Novavax Inc (NVAX) 2019 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Novavax First Quarter 2019 Financial Results Conference Call.

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

I would now like to turn the conference over to Erika Trahan, Senior Manager Investor Relations and Public Relations.

You may begin.

Thank you, operator.

Good afternoon.

I would like to thank everyone for joining today's call to discuss first quarter 2019 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 are Stan Erck, President and CEO of Novavax; and John Trizzino, Chief Business Officer and Chief Financial Officer.

Dr. Gregory Glenn, our President of Research and Development, 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 strategy and other financial and business-related matters, including expectations regarding revenue, operating expenses, cash usage and 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 turn it over to Stan to begin today's call.

Thanks, Erika.

In the first quarter of this year, we reported data from key clinical trials of our 2 late-stage programs.

In our ResVax maternal immunization trial, we reported the first ever efficacy data in a Phase III trial for RSV.

We said this before but it bears repeating, we accomplished this after 60 years of development efforts by the entire vaccine industry.

Additionally, earlier in the first quarter, we demonstrated for the second time in consecutive clinical trials that NanoFlu when compared to the best-selling flu vaccine in the older adult market is a differentiated, more broadly immunogenic flu vaccine.

These are remarkable accomplishments and reflect the importance of the Novavax recombinant nanoparticle vaccine platform and the value of our dedicated development teams.

So let's talk about the challenges lying ahead of us and what we're doing to address these challenges.

The immediate future of both our RSV and flu programs rely on interactions with regulatory agencies, which have been and remain very good.

First, let's talk about NanoFlu.

In a very large global market that cries for a better vaccine, we are now poised to bring a differentiated vaccine into a pivotal Phase III trial.

Since we announced results from the Phase II trial in January, we have been assembling all of our safety, immunogenicity and manufacturing data and preparing a briefing document to present to the FDA and in the Phase II meeting.

We expect that the outcome of this meeting will be an agreed upon Phase III pivotal trial design that utilizes the accelerated approval pathway to support future licensure.

If we get the green light that our Phase III trial design could be as straightforward as conducting a non-inferiority immunogenicity clinical trial against the license comparator, which is an efficient cost-effective approach to getting our differentiated seasonal flu vaccine into the U.S. market.

Turning to ResVax.

It should be no surprise that our investors as well as our current potential partners have all been waiting for us to provide clarity on the pathway and timing for product licensure.

That is exactly what we are focusing on.

Let me emphasize that we have remained -- we remain optimistic and we have a Phase III package including both safety and efficacy data that could support licensure.

We summarized our data at the World Vaccine Congress meetings last month and continue to believe we have achieved an important needed breakthrough for the field of pediatric infectious disease.

The good news is that we are getting the attention of regulatory agencies globally.

We have prepared and submitted briefing documents containing our data that provide these agencies with the full ResVax picture available today.

We have now scheduled meetings in May and June in the United States and 4 other countries with national regulatory agencies and additional scientific advisers and expect to come out of those meetings with a clear picture of our options.

Given the high burden of disease from RSV in infants globally combined with the data from the world's first Phase III efficacy trial of an RSV vaccine, we expect the discussions that we will have with regulators and KOLs globally will have a very high profile.

We will report on the outcome of our efforts in the third quarter.

Although my comments have been brief, all of the regulatory and planning activities that we said we would do are in process, and we expect to have multiple investor communications later this quarter.

Now I'll turn the call over to John to present a financial overview.

Thank you, Stan.

Today, we announced financial results for the first quarter of 2019.

A summary of our financial statements can also be found in today's press release.

For the quarter, we recorded a net loss of $43.2 million or $0.11 per share compared to a net loss of $46.4 million or $0.14 per share in the first quarter of 2018.

The decrease in net loss was primarily due to decreased development activities of ResVax, partially offset by decreased revenue under the Bill & Melinda Gates Foundation or BMGF grant agreement.

Revenue in the quarter decreased 59% to $4 million compared to $9.7 million for the same period in 2018.

The BMGF grant revenue is directly related to operating activities in the Prepare trial.

And so therefore, this decrease in revenue is a 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 20% to $35.5 million, primarily due to decreased development activities, including lower clinical trial costs of ResVax.

And G&A expenses were flat for the quarter at $8.7 million compared to the same period in 2018.

As of March 31, 2019, Novavax had $108.7 million in cash, cash equivalents, marketable securities and restricted cash.

Net cash used in operating activities for the first quarter of 2019 was $50.6 million compared to $66.1 million in the first quarter of 2018.

While we typically don't offer guidance on cash usage, we expect our cash used in operating activities to decrease for the subsequent quarters of 2019 as compared to the first quarter of 2019.

This is due to the timing of payments in the first quarter of 2019 as the Prepare trial expenses wind down this year.

Lastly, we've added $55 million to our cash position in the first quarter from our ATM and expect that this will give us more room to evaluate our regulatory pathway for ResVax.

This concludes my financial review.

I'll now turn the floor back to Stan.

Thanks, John.

To reiterate, Novavax team remains focused on advancing ResVax and NanoFlu in 2019.

We look forward to updating on our discussions with global regulatory agencies on pivotal licensure pathways for RSV and the use of the accelerated approval pathway for licensure of NanoFlu in the U.S.

I'd like to thank our shareholders for their continued support.

We look forward to updating you on our progress both in this quarter and throughout the year.

Operator?

(Operator Instructions) Our first question comes from Joel Beatty of Citi.

This is Shawn Egan on for Joel.

My first one, which countries have you -- do you have regulatory meetings planned for -- I heard the U.S., but I missed which other countries you have meetings planned.

Yes.

So right now, we've got regulatory meetings in Germany, in the U.K., in Spain and Sweden.

Great.

And then I have 2 other questions, one on ResVax and one on NanoFlu.

I'll start with ResVax.

So you've had a little bit more time to kind of digest your data.

As you're kind of putting together these briefing documents for the various agencies and you think about the different markets and geographies that ResVax could potentially be approved in.

Are there different data points that are more or less important for the different geographies?

Yes.

I think we've got Greg Glenn on the phone.

I'm not quite sure how to answer the question.

But go ahead, Greg.

Yes.

I think what we're after is generalizability of our data.

So RSV is a global disease.

It's both a temperate and tropical disease, so it really is a universal issue.

And our case, it would be that the signal we saw for efficacy would be generalizable.

So that's the basis we would -- we will attempt to get licensing.

And I think you asked a little bit about what we're emphasizing.

I think the -- in that context, you look at the all-cause effects, they're really quite profound and we have these effects that I think pediatricians would care about that is to prevent severe hypoxemia and hospitalization from any lower respiratory tract illness in infants really important.

We are -- we have begun to work with WHO.

And part of that dialogue is pathway to getting broad approval for the rest of the world as well.

So -- I think the point is that the data in our view is generalizable and that will be the case we make and the effects on the all-cause severe respiratory outcome is profound, and we think that will drive a lot of the interest in the vaccine.

Understood.

And then for NanoFlu.

I believe in previous calls you've indicated that in the discussions you've had with the FDA that accelerated approval could potentially be available for NanoFlu.

Can you discuss which criteria that were discussed that if met would make this pathway available?

Greg, you want to do it or me?

Yes.

Go ahead.

Maybe I can fill in.

I didn't -- I'm not sure of the full question.

Yes.

So it is just -- what you want to do is you want to be non-inferior to -- you compare to a licensed vaccine and vaccine has already been licensed and shown efficacy.

And there are [core list of] protections to try to compare yourself to and you go head to head.

You reach out 4 strains in your vaccine and you measure the immune response, and we show that we are -- it's a term I hate because I think we're better, but the term is non-inferior.

And so -- and that allows you to -- it allows you to get a licensed vaccine and then you make a commitment with the FDA that post licensure as you're marketing the product, you also commit to doing an efficacy trial.

And so you have actual efficacy data down the road, but it really accelerates the process of being able to sell or market a product, but it's nice to be able to do a clinical trial of the product in the market.

Yes.

We can refer you to the FDA guidance on accelerated approval in there.

So the actual mathematical criteria are based on the geometric mean titer ratios and 0 conversion and they have criteria.

And we can get you a copy of the FDA guidance on the accelerated approval to become more familiar with that.

Sure.

That makes sense.

Maybe I can be a little bit more clear.

Are there any criteria that had to be meet -- met in the Phase II studies in order for the Phase III program to be accelerated approval eligible?

Safety, of course, but there are no prespecified end points that had to be met to get a win there, so -- but it's our view the data will support a Phase III trial.

So the process right -- Okay.

The process right now, to be clear, is we've asked for clarity on accelerated approval pathway and we expect an answer to that very soon.

And then we will file an end of Phase II data package, which should get us a meeting, a face-to-face meeting with the FDA in July.

And that's the point at which we would reach agreement on the Phase III trial design, so that we can start in September or October.

And our next question comes from Kevin DeGeeter of Oppenheimer.

Just a few more questions for me.

With regard to how you think about communicating the outcome from these multiple regulatory discussions, do you envision at least with regard to ResVax completing each of these regulatory discussions before providing an update with regard to FDA?

Do you need to see the minutes before you want to provide some sort of feedback?

I'm just wondering if you could provide just some granularity that might help us [book end] on how to think about the time lines?

I'm sure we will want as much granularity as possible and that depends on how -- what the dialogue is and the meeting.

Well, the meetings are all within -- initial meetings are all within 1 month of each other.

And so we'll be getting various different opinions.

And we haven't decided whether we will -- we would announce one before we have the rest of them.

I think it may be that we'll assemble data from the 5 of the conversations and say this is what we think we're hearing, and this is the pathway that we think we'll take to licensure.

So there's not going to be...

And with regard to the presentation, Stan, I guess next week, European Society of Pediatric Infectious Disease (sic) European Society for Paediatric Infectious Diseases] at a high level, should we anticipate a demonstratively different part of the data than we thought few weeks ago or will that cover a lot of comparable ground?

I think it's going to cover a lot of comparable ground.

And every week, something new comes up.

But I think you'll cover a lot of comparable ground that will focus on the efficacy that we receive, the particular efficacy that we've got for the more severe forms of RSV, the more important from a medical standpoint.

And a couple of thoughts on why there was an imbalance between the trial outcome in the U.S. and trial outcome in the rest of the world.

So those are the types of things we'll cover.

I don't think it's going to be startlingly different.

We do have a little more time to present it, so you always get a little bit more data and -- so -- but not to say there won't be exciting presentation, Kevin.

Sure.

That will be great.

Okay.

Perfect.

And then just 2 more real quick ones, if I may.

First just a housekeeping item.

Can -- John, can you comment on current share count?

Current outstanding shares?

Yes.

469 million.

Yes, 469 million.

Current outstanding shares after we -- kind of work me backwards from the $55 million you raised off of the ATM into an incremental share issuance number?

Yes.

So we had $55 million raised on 84 million shares.

And so total now outstanding shares is 469.5 million shares.

Perfect.

And then just lastly, with regards to your very strong relationship with the Gates Foundation -- yes, how should we think about a time line for potential updated scope of ongoing work under that relationship.

They continue to provide meaningful financial and nonfinancial support to the RSV program.

I guess sort of under the currently defined work plan, sort of, how -- what sort of the duration of work to be completed and when or what might the criteria be to define a new or expanded work plan?

Well, as I have said in the past and as you know, the Gates Foundation thinks that we have clinical trial data that fits their mission and meets their needs.

It's infant mortality in low-income countries the vaccine works.

So how to get a license?

And so I think we are putting -- we are working with them to put our heads together to define what a pathway to licensure would be just for low- and middle-income countries such that we will get WHO prequalification.

And we're laying out that pathway now.

And if it deems that, that is a reasonable pathway with a reasonable cost and a reasonable time point that allows us to get the product into mothers -- pregnant mothers in handful years or less, then I think that we could expect that the foundation will push us to do that.

And that's a good thing.

And our next question comes from Michael Higgins from Ladenburg Thalmann.

A couple, and then I'll get back in the queue.

First on NanoFlu.

Should we still look for the 56-day and 180-day data this quarter?

And when we do see that, what are the most important things that you want to see in this longer term data versus what we've seen before?

Greg, are you still with us?

Yes.

So what we've done with the day 56 here is look at the ATI responses, which is -- by using 2 assays, the egg-based assay what the FDA will be judging us on in terms of immunogenicity and VLP which is an assay that uses recombinant proteins and we think reflect -- mostly reflects what happens in nature and what we need to protect against.

And also, we will confirm that with the use of microneutralization and that is another type of assay that is a functional assay.

So that data together we think is going to be important and we need to show that the responses are persisting.

We're in the process of submitting abstracts to high-end meetings to present that data in full.

So I don't think at this point we're ready to go through that information to the assays you'll see data from.

And again, the -- just to be clear though, generally speaking, the accelerated approval will be based on Day 28 immunogenicity comparison to licensed comparator.

And that, of course, compares that you making titer ratios and the 0 conversion.

I think we mentioned early on the call that those criteria for success in those trials are outlined in the FDA accelerated approval guidance, so we can (inaudible) what's in there.

Okay.

That's helpful.

So it sounds like we'll see that data this fall.

Is that fair?

Sounds about right.

We haven't announced the schedule or the meetings, but we are ...

Okay.

We're kind of losing you there, but happy to have you on the phone, nonetheless.

And from the Phase II, is it this fall that we look for more information on how NanoFlu looked against the commercial tetravalent flu vaccine.

That's about right.

I don't know, Stan or John, you want to chime in on the timing?

On the Phase III?

Yes.

So I think we're somewhere...

No.

No.

Phase II.

Late September, early October.

And conference is on like...

No.

That's start of the trial.

So here's the trial.

Trial -- vaccinate people on day 0. You draw blood 28 days later and then you run the assay.

You collect and run the assays.

So you won't get data until the first quarter.

Right.

The data from the Phase II against the commercial tetravalent flu vaccine.

Oh, sorry.

(inaudible) named, I believe.

Yes.

That was late September.

We published high level on that.

Are you asking when we're going to publish detailed data?

Yes.

Right.

When we're going to see some more information on how it looked against that commercial vaccine.

Okay.

Well, I think we gave the high level in our press release.

And Greg, you're going to have to...

Yes.

I just think we're submitting abstracts and that's about the right time frame -- I think September-October time frame for that information.

We talked about in detail.

We also feel that it's worthy of a high-end publication.

The timing of those submissions and acceptances are kind of hard to predict, but that's -- I think that's our plan.

So abstracts for high-end scientific conferences, submission of the data.

And we -- at this point, I don't have a specific conference to which we have -- we'll have the data at this point, but it's good data.

And I think we're very excited about the program.

And I think the fact that we think that this can move into an accelerated approval is a sign of what we think of our data.

Right.

Okay.

All right.

That's very helpful.

It sounds like we'll have some news flow this summer on ResVax and the fall it picks up again with NanoFlu.

Just one last question or 2 here.

Can you give us an update on cash runway?

And then one last follow up after that.

So Michael, we don't give specific guidance on cash runway.

I think we've indicated in the formal script that we expect to see cash used in the business decrease over the coming quarters off of $108 million of cash we have on hand today.

So I think $109 million.

So I think that's about as much guidance as we intend to give at this point.

Okay.

Fair enough.

And Stan, I believe you noted in your prepared remarks you're expecting to have several investor communications this quarter.

I assume that's on ResVax.

I expect to have investor communications on both ResVax and flu.

And our next question comes from Eric Joseph of JP Morgan.

This is Turner on for Eric.

So I just was curious on NanoFlu.

It sounded like previously you get feedback from FDA in the second quarter and maybe you got pushed back to the third quarter now.

So I was, one, wondering is there any reason as to why?

And then, number two, does that potentially impact the planned start of the study?

And then I suppose, is there any importance to starting the study in the fall ahead of the flu season?

Or if it's delayed, would that potentially be -- impact the potential results.

Yes.

Well, if it were a delay, it could impact the results.

But I don't think there'll be a delay.

We -- I think we have said previously that we will be filing the Phase II and Phase II package for the meeting.

There's a statutory 7 days that the FDA has to have the meeting.

I think we said it will be June-July, which covers over both quarters.

I think it's more likely that it'll be a July meeting, so the third quarter versus second.

So it's not a dramatic change.

And yes, it is in plenty of time to allow us to execute the clinical trial in September-October time frame.

And our next question comes from George Zavoico of B. Riley FBR.

Just following on from that last question regarding the FDA and ResVax and NanoFlu.

Is that going to be 1 meeting or you're talking about both vaccines, so you have to do separate meetings for -- one for ResVax and one for NanoFlu?

No.

Separate, various separate meetings.

Okay.

And with regard to NanoFlu, the non-inferiority, does it have to be non-inferior for all 4 strains or not?

Yes.

That's our expectation.

And although I believe that there was a vaccine approved, where 3 out of the 4 were not inferior and 1 was inferior and got licensed, so...

So there maybe a little leeway.

There is.

Okay.

And with regard to the -- well, you mentioned about the Bill & Melinda Gates Foundation.

It implies that there might be a different path for registration in the low- to middle-income countries versus U.S. and Europe and the wealthier Asian countries.

Is it possible that, that might happen.

That you might see this flu -- the ResVax vaccine approved with the backing of BMGF earlier than in Europe, supposing you have to do a Phase III.

We are on all cylinders running in all countries high income and low, middle.

And we want to see what we're going to get.

And so we don't think it's a bad thing to introduce a product in a large population markets.

The price will be very different.

But with the backing of Gates and others going there, I think for -- if nothing else, it gets the product where it needs to be to save lives.

And number two, I think it will demonstrate maybe -- may help push along in the high income countries that are reading of how the vaccine is working, so -- I think there's no negative thing about going into a low, middle income country, particularly...

I wasn't implying that.

I agree with you completely, getting into market no matter where is a good thing.

I was just wondering if that scenario was a possibility and...

Yes.

The answer is yes.

Regarding the registration packages you're sending to the regulatory agencies, it sounds like pretty much you can just copy the same one to all of them as you implied that this is not a whole lot of difference in what your -- and what message you're trying to get across regarding the efficacy of the vaccine.

But the one difference may be that -- in the EU, for example, you didn't take the alpha hit there for the informational analysis.

So as far as the EU is concerned, it's a successful Prepare trial.

Is that correct?

And are you just going to go straight to registration -- possibly go straight to registration there without having to talk about another Phase III trial.

That's the question we're going to ask, but you're right.

And in fact, we'll go -- we plan on going back to the U.S. and asking them to revisit that issue as well.

So we're going -- these are all legitimate questions for us to ask.

I don't think there's anything that's cast in concrete.

This is -- as I try to emphasize, this is a huge global healthcare problem.

Nobody has been successful with any Phase III efficacy trials.

They haven't gotten into a Phase III efficacy trial.

And we've demonstrated efficacy.

And above all, we've demonstrated safety.

And there's no safety benefit ratio -- there's no issue of safety.

So any efficacy is a plus.

And we're very confident going into these places.

And I think it will make -- we'll make them think twice before they take a non-thoughtful pass -- pathway to thinking about approval on what we need to do further.

So that wasn't a very elegant way of saying it, but we think we have a licensable product.

And finally, I have a question about your share count.

I mean it's well over 450 million now and you're new trading under $1.

You've been there for a couple of months now.

With regard to any sort of reverse split or anything like that, any plans for that?

You haven't been there, but -- and you could have some significant results coming in, decisions by the FDA that could bring you back over $1.

So are you thinking of that or going to wait?

In fact, you missed an 8-K that we filed.

So we are doing a reverse split.

It will happen on May 8 and we decided we didn't want to have to deal with -- we want to be so focused on all of these opportunities we have on flu and RSV that we didn't want to be dealing with anything with NASDAQ, so we took -- bit the bullet a while back and said we're going to do a reverse.

And so we're doing a big one.

So it's 20:1, 1:20 and it will take us completely out of that ballpark.

I mean NASDAQ gives you a leeway there for several months, at least a year, I think, right?

They give you 6 months.

6 months.

There's no reason not to do it.

I'm now convinced that a non -- the guess is split most of my career and I'm now convinced -- most people will talk about companies who do a reverse, typically go down following the reverse.

It's not universally true.

And I believe that most of those companies continue to go down because they're trying to solve a problem when a company didn't have a bright light ahead of them.

We have 2 late-stage clinical products that have efficacy data that have strong data.

And we think that this reverse split will only help us get back to the investor base for the money.

In addition to available shares to -- that would allow us at the right time to make an additional raise, George.

And also there's some important dates for kind of Russell rebalancing that's coming up that's important to who's holding our stock.

So for those 3 reasons, we thought it was the right time to make the decision to do the reverse split.

So it wasn't simply based upon being below $1 because you're absolutely right.

You have at least 6 months to cure that.

But for these 3 reasons collectively, it was important for us to make this move now.

I see.

So basically, you want to get this part out of the way by May 8 you said and then concentrate just solely on ResVax and NanoFlu and not worry about any sort of...

That's exactly right, George.

Yes.

And if there are any fluctuations, you'll take the hit and hope -- plan for positive results giving you the rebound.

Well, yes, let's be very clear because I think we don't expect to take hit.

I think this move is important for the shareholders -- shareholder value.

It's important for the company, our ability to raise additional funding to support ResVax and to support NanoFlu and also I think important for positioning with the institutional investor community.

So I think for multiple reasons, it's important for our overall strategy and what we're trying to do for the balance of the year.

And ladies and gentlemen, this does conclude our question-and-answer session.

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

And I'd just like to -- sorry, I guess I don't have any closing remarks other than the fact that we're looking forward to talking to you more during this quarter about the events that we believe we got on our plate right now, so thanks and thanks for sitting through the conversation.

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

This concludes today's program.

You may all disconnect.

Everyone, have a great day.