Novavax Inc (NVAX) 2013 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to your Novavax, Incorporated third quarter 2013 earnings conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. (Operator Instructions).

As a reminder, this conference call is being recorded. I would now like to turn your over to your host for today's conference, Mr. Buck Phillips, Chief Financial Officer. Mr. Phillips, the floor is yours.

Thank you very much. Good morning. This is Buck Phillips, Chief Financial Officer of Novavax. I want to thank all of you for joining us on today's third quarter 2013 financial results conference call. Both the earnings release from this afternoon and an archive of the earnings call can be found on the Company's website at Novavax.com.

Joining me on today's call is Novavax President and CEO, Stan Erck; and Novavax Chief Medical Officer, Greg Glenn, as well as other members of our executive team.

Before we begin our 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 strategies 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.

Further information on the factors and risks that could affect Novavax's business, financial condition and results of operation are contained in Novavax's filings with the SEC, which are available at SEC.gov. These forward-looking statements speak only as of the date of this call, and Novavax assumes no duty to update such statements.

I will now turn the call over to Stan Erck, President and CEO.

Thanks, Buck. Good afternoon, everyone. Thanks for joining us today. In particular, thank you for joining us given that we have just had an investor -- analyst and investor update call last September, a month ago, where we spent a couple hours going through in some detail our clinical development plans. But there are a number of key items we would like to discuss with you today. And I will begin the call with a brief overview of recent developments, and then I will turn the call back over to Buck to go over quarterly financial results, and then we will be happy to take any questions that you have.

So first, let's get started with some updates from the RSV program that's in clinical development. So after reporting in July top-line data in elderly adults, we presented the details from the study in a poster session at ICAAC, which is quite possibly the largest infectious disease conference held every year, and we did that this past September. And also at the same meeting in a separate poster session, we were able to show very promising passive immunization data in the cotton rat, which is a relevant animal model, which demonstrated protection from the vaccine-induced palivizumab competing antibodies or synergist antibodies.

Also, last month, we begin our Phase II dose confirmatory study of the RSV-F vaccine in 720 women of childbearing age to further evaluate the product's immunogenicity and safety in the maternal immunization setting. And I am happy to be able to report that we have already completed enrollment of the study and we look forward to sharing data from the study with you in the second quarter of 2014.

I will point out that just once again we have enrolled a study, and this is a large study, in less than two weeks. We are quite good at study execution.

So regarding our pandemic influenza program, you will recall that in July we initiated a Phase I clinical trial of our H7N9 influenza vaccine. This is the virus that began circulating in China back in March of this year. Again, the trial was fully enrolled in under 10 days. And I want to remind you a couple of key facts about this vaccine.

So from gene sequence, from the date of gene sequence to first subject in was 91 days. We showed -- in parallel, in an animal efficacy challenge model, we showed 100% efficacy. We publish those data in the journal Vaccine, and the trial has been completed. The dosing and follow-up visits were on schedule and data is coming out this quarter. And we will announce the results later on this quarter.

So, finally, we also announced that we are moving forward to initiate new seasonal and pandemic influenza trials under the BARDA contract, and that BARDA had agreed that are pandemic influenza trial should use our H7N9 vaccine candidate and our newly-acquired adjuvant, matrix M. This is a big move forward for us. And I'm also pleased to report that we are continuing to work with BARDA on both of these trials, the pandemic and seasonal, and expect that they will both be launched in the first quarter of 2014.

Just to remind you that with the activities in late 2013 and 2014, these activities will drive substantial increases in revenue in 2014 versus 2013 because of the new activities in clinical trials.

So, in addition to advancing our pipeline, Novavax has improved its capital positioning significantly during the third quarter. In September, in advance of our analyst and investor day, we conducted a secondary stock offering and successfully raised net proceeds of $94.7 million.

And with that, I will turn the call over to Buck to review the third quarter 2013 financial results.

Thank you, Stan. Before I continue, please note that the financials I will be discussing here today reflect consolidated results inclusive of our July 31, 2013 acquisition of Isconova AB, now Novavax AB.

For the third quarter of 2013, we reported a net loss of $15.3 million or $0.09 per share compared to a net loss of $7.2 million or $0.05 per share for the third quarter of 2012. Novavax had revenue in the third quarter of 2013 of $4.8 million as compared to $5.8 million for the same period in 2012.

The decrease in revenue this quarter was primarily a result of a lower level of BARDA-funded clinical activity associated with the Company's seasonal and pandemic influenza programs as compared to 2012. This decrease in revenue was partially offset by $400,000 in revenue from Novavax AB in the third quarter of 2013.

In conjunction with the decrease in revenue, the cost of revenue declined to $2.3 million in the third quarter of 2013 compared to $3.8 million in the same period of 2012. Again, this decrease was related to the lower levels of activity associated with the Company's previously mentioned influenza clinical trials.

Research and development expenses increased to $13.9 million in the third quarter of 2013 compared to $6.6 million for the same period in 2012. This increase was primarily a result of increased costs relating to the Company's initiation of RSV and pandemic H7N9 influenza clinical trials as well as higher employee-related costs and approximately $1.4 million in R&D expenses consolidated from Novavax AB.

General and administrative expenses increased to $3.9 million in the third quarter of 2013 compared to $2.1 million for the same period in 2012. This resulted from higher professional fees, including those associated with the acquisition of Novavax AB and approximately $600,000 in G&A expenses consolidated from Novavax AB.

Net cash used in operating activities for the nine months of 2013 was $33.1 million compared to $15 million for the same period in 2012. The increase in cash usage from prior year was due to higher research and development spending, including the Company's RSV and pandemic H7N9 influenza clinical trials as well as increased employee-related costs.

As of September 30, 2013, the Company had $146.4 million in cash, cash equivalents and investments compared to $50.3 million as of December 31, 2012.

In the third quarter of 2013, we determined that our development plans required financing that would address the long-term capital needs of the Company. We did this in two ways. First, we raised $24 million in net proceeds at an average price of $3.07 per share through the use of our ATM facility early in the third quarter. Based on the strength in the stock price during that period and our assessment of institutional demand, we halted ATM issuances and close a public offering of common stock in late September, raising $94.7 million in net proceeds at $3.14 per share.

With these financings, we believe the capital at the end of the third quarter of 2013 will fund our very aggressive operating plan into 2016. For that reason, at this time we have no plans to issue equity through the ATM or through other forms of equity offerings for the foreseeable future.

With that, I will close my comments and turn the call back over to Stan.

Okay, this concludes our prepared remarks for the day. At this point, we will turn it back over to Doug, who is our operator, who can orchestrate the questions.

(Operator Instructions) Bill Tanner, FBR Capital.

Congrats on the progress. The questions I have may be for Greg Glenn. Is he on the line, on the call?

I'm here. How are you doing?

Excellent. Well, I had a couple of questions for you. Number one, for those of us who -- I know you presented at the RSV Vaccine Conference in Portugal. So for those of us who were unable to attend, it would be interesting or helpful if you could maybe give us -- not necessarily a synopsis, but just a viewpoint as to how the conference went, what the level of interest is in the space in general, and how your vaccine stacks up with some of the other -- with the other modalities that are being investigated.

Yes, great. So this was a conference, an international conference, focused on vaccine development of RSV only. So it was a very concentrated meeting. That means that it was well attended, it was packed. The sessions were packed. There were a lot of topics addressed from (inaudible) virus to epidemiology.

We had three presentations. The first was done by Dr. Gayle Smith, who is our head of research. He reviewed our approach to using the F protein as a vaccine and particularly how we have displayed the [SY 2], or Synagis palivizumab-like epitopes. And I think his talk was extremely well received. We have a compelling preclinical data set, a mechanism of action rationale for the vaccine antigen choice. I think it was extremely well received, as I said. And we followed that with a presentation on maternal immunization, which I did. And then Dr. Lou Fries provided a detailed presentation of the elderly data which we generated this year.

So with respect to maternal immunization, this is a modality to address RSV in the earliest months of life, since it is such a -- isn't really any other strategy impact, I would say, amongst the pharma companies and developers. There's clearly a consensus that this is the best clinical strategy to address the very young.

And then looking at this stage of the program, we are clearly many years in advance of any other candidate vaccine. So we were, again, presenting our Phase II data from a large trial, 320 subjects. We showed that we induced robust antibodies, functional antibodies and had a very safe vaccine.

So I think that was well accepted. And by the way, these presentations are about to be put up on our website in the next few days.

And then finally, Dr. Fries presented the data where we evaluated the RSV F vaccine in the elderly. And again, I think what is remarkable in all these trials is the consistency with which we are showing the immune responses to the vaccine; that is, the anti-F, the neutralizing antibodies and the palivizumab competing antibodies, which we think are very important.

So I would say, in general, it was extremely well received in terms of the data and the science. There were some other, I would say, interesting concepts. Most of them were quite early in development. And we were able to, I think, stand up well with some of the scientific and developmental criticism and questions that we had there.

I think we will shortly post all three of the presentations on the website. They have more detail than we provided at the analyst update, so I think it would be quite interesting and worth reviewing.

Great. And then a follow-up as it relates to the ongoing Phase II study, appreciating that it's far larger and that the Company is wanting to make sure that you got the appropriate dose. Is there anything incremental coming out of the data, do you think, or anything coming out of the data that would be incremental to the story just in terms of more confidence that you are on the right track? Or is this just basically going to be pretty much the data similar to what has been revealed thus far?

Well, we have a lot of confidence in our program. So I think we have three trials where you see the immunogenicity and safety perform or the vaccine perform in those arenas very consistently. So in this current trial, it's quite large. So in order for us to step into maternal immunization, we determined that we needed a large safety database. So we will see that in this trial.

And then we are answering some very important questions in terms of dosing regimen and use of alum dose. And together, that will allow us to determine at what stage of pregnancy and how many doses we will be providing immunizations so that we have a peak antibody response.

And I think one of the real step-forwards here is we will have detailed antibody kinetics. As you can imagine, what we would like to do is immunize in such a way that the antibodies peak, therefore the babies receive the maximum amount of antibodies that we can safely induce. And we have a very detailed set of sera assessments to do that so we can compute the area in the curve and provide the vaccine in the best dosage range.

So it really is a critical study because it will allow us to evaluate the correct dosing regimen and optimize the dosing going forward.

Okay, great, thanks very much.

Thomas Yip, MLV & Co.

With promising data from the RSV vaccine from both women of childbearing age and the elderly population, you have these two very susceptible populations. Can you please remind us of what is your next step for the RSV vaccine?

Yes. So with respect to covering infants through maternal immunization, our current plan is to begin the study in pregnant women approximately this time next year. There we will be immunizing in the third trimester based on the dosing regimen we determine from the current study.

And I think that study will be a very important landmark. First of all, we want to establish the vaccine's safe in this population. We have a lot of confidence that it will be. Then we will look for the level of palivizumab-like antibodies, neutralizing antibodies in the mother and in the baby. So we will be able to evaluate placental transfer of these functional antibodies to the infant.

And then, thirdly, I think we will be able to collect some data on the antibody kinetics. And so, as you can imagine, the baby will get a certain amount of antibody after birth that will no longer be supplied to the antibody from the mother, and so there will be a level of decay, a time over which the antibodies will go away. And determining that will be very important for us to determine the endpoints and the extent of the time duration of protection that we might expect. So that would happen -- we expect to start that trial, as I said, approximately this time next year.

With respect to the elderly, we were looking -- as this trial this trial was actually very important that we conducted and saw the results this year, we were looking for immune response that would give us confidence that we would elicit -- could elicit protection. Given that, that allowed us to then advance the program into what we see as the future for this vaccine, which would be to combine it with the seasonal influenza vaccine. So there, we would combine our late-stage VLP quadrivalent seasonal vaccine with the RSV vaccine. We intend to begin testing that vaccine in the second quarter of next year, and that is obviously a very important result. We expect to see those results towards the end of the coming year.

So that's our -- and our goal there, of course, is to supplant the current seasonal flu vaccine that's given to this population because the RSV itself, as you know, causes a great deal of pathology in elderly and high-risk adults. So there's approximately 180,000 annual hospitalizations due to RSV and approximately 15,000 deaths.

So it lines up very well with one of the influenza strains. And we think this will be -- we believe, after discussing this with many key opinion leaders, this will be a very important medical intervention to offer to this population. So in a nutshell, that's our plans with these two programs.

That sounds great. I just want to confirm -- so is the seasonal flu RSV vaccine combination trial only limited to elderly patients?

Well, that's a good question. So we know -- what we plan to do is to do this in healthy adults, in elderly adults. And this trial, by doing that, will provide us the safety data which will allow us to move into the pediatric population as well where we think, at least in the 2- to 5-year-olds, we can safely test and license a combination flu vaccine.

As you probably know, it's recommended that this population has a seasonal flu vaccine, and we would like to add RSV. RSV in this population continues to cause many outpatient visits. The hospitalization rates are lower, but the children suffer bouts of RSV, often leads to wheezing and ongoing wheezing. And we think there's a role for an RSV vaccine in the combination in this population.

So that would be our consideration, that we may start a pediatric combo trial. And we will make that decision after we have looked at the data from this upcoming trial in healthy adults.

I see, thank you very much. Thanks again for taking my questions.

(Operator Instructions) At this time I see no further questions in the queue. I would like to turn it back over to Stan Erck, President and CEO. Mr. Erck, please go ahead.

Thanks, Doug. So my hats are off to all of you who sat through both the analyst call for a couple hours and today. And we look forward to reporting to you on the results over the next quarter, in three months. Thanks. Bye.

Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program and you may all disconnect. Have a wonderful evening.