Novavax Inc (NVAX) 2018 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Novavax Third Quarter 2018 Financial Results Call.

(Operator Instructions) As a reminder, this call is being recorded.

I would now like to introduce your host for today's conference, Erika Trahan, Senior Manager, Investor and Public Relations.

Ma'am, you may begin.

Thank you, operator.

Good afternoon.

I would like to thank everyone for joining today's call to discuss third quarter 2018 operational highlights and financial results.

A press release of our 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 on today's call is Stan Erck; President and CEO of Novavax; and John Trizzino, Chief Business Officer and Chief Financial Officer.

Dr. Greg Glenn, our President of Research and Development; and Amy Fix, our Senior VP of Regulatory Affairs, will also be available for the Q&A portion of the call.

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.

I'll now turn it over to Stan to begin today's call.

Thanks, Erika.

Welcome to our third quarter 2018 earnings call.

In the third quarter, we continued to execute on all of our goals for our RSV and flu vaccine programs.

This puts us within 3 to 4 months from reporting data for both programs, the pivotal Phase III efficacy data for ResVax and Phase II data for NanoFlu.

With these data in hand, we will continue efforts related to submitting the very first marketing application for any RSV vaccine and are preparing to initiate a pivotal Phase III clinical trial for NanoFlu.

We have taken and will continue to take steps to prepare for the success of both programs, but more on that later.

First, let me remind you what we've accomplished this third quarter and earlier this year.

In our ResVax program, we started the year with results of an informational analysis of our Prepare trial that indicated that our vaccine was performing well in the first 1/3 of the trial.

That analysis told us that the level of efficacy in the first 1,307 children whose moms were given ResVax or placebo was somewhere between 45% and 100%.

And although we remain blinded to the specific point estimate, we continue to believe that any level of vaccine efficacy in this range would represent a historic breakthrough and would be licensable by the FDA and EMA.

Since then we have been carefully following and compiling the data for the remaining 2/3 of the trial participants.

And while we are not quite at the very end yet, we can look at the number of primary endpoints observed through Day 90, and while we can't know into which group these primary endpoints fall, we think the number of primary endpoints observed for the remaining 2/3 of participants looks very similar to what we saw in the first 1/3 of participants.

This is very promising to us.

Regarding trial execution, we finished enrolling the 4,636th pregnant mom representing the final enrollee in the trial in the second quarter and the final baby was born in July.

We closely monitor the infants through their first 6 months of life, and we now know when that 6-month period will be over.

We have initiated a massive effort of data collection and data cleaning in order to meet our commitment to have database lock and unblinding in the first quarter of 2019.

I'm pleased to report that this effort is going as scheduled.

My team and I have just returned from the 11th International Respiratory Syncytial Virus Symposium, which is a biannual scientific meeting that brought the global RSV community, including academic, government and industry, together to present updates on progress toward the development of RSV vaccines, monoclonal antibodies and antivirals.

As you would expect with the only RSV vaccine in late-stage clinical trials, Novavax had the spotlight with 2 oral presentations and 5 posters, all of which are available on our website.

Switching gears to our NanoFlu program.

You will also recall that we started 2018 with Phase I/II clinical results.

Data from that trial demonstrated significantly improved NanoFlu hemagglutinin responses as compared to the leading competitor vaccine in older adults.

These data were sufficiently robust as they merited publication in the New England Journal of Medicine last June, a rare occurrence for early stage clinical trial results.

We followed this trial with a meeting with the FDA, during which the FDA acknowledged and agreed that the accelerated approval pathway could be available for NanoFlu.

As many of you know, the accelerated approval pathway could allow Novavax to conduct a well-controlled Phase III trial designed to meet established immunogenicity endpoints against a licensed comparator with a commitment to conduct confirmatory post-marketing trials to demonstrate clinical effectiveness.

We plan to discuss the Phase II clinical trial data and the proposed Phase III study design and reach agreement on the use of accelerated approval with the FDA during an end of Phase II meeting in the first half of 2019.

And in September, we announced the initiation of our Phase II clinical trial of NanoFlu and I'm happy to now report that we completed full enrollment in October and are on target to unblind and announce top line data early in the first quarter of 2019.

So we're preparing for success.

And as I described in our last quarterly earnings call, we have initiated a number of pre-licensure activities that are critical to enable us to launch our products as soon as possible post-licensure.

These activities cover the following 4 areas: manufacturing quality, global regulatory discussions, pre-commercial activities targeting private and government payers and health providers and partnering discussions to help us leverage the infrastructure of Big Pharma and accelerate the process of setting up global manufacturing, distribution, sales and marketing.

So let me provide you with a brief update on each of these areas.

Manufacturing and quality.

Over the last 2 years, we have been working on process improvements with a focus on yield improvements.

For both of our programs, we have been able to increase yields by 5- to 10-fold over the levels of our early development.

These yield gains will allow us to manufacture our products to meet global needs for product launch and through the near future in our current GMP production facilities.

We're also confident that yield improvements of this magnitude should allow us to maintain gross profit margins that are similar to those generally found in the pharmaceutical industry.

Additionally, we are in the middle of a campaign for process performance qualification, also known as PPQ for ResVax.

PPQ data are required components of our marketing applications.

These data are needed to confirm that we have a validated manufacturing process capable of consistently producing vaccine at commercial scale.

And finally from a manufacturing perspective, we have requested and have been granted a meeting with the FDA this December to discuss our commercial manufacturing facility.

These manufacturing efforts provide assurance that we remain on track for submissions of our BLA and MAA in the first quarter of 2020.

In regulatory affairs, we have now had important and successful meetings with the FDA and with 5 major European regulatory agencies.

We discussed and reached agreement on details of the ongoing ResVax program, including requirements for the future centralized application with EMA.

We've also confirmed with the FDA the administrative requirements of our BLA, including the content and format of our clinical data sets.

These regulatory activities are being done well in advance of our submissions as part of our ongoing BLA and MAA preparation with the goal of submitting both applications in the first quarter of 2020.

With that in mind, we're now preparing for our pre-submission meetings with FDA and EMA that are expected to occur in the middle of 2019.

Commercial activities, we have a small core commercial group that has succeeded in several important pre-commercialization activities, including prompting the CDC's advisory committee to set up a working group for RSV so that they'll be ready when our BLA is approved.

They have also been working closely with payers and providers over the years to understand strategies for introducing our vaccines into the markets and have been developing branding and market communication strategies.

Partnering, we continue to have closed discussions with potential pharma partners on both ResVax and NanoFlu.

While we are confident we could launch both products independently, partnering with one or more of the large pharmaceutical companies with vaccine divisions will allow us to globally commercialize our products and mitigate the need for new investor funding through our product scale-up and launch.

So how do we manage all this?

As you've just heard, we have significant opportunities that come with a lot of heavy lifting yet to be done.

We're fortunate to have a very seasoned in-house team that has been with us through thick and thin for a long time.

We've identified several people within our organization who have taken on the responsibilities that will ensure that we get both our RSV and flu vaccines across the goal line in a timely fashion.

These folks have been working closely with me and the rest of my senior management team to get us where we are today.

And so I'd like to take a couple of minutes to mention a few recent promotions.

In quality, Jody Lichaa has been promoted to Senior Vice President of Quality Assurance.

In this late stage of development, I can't overstate the importance of our quality organization to the success of our product launch.

Jody has the experience and the vision to continue to lead that effort as we begin to scale up next year to make product for launch.

In manufacturing, Brian Webb was promoted to Vice President of Manufacturing.

Brian came to us several years ago after years of increasing responsibilities in Big Biotech and Big Pharma and is responsible for manufacturing all of our vaccines.

He is currently leading our efforts in scaling production for product launch for ResVax and for Phase III NanoFlu trials.

In regulatory, Susan Hensley has been promoted to Vice President, Regulatory Operations.

Susan is the operational lead for the overall BLA organization and set up all of our processing systems for electronic regulatory submissions, a complex job that requires that she systematically organize the work of multiple groups and departments.

And Kathleen Callahan has been promoted to Vice President, Regulatory Affairs CMC.

Kathleen has been the CMC lead on all of our development programs and continues to provide a strategic direction to our project teams as we navigate a multitude of CMC regulations.

And in commercial, Brian Rosen has been promoted to Senior Vice President, Commercial Strategy.

Brian joined Novavax with commercial experience in RSV and flu.

He has laid the groundwork for our public and private payer strategy, worked with the CDC to promote the formation of an AIC working group for RSV and developed the global analysis of the disease burden and economic impact of RSV.

And I also want to mention what we announced last week that we've been very fortunate to attract a new member to our Board of Directors, Rachel King.

Rachel is a very experienced and thoughtful biotech veteran.

She is currently CEO of GlycoMimetics and a member of the Executive Committee of BIO and sits on the Board of the University of Maryland BioPark.

Rachel's experiences in Big Pharma, venture capital and biotech companies will no doubt be invaluable to our board.

We welcome Rachel to the team.

I'll now turn the call over to John Trizzino.

Thank you, Stan.

Today, we announced financial results for the third quarter of 2018.

For today's call, I will focus on the key results for this quarter, but the 9-month financial results can also be found in today's press release.

For the quarter, we recorded a net loss of $44.6 million or $0.12 per share compared to a net loss of $44.6 million or $0.15 per share in the third quarter of 2017.

Revenue in the quarter decreased 7% to $7.7 million compared to $8.4 million for the same period in 2017.

The Bill & Melinda Gates Foundation grant revenue is directly related to operating activities in the Prepare trial.

And so therefore, this decrease in revenue is the result of completing enrollment of the Prepare trial in the second quarter of 2018.

Related to our net loss for the quarter, R&D expenses decreased 1% to $41.3 million in the quarter and G&A expenses increased 2% to $8.3 million in the quarter.

As of September 30, 2018, Novavax had $145.6 million in cash, cash equivalents, marketable securities and restricted cash.

Net cash used in operating activities for the third quarter of 2018 was $33.5 million compared to $44.2 million in the third quarter of 2017.

The decrease in cash usage was primarily due to receiving a $15 million payment under the BMGF grant in the third quarter of 2018, whereas no payment was received in the same period of 2017.

This concludes my financial review.

I'll now turn the call back over to Stan for closing remarks.

Thanks, John.

So by the time we speak again, we expect to be sharing our data from both of our ResVax and NanoFlu trials.

It's an exciting time for the company as you can imagine.

So we'll open it up and turn it back over to the operator.

(Operator Instructions) Your first question comes from Eric Joseph with JPMorgan.

Just a couple from my side on NanoFlu.

I guess, with the flu season sort of about to get underway, I'm wondering if you have any visibility on the types of strains that are taking root and how that tracks with NanoFlu coverage versus some of the commercial products?

And it looks like 5 different formulations are being evaluated in the Phase II.

Maybe just sort of elaborate on how the different formulations differ and whether there is any meaningful impact into how they would be produced or manufactured.

This is Stan.

So I don't have any insight into how the flu season is shaking out yet relative to what's the strains of the vaccine.

Greg, do you have anything on that?

There is nothing.

I think it's too early.

With regard to our trial, I think as we mentioned a while back, the strategy here is to get a formulation that we can take into Phase III.

We expect that a few of these formulations will work, but we had to accomplish a couple of things.

One of the things we had to accomplish was to show that our adjuvanted vaccine had an improvement over our adjuvant -- nonadjuvanted vaccine.

You have to show that when you add an adjuvant that it -- to the FDA that it has -- gives benefit.

Another is that we want to try a couple of different dose levels of our antigen in particular to see whether in the B strain, which is typically the least robust immune response, whether boosting the response -- boosting the antigen of B would take care of that.

And we'll find that out.

We looked at a couple of different adjuvant doses.

We've always gone with 50 micrograms.

We've boosted it up a little bit, and we'll see -- with the goal of picking the final product for Phase III from this trial.

Got it.

And when you say you hope to share data early in the first quarter of 2019, could that be at the J.P. Morgan Healthcare Conference in San Francisco?

Well, that's early in the first quarter.

So we can't promise that yet because we don't have the data.

So we're shooting -- we're targeting as early as possible in the first quarter.

(Operator Instructions) Your next question comes from George Zavoico with B. Riley FBR.

I was looking over the posters at the RSV International Symposium.

You really had a lot of information there characterizing your RSV vaccine.

And I wanted to ask you to put that into context of how your ResVax differentiates from other vaccines that are coming up in development.

I mean, you've got 3 different forms of prefusogenic, fusogenic and postfusogenic and you've characterized the epitopes on the vaccine, the kind of antibodies that are developed.

And help me understand how differentiated that is and how that might be prescient for the outcome of the maternal immunization trial.

George, this is Greg.

So thank you for taking a look at those posters.

I think we have ourselves some very good work there.

So in the last -- so we started our vaccine program about approximately 8 to 10 years ago.

And in the meantime, there has been a lot of work done on mapping of epitopes through the use of broadly neutralizing antibodies onto the F protein.

And then as you noted, there have been descriptions of several structures, including a pre-fusion vaccine, a post-fusion vaccine and then our vaccine.

So we took many of these monoclonal antibodies, we looked to see if those epitopes were on our vaccine, which they are.

And I think what we can say today is in addition to the palivizumab-like antibodies, which we have made quite a bit of -- paid quite a bit of attention to, there are other epitopes making other broadly neutralizing antibody sites that should neutralize the virus.

So what does that mean?

That means that we should be able to cover the F viruses both RSV/A and RSV/B very robustly with our vaccination.

There has been some debate about the most ideal constructs and maybe some claims that the pre-fusion form is the most ideal form.

And so we took those critiques into account, we made pre-fusion vaccines, we compared them head-to-head to our vaccine as you can see on those posters, and you can see we're quite a bit more immunogenic than the pre-fusion or post-fusion form.

So all that has, I think, again, reassured us that our construct is good, it's very stable, it's in a particle.

It makes strong and protective antibody responses.

And so I think in that setting, it was very important to carry that message to the rest of the field.

It was an important meeting.

The RSV meeting is a meeting held every 2 years, it gathers all the experts of the field.

And I think generally speaking, people are very, very enthusiastic about our program and looking forward to the data as we are.

Okay.

I had a question about -- one of the posters talks about feasibility evaluation very much related to the goals of the Bill & Melinda Gates Foundation in terms of formulating the vaccine to make it stable at 37 degrees.

And it looks like you've achieved that with this process, if I'm interpreting the poster correctly.

Yes, you are.

Yes.

So we have 2 posters actually that look at the stability of our vaccine.

I would say, that's a hallmark of the vaccine that we made is that we originally made it to be stable, because F protein, as you know, in its natural state is metastable.

There has been some product failure in the past because of the stability.

So we, I think, conquered that very ably.

And the one poster is for Blow Fill Seal, which is sort of a presentation format that's suitable for the developing world.

The Bill & Melinda Gates is funding development of that technology.

And the other poster was looking at some of the, what we think are key epitope on the surface of the F protein, and again, compare it to a pre-fusion form of the vaccine.

So when you heat it up, you can really -- our vaccine melting point is almost -- it's 95 degrees centigrade, which is almost boiling as you know.

So it's very hard to denature our vaccine, whereas a pre-fusion has a much lower melting point and it forms aggregates and so we showed that in the poster, one of the other posters.

So 2 very good posters reflecting what we know internally, that the stability of our vaccine is very, very good.

And as you know, that's really key for advancing it to commercialization.

But so what are your obligations now as far as the Bill & Melinda Gates Foundation?

And are they providing any more resources for you to be able to manufacture this using this Blow Fill Seal process to make it available to the third world and underdeveloped countries?

George, this is Stan.

So our agreement with the Bill & Melinda Gates Foundation is the $89 million is to fund us through Phase IIIs.

And we have a commitment to -- once we file the BLA is to follow-up with WHO and apply for prequalification, which is a process that is necessary to be able to distribute product in low-income countries.

There are some questions that will be opened once we get our efficacy data about what the proper presentation of the vaccine will be in low-income countries.

And our agreement with the Gates Foundation does not cover the cost of evaluating that formulation beyond what our standard formulation is.

So that will be a negotiation and it will be up to the Gates Foundation and WHO to help us determine what the best presentation will be so...

So the launch into the rest of the world is going to -- it's going to be a different formulation for the U.S. and Europe and so the launch in the rest of the world will be sort of [a bit later] problem.

Yes.

U.S. and Europe will be the same formulation.

Right, right, right.

But the rest of the world will not.

And the rest of the world could be, but it might not be.

We don't know yet is the answer to your question.

Presentation of formulation, different [vials].

Yes.

It will be -- sorry, John Trizzino is right.

The formulation itself, the active ingredient in the formulation will be the same.

If it goes into a prefilled syringe, a vial or something called the Blow Fill Seal will depend on what the world wants.

Okay.

All right.

By the way, I wish I went to the meeting, but I didn't.

I accessed the posters online and was taking a look at them, but it would have been nice to have been there.

I would have liked to have seen that -- seen all that.

It's a nice venue and it was a great meeting because as I pointed out in the presentation, we're the game right now as far as late-stage clinical data.

And are you -- when you mentioned you want to get launched as soon as possible after -- as we all hope it will be approved, how long of a window are you actually aiming for?

Can you disclose that?

It looks like almost immediate.

I think the answer, George, it's almost immediate.

And there is launch, we will be making product and putting it into inventory during the BLA review process.

And once it gets approved then we can launch, we think, probably immediately.

The question is uptake and uptake will be enhanced greatly through the process of ACIP recommendation because that's where your payers get recommended and that occurs 3x a year.

So depending on when the BLA gets approved, it will be 1 to 4 months before ACIP weighs in.

And if the timing is good, you will be ahead of either the northern or southern hemisphere RSV season.

Yes, that's actually, we don't -- you can't think of this as a seasonal vaccine anymore.

Our expectation is we're going to get year-round recommendation.

Remember, we're vaccinating a woman in week 24 -- 28 through 34, okay, and there's gestation, and the kid's going to be around for 6 months and so this is -- that season doesn't matter anymore.

Your next question comes from Ted Tenthoff with Piper Jaffray.

Can you hear me, okay?

Great, Ted.

I missed a little bit on the call jumping back and forth, but I just want to get a little bit more clarity about how this year's flu season is impacting development and the study, and [the submission] -- you're still on track for data in the first quarter of next year.

Ted, Greg here.

There isn't much going on in the flu season.

We designed the trial to -- as an immunogenicity trial to be conducted as far as possible outside of the flu season, the flu virus is circulating.

So right now we're really not seeing much in the CDC surveillance end.

We wouldn't expect it.

It will start soon, but we have our last bleed and it's outside the season.

So that is a good [timing].

That makes sense.

And we're still on track then for more data in the first quarter?

We are.

We are.

We're very, very much focused on getting immunogenicity as early as possible in the first quarter.

All right.

Good.

Excellent.

I'm also excited for the Prepare data coming up.

So thanks so much for the update guys.

Thank you.

Thank you.

And I'm showing no further questions at this time.

I would like to turn the call back over to Stan Erck for closing remarks.

Okay.

Thanks, everybody.

We're excited.

I hope that came across.

We're going to be talking publicly again in the not-too-distant future about our data.

So look forward to doing that.

Ladies and gentlemen, thank you for participating in today's conference.

This does conclude the program and you all may disconnect.

Everyone have a wonderful day.