&D expenses.

Revenue in the quarter decreased 15% to $3.4 million from $4 million for the same period of 2019, and the decrease was primarily due to the completion of the Prepare trial in 2019, partially offset by revenue recorded from CEPI's funding. R&D expenses decreased 52% to $16.9 million in the first quarter of 2020 compared to $35.5 million in the same period in 2019. This decrease was primarily due to decreased development activities of ResVax, lower employee-related costs and other cost savings due to the Catalent transaction in 2019. G&A expenses increased, coming in at $9.4 million in the first quarter of 2020 as compared to $8.7 million for the same period in 2019.

As of March 31, 2020, Novavax had $244.7 million in cash, cash equivalents and restricted cash. Net cash used in operations for the first quarter of 2020 was $23.1 million compared to $50.6 million for the same period in 2019.

During this quarter, we further strengthened our balance sheet. In the first quarter of 2020, we raised $186 million in net proceeds. And from April 1 to May 08, we raised an additional $74 million in net proceeds for a total of $260 million since the end of 2019 through our ATM offerings. Novavax's cash position as of today is now in excess of $300 million.

That concludes my financial review. And now I'll turn the call back to Stan.

Thanks, John. We look forward to updating you on the Phase I clinical trial of 2373 in July. And with that, I'll turn it back over to the operator for Q&A.

(Operator Instructions) I'm showing our first question comes from the line of Michael Higgins with Ladenburg Thalmann.

Congrats with the CEPI funding. That's impressive, especially they had the biggest they've put out so far. Looking ahead a bit, trying to understand this ACT Accelerator, what kinds of margins you can expect? And do we look at anything already from Gilead's remdesivir and the discussions they're having with the investment community?

Yes. It's a bit early to predict margins at this point. We do know that we're going to be -- we expect to be producing at very large scale, and we should be able to have efficient production. We don't know the cost of that production yet and -- nor do we know the -- what the selling price is. So it's a new world out there in a pandemic setting. And my expectation is that we'll have reasonable gross profit, operating margins.

Another question would be, looking ahead to this summer, just a follow-up from 2 months ago on the last quarterly call, which is, once you've got data in July, can you talk a bit about the schematic stuff? If you can give us kind of an update as to how you roll into a larger study coming into the fall, does the IND stay open? Is it a separate study, separate sites? Obviously, you want to review the data before you can start moving forward, but it sounds like it's happening a bit of a rolling fashion. Can you give us kind of an update on that?

Greg?

I can jump in. Yes. So we'll be down under IND. The data we filed for IND, and when we see the Phase I data, we have written the protocol, so that we can pivot rapidly into a later-stage trial. Right now, we anticipate that, that will be a Phase II trial in the order of 2,000 subjects. However, there's a lot of discussion about how one might accelerate that. So we're doing our best just to be prepared with sufficient animal data and human immunogenicity data to take the next step. And you'll see -- you may have seen we announced that on Wednesday we're going to give a more detailed update on the COVID preclinical and steps -- next steps.

Yes. I noticed that. That's helpful.

Okay. Good. I'm glad you saw that. Yes.

And then last one, I'm sure it's a busy queue, just trying to get a sense for the global manufacturing. This is a heck of an update from the up to $10 million per month by year-end to $100 million by year-end '20, possibly billings next year. I would think it depends not just on the yield, as you mentioned on the call, but also securing access to manufacturers. Obviously, CEPI can help with that. But a lot of the folks that are involved with this, say, the top 5 globally, they've had a lot of press releases and comments out about securing other manufacturers. How confident can you be that you'll have enough ability to manufacture? Is that something that CEPI helps with, that WHO helps with? How do we kind of think about that?

So we didn't just start thinking about that. And so we've been working on it for a while. We have been very optimistic about our data. We've seen this before. We've seen it with 2 coronaviruses. We've seen it with the pandemic flu viruses. We've seen it with Ebola, where we get early clinical data -- sorry, early preclinical data, and that in mice that translates into nonhuman primates that translates into humans and then Phase I and Phase II trials with immunogenicity. We've got -- and of course, as you know, we don't have Phase I results yet. We bet a while ago that our technology would give us good data in Phase I. So we didn't wait. We didn't lose 6 months by waiting for Phase I data. We started on right away and are securing sufficient capacity to be able to make the statement that we made in this press release.

And our next question comes from the line of Mayank Mamtani with B. Riley.

Okay. And our next question comes from the line of Vernon Bernardino with H.C. Wainwright.

Congrats on this amazing achievement. I'm very curious, and that's because I'm very excited for your very large amount of funding that you got from CEPI, I was wondering if you could tell me how -- what exactly excited them the most as far as the vaccine programs out there to choose your program in particular? And as far as the candidates are concerned, you chose CoV2373, how many candidates did you screen? And what led to the choice of that particular candidate for going forward into clinical trials?

Thanks, Vernon. I'll answer the first question and let Greg answer the second part of the question. I think that they -- I think what got them most interested in our program was the fact that we have -- we are an experienced emerging infectious diseases vaccine company. Our platform has produced, as I mentioned in my last comment, has produced vaccines that have shown not only going to be responses in safety but efficacy in models -- in animal models and nonhuman primate models.

We've done -- in Ebola, we probably had the best immune response has ever gotten from a vaccine with our Matrix-M adjuvant vaccine. So I think it's the experience of that combined with the fact that our process has been scalable, we've done it with flu, we've done it with RSV. And so there's a -- we have a lot of confidence we can scale it. And I think when you ask me how do they -- when looking across the field, how do they compare it to others, I think there are a lot of other good technologies out there that just have not had the experience that we have. And so there's -- and both with immune responses and with scale. And so it's -- ours probably represents a fairly safe bet and the others are exciting, and time will tell.

Vernon, thanks for your support. Just to jump on this question. I think the hallmark of our vaccine is immunogenicity. It's very immunogenic, and we were able to construct some good assays to demonstrate that. And so I think that's good -- that was important. So as you asked, we actually I think had about 30 constructs we made in a short period of time. And we did evaluate them based on several factors. So stability, productivity, because we knew that a lot of doses would be required in immunogenicity. And I think when we look at our immunogenicity -- you may know this on Wednesday, we're going to provide some detail. We'll have a half an hour talk on our COVID program. You'll see our preclinical data. I think when they saw that, it is very compelling that the vaccine should work and be protective. So I think that combination, immunogenicity, productivity, stability of the construct, these are proteins that inherently can be unstable and the structure is really critical.

And I think it's a mature technology. We just completed a Phase III trial with the same kind of construct. It's a recombinant nanoparticle Matrix-M. We had very good results there. So I think all those things have come together. At this moment, we're very excited and grateful that CEPI stepped up to support us at this magnitude.

Great. I have two follow-ups on that, that are related. So one part of the deal is to increase production of Matrix-M adjuvant. What exactly is that for? And then, Stan, you mentioned that you saw high neutralizing antibody just after a single dose. Is part of the thinking in all this such that if you need only a single dose but you're testing, let's say, these are 2 doses, but because of Matrix-M, the availability of it, allows you to get away with a single dose, does that play into the whole thinking about the 1 billion doses by the -- in 2021?

Well, I think I'll let Greg respond.

Yes. I think we -- first of all, I think we're not seeing real limitation with the adjuvant supply. So our staff has worked very hard to make sure when you look at those dose numbers that it's not going to be limited by either. So it's a relatively simple process to make Matrix-M. It's a very good adjuvant.

We're going to look at this in the trial setting. As you note, after one dose, we get a very good response, we get neutralizing antibodies. And we see dose vary. This is a virus, however. It's highly infectious. It has a very tight binding to the human cell. So disrupting that is going to be very important. There could be a lot of merits in having really high neutralizing antibody, and we're going to weigh all those factors as we move into our late-stage trials. We'll have the data to look at that. And I think we have assays that are really meaningful. They're conservative in terms of neutralization. They're functional in terms of blocking receptor binding, and we think it gets to the heart of the critical nature of how this infection spreads. So we're going to take into effect all those factors, I think, for making the dosing decisions going forward.

(Operator Instructions) Our next question comes from the line of Mayank Mamtani with B. Riley.

Can you hear me, guys, now?

Yes. We can.

Okay. Finally, I got disconnected first and then you couldn't hear me. Congrats on the update. Very quickly, on the Phase I study design, I noticed that you are testing dose without Matrix-M adjuvant. So I'm just curious sort of what's the rationale for that, doing with and without Matrix-M? And also, as you think about the IgG antibody assessment, I'm just curious how do you think about what you learned from there about the other endpoints, the more core endpoints of geometric mean, these units and in others like seroconversion. Could you maybe talk to that?

Yes. That's a great question. So look, whenever you do a trial with an adjuvant with a new compound like this, you need to clearly demonstrate the adjuvant effect. So that really is important, and it allows you to compare and contrast the safety and immunogenicity. With our Ebola vaccine, which I think is a very good blueprint for the immune response we'll see here, we could see the adjuvant was critical, and that was important for going forward for regulators and of course public health and ourselves. So that's its role, it's to demonstrate the need for the adjuvant.

The different measures, they are kind of, if you will, orthogonal, looks at the immune response. The overarching response is a spike response. So we measure the IgG. Because people are immune-naive, we expect to have very high levels of seroconversion on the order of 99%. So that would be the norm here, and I think we're going to see that in our adjuvant -- especially our adjuvant 2-dose formulation.

And other assays measure different things. So as I mentioned earlier, receptor binding is the first event. It's an important event, if you can block that. It's a very high affinity event. So it takes a really good antibody, in our opinion, to block that binding. Neutralization is a different look. It's probably a combination of what you get from receptor binding blocking and some other epitopes, some other immune responses to the rest of the spike protein.

So when we look -- we look at all of them, they -- as you'll see on Wednesday, when we talk about this, there's a really nice relationship between all those immune measures, which make sense. And I think those different looks, the immune response really give us a lot of confidence that the vaccine should work.

Great. That's super helpful. And then on the Wednesday presentation, I'm assuming this is a combination of the nonhuman primate and the mice study that you talked about, any incremental color you could give on -- I think you said 30 constructs you tested in mice, but in the nonhuman primate, was it just 1 candidate you tested or...

Yes. Yes. We down selected -- by the time we got to nonhuman primates, we have generated a lot of confidence in the construct we made. So the nonhuman primate is the 2373 construct.

Okay. Great. And just final question on NanoFlu. Are there any alternative regulatory paths that become available, obviously, given the current environment beyond the ones you obviously have, like the fast track and the accelerated approval that are potential options for NanoFlu?

That's an interesting question. So right now, no, I think we expect to go through accelerated approval. We have an obligation to do a post-licensure efficacy study. I think we're on track for that. I think it is very, very good data. I think it's intriguing. There was a lot of flu. When COVID came around, it was really dominating, and it's going to be interesting. I think what COVID will do for flu is, we hope, generate interest in preventing this seasonal disease because every year, there's a large number of people that die from seasonal influenza and we need a better vaccine. So I think we have very good evidence we have a better vaccine going forward. So I think that's going to emphasize this COVID, this pandemic will emphasize the problem we see every year with an annual seasonal influenza vaccine.

And the issues we are addressing are the key issues, the drifted vaccines are not able to induce immune responses to recognize these drift strains and especially around H3N2. So our data looks very strong in that arena. And I think shortly, we're going to be able to show that the CMI data, and frankly, the Phase II data will be published shortly as well. So you'll see that. We think that's the missing arm of a good immune response to flu in older adults. And I think you'll see our vaccine, I think we've mentioned it before, really gives a very good and a specific effector cell response. And we think that's an important piece of the puzzle here going forward.

And our next question comes from the line of Vernon Bernardino with H.C. Wainwright.

One thing as far as the vaccine is concerned, you'll probably go into this at the world vaccine presentation, what is the actual amount of protein for the CoV2373 candidate that is actually being administered?

Yes. So I think we mentioned this before, we're using 2-dose levels in our Phase I trial, 25 micrograms and 5 micrograms. It was our experience with Ebola using similar levels that we were really at the top of the dose response S-curve. So 5 and 60, in that case, micrograms, were really no different in terms of immune responses. And so it's our expectation that's likely to be the case here. So obviously, 5 micrograms is a very nice dose variant. 25 micrograms is relatively low. But -- so we're just doing those 2 arms with Matrix. And then as you mentioned early on, without an adjuvant, there's control, so that's our antigen dose level. 50 micrograms of Matrix, 25 and 5 of the antigen, and we'll be giving that with 2 doses or we also have 1 arm with a 1-dose immunization with 25 and 50 of Matrix.

And as a follow-up, given sometimes the confusion of the symptoms as far as when you initially look at somebody who's infected with SARS-CoV-2 and people who are also infected with the flu, is there a potential to have actually a combination vaccine?

Well, yes. I think -- we think about that because our specialty is in respiratory vaccines, so it's got -- it has that potential. I think what -- we need to see where this will go. Many experts think this will become a common annual seasonal issue, and it would make sense to have a combination vaccine. It's certainly theoretically possible we could formulate the vaccine. It's the same platform. It's a nanoparticle. We're using Matrix-M in both those settings. So that's a good thought.

Because if it totally doesn't go away, conceivably, if you added it to a seasonal flu vaccine, then you're kind of taking care of both even -- and not really relying on the fact of SARS CoV-2 ever going away.

Yes. It's a good thought. It's good thought.

And I'm showing no further questions at this time. I will now turn the call back over to CEO, Stan Erck, for any further remarks.

Yes. Thanks. As you can imagine, we're euphoric in the company. It takes a long time. We've been working to be at this point for at least the decade that I've been at the company. We've had in the last 6 weeks, we've worked on a project that virtually everybody in respiratory vaccines have been trying to do, which is to get a better flu vaccine. Our goal is to get a differentiated flu vaccine, not be as good as the best flu vaccine but differentiated from that, and we accomplished that. And that alone was a big deal. And then coronavirus comes along, and we do what we've been doing for the last half dozen emerging infectious diseases. And we have a lot of confidence, and we're being supported by large groups of academic and nongovernmental organizations and I think corporations that will help us get to the point where we can help solve this problem.

So we're proud of the work we've done, and we're happy. We're finally getting recognized for it. And we look forward to reporting on data in a fairly short period of time. And thanks very much for listening in. And at that, I'll sign off.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating, and you may now disconnect.