Novavax Inc (NVAX) 2014 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Novavax Q2 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 call is being recorded. I would now like to turn the call over to Mr. Buck Phillips. You may begin.

Good afternoon. This is Buck Phillips, Chief Financial Officer of Novavax, and I would like to thank everyone for joining today's call to discuss our second-quarter 2014 financial results. Today's earnings release is currently available on our website at Novavax.com, and an audio archive of this conference call will be available on our website later this evening.

Joining me on today's call is Novavax's President and CEO, Stan Erck, and Senior Vice President of Research and Development, Dr. 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 will change over time.

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

Thanks, Buck. Good afternoon, everyone. So we are now eight months into 2014, and I'm very pleased to tell you that the momentum we created in 2013 and in the first half of 2014 continues. In the second quarter, we delivered on a number of important clinical and corporate achievements, including significantly strengthening our balance sheet and delivering data from two important clinical trials using our RSV-F vaccine candidate. These successes set the stage for several important milestones over the remainder of 2014 and into 2015.

One of our most important accomplishments this year was the April announcement of the topline data from the Phase 2 dose confirmation clinical trial of our respiratory syncytial virus, or RSV, vaccine in 720 women of childbearing age. We discussed this data in detail on our last call, but Greg Glenn will provide a brief summary of these results as they support the maternal immunization trial that we will initiate in the next few months.

Also in the quarter, we announced positive one-year follow-up data from our Phase 1 study in elderly. Greg will provide an overview of this data, as well as a brief overview of the next steps in our RSV development plan. When Greg finishes, I will speak to the other corporate highlights and achievements during the quarter, as well as key anticipated events through the end of the year, before handing the call to Buck Phillips, who will go over the financials. We will then open the line to take any questions you may have.

So Greg, let me turn the call over to you to discuss our RSV program.

Thanks, Stan, and good afternoon. On April 28, we announced the topline data from our dose confirmatory Phase 2 clinical trial in women of childbearing age. While we did discuss these trial results on our last call, I would like to reiterate key findings and how they relate to our upcoming maternal immunization study that we expect to start in the next few months. This study was a randomized, blinded, placebo-controlled trial, designed to evaluate the immunogenicity and safety of multiple formulations of our RSV nanoparticle vaccine adjuvant with aluminum phosphate. The study enrolled 720 healthy women between the ages of 18 and 35, and they received either one or two IM injections with either two different dose levels of antigen and a range of doses of adjuvant. The highlights of the data include the RSV vaccine candidate was well tolerated with no vaccine-related serious adverse events, and the safety profile was consistent with other studies.

A single 120-microgram antigen dose generated palivizumab-like antibody levels of approximately 400-microgram per ML, the highest level seen in any of our previous studies. There were clear increases in both the RSV-A and RSV-B neutralizing antibodies that were shown across all dose formulations. The vaccine induced palivizumab-like competing antibodies also demonstrated strong concordance with our anti-RSV-F IgG antibody responses. This data was highly encouraging, and it served to inform the design of our upcoming trial of pregnant women, which we currently anticipate enrolling in the next few months.

This next study, which we refer to as M203, will enroll 50 women in their third trimester of pregnancy. It will be a randomized, blinded, placebo-controlled trial with the primary endpoint of safety for both the mothers and infants. Other endpoints will include immunogenicity and the transfer of the anti-RSV antibody induced by the vaccine from the mother to the infant through the placenta.

Additionally, we will estimate the antibody half life in infants. The data generated from this coming trial should provide a basis for moving the program into efficacy studies. M203 will be a very important study for the program and the Company, and we expect to initiate this trial, as I said, in the next several months.

Now, moving on to the one year follow-up data from the Phase 1 study of our RSV vaccine candidate in elderly subjects, that data which we announced in May, this was a dose-ranging placebo-controlled Phase 1 clinical trial in 220 elderly subjects, 60 years of age, with a mean age of 68. Subjects received a single injection of either 60 micrograms or 90 micrograms of the RSV-F vaccine with or without aluminum phosphate as adjuvants. Again, the positive topline interim safety immunogenicity previously released by Novavax in July of 2013 described antibody responses at days 28 and 56.

In the one year follow-up data, the group received a 90-microgram dose without adjuvant. The anti-F IgG levels and the palivizumab-competing antibody levels were significantly elevated over baseline at day 118 with geometric mean of 130 micrograms per ML and at day 180 with a geometric mean of 114 micrograms per ML. For this same group at day 180, anti-RSV-A neutralized the antibodies were a log2 8.8 and RSV-B neutralized the antibodies were a log2 9.0, both considered protective levels in seroepidemiology studies.

Since the RSV-C didn't last four to five months, it was important to see this follow-up data, which supports our vaccine, supports the concept that our vaccine could be protected across the full RSV season. But our data also suggests that, since protective levels are diminished by day 365, amnio boosts of our vaccine may be warranted.

Overall, these very encouraging results support continuing development of the seasonal elderly vaccine. We expect to initiate a larger Phase 2 clinical trial in the elderly population in the next several months. The outcome of this next clinical trial will determine the next steps, which may include moving directly into a Phase 3 trial. We expect to start this study in the fourth quarter of this year.

In addition to the maternal immunization study and the elderly study, we also plan to initiate our first clinical trial of the RSV vaccine candidate in the pediatric population. This will be the first clinical study of the vaccine in pediatric population, and the influence will focus on safety immunogenicity in an RSV zero positive population.

And, finally, I would like to point out that there are two preclinical data sets that will be presented at the upcoming ICAAC conference to be held in Washington, DC, between September 5 through 9. The first one is titled an Oral Presentation -- it is an oral presentation, excuse me. And the title is Immunization of Pregnant Baboons with the RSV Nanoparticle Vaccine protects infant baboons challenged with respiratory syncytial virus in a comparable manner to infants prophylaxis with RSV. This will be presented at the maternal immunization session.

And, finally, a poster will also be presented on the development and characterization of recombinant RSV nanoparticle vaccine-induced monoclonal antibodies.

With that, let me turn the call back to Stan. Thank you.

Thanks, Greg. As I am sure you can all tell from Greg's presentation, we remain excited about the data and the future of our RSV program. So let me reiterate, over the next six to eight months, we plan to initiate four different clinical trials in RSV. We plan to initiate our first RSV trial in pregnant women to demonstrate transfer of the antibodies to newborns. We will start our first RSV trial in the pediatric population in an effort to develop a vaccine to protect kids from six months to six years. A third trial will be an RSV Phase 2 trial in elderly patients. And, finally, for a combination RSV and seasonal flu product candidate, which we refer to as a penta variant respiratory vaccine, we plan to initiate a Phase 1 clinical trial in early 2015.

We also plan to initiate a Phase 2 trial with our quadrivalent seasonal flu influenza vaccine candidate in the fourth quarter, and assuming it's a successful trial, this should lead to a Phase 3 efficacy trial by the end of 2015. All told, we will initiate five separate clinical trials over the next six months with the expectation that we will release data from each of those trials throughout 2015.

Switching to our pandemic influenza program, as discussed on our last call, our Phase 1-2 clinical trial of our H7N9 avian influenza VLP vaccine candidate and our Matrix-M adjuvant technology remains ongoing. This trial enrolled 610 healthy subjects to evaluate the safety and immunogenicity responses to the vaccine with adjuvant. The trial is also evaluating three different dose levels of the antigen and two dose levels of the Matrix-M adjuvant. We continue to expect that topline safety and immunogenicity data will be reported later in this quarter. We believe this trial will lead to a dose confirmation trial in healthy and older elderly adults, followed by a Phase 3 immediate immunogenicity trial.

On a charge of corporate milestones, we closed the public offering in the second quarter, which raised $108 million in net proceeds. And I would also like to announce our 2014 analyst and investor meeting, which we will hold on September 23, in New York City. That meeting will be accessible via webcast to all investors, and we will provide more information on the agenda topics over the next few weeks.

And, with that, I will turn the call over to Buck to review our second-quarter 2014 financials.

Thank you, Stan. For the second quarter of 2014, we reported a net loss of $17.9 million or $0.08 per share. This compares to a net loss of $12.6 million or $0.08 per share in the prior year period. Revenue in the quarter increased to $8.3 million compared to $5.3 million for the same period in 2013. The increase in revenue is primarily due to a higher level of activity under our contract with HHS Barda, specifically relating to the ongoing US Phase 1-2 clinical trial of our H7N9 vaccine candidate with Matrix-M, as well as other preliminary manufacturing and preparatory work for our planned Phase 2 seasonal influenza trial which we expect to start later this year.

In addition, we recorded revenues during the quarter under our PATH contract relating to our recently completed Phase 2 clinical trial of our RSV vaccine candidate in women of childbearing age. Costs of government contracts increased to $5.1 million in the quarter from $1.6 million in the same period in 2013. The increase is directly related to the factors that led to increased revenue under the contract with Barda that I have previously discussed.

R&D expenses increased to $15.2 million in the quarter compared to $10.8 million for the same period in 2013. The increase in R&D expense is primarily due to continued growth in support of the RSV program, the influenza program, and others, as well as the inclusion of $1.6 million in Novavax AB R&D expenses in the 2014 quarter, which did not exist in the 2013 quarter.

G&A expenses increased to $5.8 million in the quarter compared to $4 million for the same period in 2013. The increase is primarily due to higher non-cash stock compensation expense of approximately $0.9 million and the inclusion of Novavax AB G&A expenses of approximately $0.6 million.

As of June 30, 2014, the Company had $208.8 million in cash, cash equivalents, and investments, compared to $133.1 million as of December 31, 2013. During the quarter, as Stan mentioned earlier, we significantly strengthened our balance sheet by raising net proceeds of $108 million in an underwritten public offering. As we discussed at the time, the new capital would enable the clinical development of the RSV vaccine candidate and the elderly indication in parallel with our maternal vaccination and pediatric indications.

In addition, the new capital will be used for general corporate purposes, which include capital equipment investments necessary to meet the manufacturing demands of our planned and future clinical trials.

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

Thanks. We will turn it over to the operator for a Q&A session now.

(Operator Instructions). Bill Tanner, FBR.

Thanks for taking the question, and congrats on the continued progress. One of the -- I guess, as we talk to investors about the story, one of the questions that comes up a lot is, as it relates to the maternal vaccination, a simple question is, why would women want to participate in this study that are pregnant. It is an experimental vaccine, obviously. So just wondered if you could address that maybe.

And then, also, perhaps, if you anticipate there being any enrollment challenges in the Phase 1 pediatric. And then, not to pin you down, just kind of a rough timeframe when we might see some at least topline data from both of those studies.

Good questions. So operationally, we put a great deal of effort into the execution of the maternal immunization trial. We're working with a number of academic centers. The groups that are conducting the trial are typically obstetric gynecologists. So they understand the importance of those conversations, and we are, of course, very careful in how we represent the vaccine. Because, at this point, we do not have any benefit -- any known benefit of vaccines for the patients. So that conversation in the informed consent studies is a very cautious conversation.

However, our investigators are experienced with this. I think I have mentioned before that because of the [pretusis] and influenza vaccines being given as maternal immunizations, there has been a great deal of work that has gone on in this arena, and we are able to take advantage of much of that work that has created the clinical structures that would allow us to do our trial.

So we are optimistic that we can recruit and -- but we are very aware of the challenges. We have spent a lot of time working on how to execute in this program.

So I think with the pediatric trial, the same type of conversation. So again, these vaccines are very carefully evaluated. We get a lot of good advice, both from regulatory authorities as well as investigators, and so we are very careful in those conversations. I think that data would be -- we are not really giving any guidance, but typically these trials would take about one year, and I think beyond that we haven't really provided any guidance on the RSV pediatric program in terms of results.

And just one last -- other question on the pediatrics. So it is a Phase 1, and obviously one of the goals would be to assess the safety. But, assuming that there could be some antigenicity data -- useful data that would come from that as well.

Exactly. It would be a safety immunogenicity trial. We will evaluate a limited number of dose formulations. So we will look at safety of the vaccine and immunogenicity of the vaccine. And this -- I should mention, in this population, it will be in RSV zero positive patients that will be prescreened to ensure they have some level of antibody to the RSV virus in advance. That would reflect the kind of population we have been working with in healthy adults.

Ed Tenthoff, Piper Jaffray.

So I guess I have a question with respect to the Barda contract and how that is developing and how the revenues are being recognized. We saw an increase in revenues in the quarter through the various funding sources. What should we be expecting from Barda in terms of helping to pay for the ongoing pandemic studies through data, and then even going into the seasonal studies, what expectation should we have there?

So the expectation is, as I think we have mentioned, the Barda contract is run on a cost plus fixed fee. So there is a profit margin and covers all of our costs associated with the flu development program. So you see it go up. That is a function of running a clinical trial, a Phase 1-2 trial clinical with H7N9. I think your expectations should be that the revenue numbers are going to continually go up. It will be bumpy because it ties to costs when we have clinical trials, but we're going to be starting a fairly large Phase 2 trial in the fourth quarter of this year that will continue into the first and second quarter of next year. And if that leads, presumably that leads into production of Phase 3 material in the middle of next year, which will lead to a Phase 3 clinical trial, which will further increase the revenue number fairly dramatically.

Okay. All right. So we should consider continued involvement from Barda for the funding of that program.

That is what our expectation is.

(Operator Instructions). George Zavoico, MLV & Company.

Buck, you mentioned something about manufacturing expansion from capital investments that need to be made. Because you are -- in preparation for all these trials, you are going to be making a lot of vaccines and a lot of different vaccines. So what capacity do you have now, and what capacity do you need to add for the clinical trials? And then, will you need to add more for commercialization?

I think it should be recognized that we are actually manufacturing a lot of product right now. As Stan said, we are starting a bunch of clinical trials here over the next number of months through the end of the year. So manufacturing is ramping up dramatically. We have great expectations for these programs, and we are looking forward into 2015 and, I think as was mentioned once or twice in our commentary today, we have a number of Phase 2 trials that could potentially position this Company for Phase 3 in late 2015.

That said, our manufacturing at scale would have to be positioned to actually handle those trials. It could be positioned for, as you know, the regulatory packages that would need to go along with those trials. So you should expect us to invest accordingly in order to keep an accelerated development path for the products that we have talked about today.

And, in that regard, if you do start the trials, assuming everything goes well, as I hope it will, in late 2015, as these trials typically are not necessarily all that long, let's just speculate that you do start a couple of these trials in 2015, you're probably done with them in 2016. You might be able to file an NDA. So conceivably, in the best case scenario, you may be able to launch something in late 2017 or early 2018. If that is the case, then are you beginning to plan for commercialization activities starting to plan to build out a sales force with the intent that you are going to do it on your own, or is there a possibility of partnering as well?

It is Stan, so yes.

Okay. Thank you.

So, actually, I announced at the last quarter that we added to our staff a Senior Vice President of Commercial Development, John Trizzino, who is a fellow with a lot of experience in launching and running sales forces for both vaccines and for RSV, for that matter, for (multiple speakers).

Yes. I know John well. Yes. That's right.

So that is in anticipation of having a commercial product. And so the answer is, we will be prepared to market it ourselves, but, clearly, if we are going to be a global product company, we will have partners who will help us market it in faraway territories.

Okay. Thanks. And then a final question, obviously, a lot of the focus is mainly in RSV. But you have got operations going on in Cadila in India, and you have developed some MERS stuff. Could you just briefly say if there is anything particularly newsworthy in any of these other programs of yours?

Yes. I think progress in India continues to be made. They are moving through clinical trials in both flu and rabies, as we have disclosed. Data looks good. We will be disclosing those data later this year or early next year. I think that the question about MERS, if you recall, and I'm sure you do, that we have an active program for paying attention to emerging viruses, emerging diseases, and making vaccines for them.

Last year, I think we had a watershed event when we were able to produce an H7N9 vaccine from date of gene sequence becoming available to first in humans in 91 days. At the same time, as we were doing that, we were developing a MERS vaccine candidate and collaborating with researchers at the University of Maryland to show -- to demonstrate that, in an animal model, the cows model, that we can stimulate high levels of neutralizing antibodies to MERS, and those data were published in April. And I believe, at least to our knowledge, this is the only data on a MERS vaccine that has been published.

Congratulations on that progress. Thank you very much. Look forward to a pretty steady stream of news reports coming up.

Kevin DeGeeter, Ladenburg Thalmann.

Just wanted to add my congratulations on the progress. Most of my questions have been answered. Just maybe one more and I apologize, maybe I missed this. Are you guys going to be presenting any data at the RSV meeting in November? And, just generally, maybe could you give us your updated thoughts on the competitive landscape?

Yes. I think that, as Greg mentioned, we will be presenting data at the ICAAC meeting in October. There are a couple of -- in September. Sorry. In October there are a couple of other vaccine meetings that we will be presenting data at and, as you can imagine, at the RSV meeting in November in Cape Town, South Africa, I expect that we will be very prominently represented there with data from elderly and women of child bearing age, presumably the start of enrollment of pregnant women trial, the start of a pediatric trial around that time period. A lot of preclinical data that Greg and his team have generated will be at that meeting and will be presented at that meeting. We will be very prominent there. We are the leader in RSV, and I think that will remain evident through that meeting.

Regarding our status, we feel as we have felt for the past two or three years that we maintain a fairly clear lead in terms of competitive edge on all of our three programs, as you hear from this presentation. We are not doing these programs in sequence. We are doing them in parallel because we have high confidence that our vaccine is going to work, and we are willing to make the investment, and we have the ability to do that to make sure that we are the first in all three areas.

(Operator Instructions). I am currently not showing any questions. I would like to turn the call back over to Novavax for any further remarks.

Okay. Once again, I want to thank everybody who participated, and I hope to be able to talk to you all in September at our investor conference and again three months from now on our next quarterly call. Thank you.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program, and you may all disconnect. Everyone, have a great day.