Novavax Inc (NVAX) 2019 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to Novavax Third Quarter 2019 Financial Results Conference Call.

(Operator Instructions) I would like to hand the conference over to your speaker today, Erika Trahan, Senior Manager, Investor and Public Relations.

Ma'am, please go ahead.

Thank you, operator.

Good afternoon.

I'd like to thank everyone who has joined today's call to discuss our third quarter 2019 operational highlights and financial results.

A press release announcing earnings is currently available on our website at novavax.com and an audio archive of this conference call will be available on our website later today.

Joining me 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 be available for the Q&A portion of the call.

Before we begin with prepared remarks, I need to remind you that we will be making forward-looking statements during this teleconference that could include financial, clinical or commercial projections.

Statements relating to future financial or business performance, conditions or strategy and other financial and business-related matters, including expectations regarding revenue, operating expenses, cash usage in clinical development and anticipated milestones are forward-looking statements within the meaning of the Private Securities Litigation Reform Act.

Novavax cautions that these forward-looking statements are subject to numerous assumptions, risks and uncertainties, which change over time.

I'll now hand it over to Stan to start today's call.

Thanks, Erika, and welcome to our third quarter earnings call.

In the third quarter, we focus on our 2 core vaccine programs, and I'm pleased to say that we've made important progress in both.

So starting with NanoFlu.

As we discussed last quarter, we reached agreement with the FDA on the design of our Phase III clinical trial for NanoFlu.

We also agreed with the FDA that these trial results will be considered pivotal data for purposes of licensure.

With these understandings in hand, we focus our activities on conducting the pivotal Phase III clinical trial to evaluate the immunogenicity and safety of NanoFlu, co-formulated with our proprietary Matrix-M management in healthy adults aged 65 and over.

In October, we initiated and completed the enrollment of 2,652 healthy older adults across 19 U.S. clinical sites for this Phase III clinical trial.

Trial participants received either NanoFlu or the licensed comparator, Fluzone Quadrivalent, both of which contain the 4 influenza strains recommended for the 2019, '20, Northern Hemisphere influenza season.

Participants are being followed for approximately 1 year after injection.

However, the primary immunogenicity analyses are made on Day 28 sera samples.

The trial's primary objectives are to demonstrate, one, safety; and two, noninferior immunogenicity of NanoFlu compared to Fluzone Quadrivalent as measured by HAI titers.

Thanks to the hard work of the Novavax team over the last quarter, we are in a position to deliver top line data from the study in the first quarter of 2020.

I'd like to take a moment to note that there -- that the strategic value of Novavax has been significantly reinforced by the recent presidential executive order issued in September, recommending the modernizing of the influenza vaccines for the benefit of national security and public health.

We think this executive order is a culmination of years of growing concerns raised by public health advocates about the current state of influenza vaccines.

NanoFlu, which is a non-egg based vaccine formulated using recombinant nanoparticle technology and, combined with the safe and potent adjuvant, has all the characteristics of the better flu vaccine mandated by that executive order.

Clearly, we believe positive top line data from our NanoFlu Phase III trial to generate significant value for Novavax and its shareholders.

The completion of this trial is, therefore, the key objective and focus of our team.

Successful top line results would support a subsequent BLA here in the U.S. using the FDA's accelerated approval pathway.

The importance of this opportunity cannot go understated.

Accelerated approval provides us with a pathway to efficiently and cost effectively complete the pivotal Phase III clinical trial of NanoFlu and move forward towards commercialization.

Again, we look forward to reporting our data by the end of the first quarter.

Now turning to a brief progress report on ResVax, our vaccine for the prevention of RSV in infants via maternal immunization.

As we have reported, the European Medicines Agency and the FDA have both recommended that Novavax conducts an additional Phase III clinical trial to confirm the efficacy we observed in the Phase III trial data we reported earlier this year.

Novavax is in continuing discussions with both global regulatory authorities and with potential partners to explore the opportunity to bring ResVax to market globally.

We presented additional safety, efficacy and safety findings from the program at the Infectious Disease Society for Obstetrics and Gynecology Annual Meeting in August and at the World Vaccine Congress Europe last week.

The presentations included new observations based on the recently completed analyses of the 1-year safety data, including a 56.9% reduction in the incidence of serious adverse events diagnosed as pneumonia, with confirmation by chest x-ray, which extended through the first year of life.

The strength and duration of this effect exceed the direct benefits of the RSV intervention and represent the potential for various significant benefits to global public health.

Finally, before I turn the call over to John, I want to note that the Novavax-Catalent deal we detailed last quarter closed in the third quarter.

As a quick reminder, Catalent purchased Novavax's manufacturing equipment and related assets for approximately $18 million, assumed the property leases to 2 Novavax product development and manufacturing facilities and hired approximately 100 of Novavax's manufacturing and quality employees.

I am pleased to say that Catalent has begun to provide process development and manufacturing services for our programs and completion of this agreement has reduced our burn rate, while allowing us to maintain the necessary resources to execute on our business strategies.

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

Thank you, Stan.

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

A summary of our financial statements, including 9-month results, can also be found in today's press release.

Before we start, I would like to remind everyone that effective May 10, 2019, we completed a reverse stock split of our issued and outstanding common stock at a ratio of 1 for 20.

Share and per share information have been restated to reflect the reverse stock split.

For the third quarter, we reported a net loss of $18 million, or $0.74 per share, compared to a net loss of $44.6 million, or $2.33 per share, in the third quarter of 2018.

The reduction of net loss was mainly due to decreased development activities for ResVax, partially offset by decreased revenue under the Bill & Melinda Gates Foundation grant agreement.

Also, the third quarter net loss in 2019 includes a gain of $9 million recorded as a result of the Catalent transaction.

Revenue in the quarter decreased 68% to $2.5 million from $7.7 million for the same period in 2018.

Again, this decrease was driven by the completion of enrollment of participants in the prepared trial in the second quarter of 2018.

R&D expenses decreased 55% to $18.6 million in the third quarter of 2019 compared to $41.3 million in the same period in 2018.

This decrease was primarily due to decreased development activities of ResVax, lower employee-related costs and other cost savings due to the Catalent transaction.

G&A expenses decreased slightly, coming in at $7.9 million as compared to $8.3 million for the same period in 2018.

As of September 30, 2019, Novavax had $75.9 million in cash, cash equivalents, marketable securities and restricted cash.

Net cash used in operating activities for the first 9 months of 2019 was $112.9 million compared to $139.6 million for the same period in 2018.

Regarding our cash needs, we expect our cash used in operating activities to continue to decrease in the second half of 2019 as compared to the first half of 2019 due to the Catalent transaction, including a reduction in salaries due to the transfer of employees, assignment of facility leases and as prepared trial expenses continue to wind down the balance of this year.

This concludes my financial review.

I'll now turn the call back to Stan.

Thanks, John.

It's an exciting time to be part of this company, and we look forward to updating you on our progress as we close out 2019 and transition into 2020, especially with regards to NanoFlu as we anticipate Phase III data in the first quarter of 2020.

Thanks again to everyone with us on the call today, and now I'll turn it over to the operator for Q&A.

(Operator Instructions) Our first question comes from the line of Kevin DeGeeter with Oppenheimer.

Maybe just 1 or 2 for me.

Can you just comment on your provided perspective as to growth trends, particularly among vaccination of the elderly in the influenza market and just how we think about sizing out the addressable opportunities in the event of a positive Phase III readout for NanoFlu?

Maybe 1 thing I could say -- Kevin, this is Greg.

I was looking at the flu vaccine uptake last year recently.

And in older adults, it was 68% and gone up over 2% the year before.

So even though the vaccines aren't working well, they are promoting the use of the vaccine.

It's true of all age groups, but even the older adults, 65 and above, were -- had the greatest usage.

And that was about 68%.

Yes.

So I'll just add on top of that.

From a commercial standpoint, Kevin, what you have is a marketplace, as Greg said, that continues to see high vaccination rates.

But you're also seeing the growth of the elderly population in the U.S., where the over 65-year-old population is expected to continue to grow just coincidentally to about $65 million or greater over the next several years.

But also, you have -- continue to have supporting policy there for vaccination of older adults.

You continue to have solid payer support there as well given Medicare Part B coverage for influenza vaccines and support for any person over 65 years of age walking into the doctor's office or the pharmacy and getting their flu vaccine for free under Medicare.

So I think, overall, what you have is a population that's in need of an effective -- a more effective influenza vaccine.

You have supporting policy and supporting payer strategy.

And following up on that, in a scenario where NanoFlu was demonstrated to be non-inferior but not statistically superior, which seems like a reasonable base case.

Can you just kind of talk about what really drives shift in market share for the flu market without a regulatory claim of superiority, which we simply have not seen in this space and just how we think about when we see the efficacy profile, how -- to lay that metric against opportunities to really drive market share shift in the future?

Yes.

Kevin, it's Stan.

So yes.

So let's look at what's happened and then let's look at what our vaccine should be able to do in the market.

What's happened is just that Fluzone High-Dose, whose data showed -- when they did their accelerated approval trial, showed, I think, roughly an 80% superiority over Fluzone standard dose in terms of HAI response.

And then they did follow that up with a efficacy trial, and they showed something like 23% or 24% benefit.

We already know that we can -- in our Phase I and Phase II, that we have shown, at least with H3N2, a higher dose -- higher immune responses with our vaccine and theirs, and particularly on the important strains that are circulated but have drifted.

And so we think we have an advantage over Fluzone High-Dose's advantage over Fluzone.

So -- and they've done well.

They've gone from 0% to 68% market share with a very premium priced product over the last 6 or 7 years.

And so I think the quality difference is sales product.

And so we came in the market, and we have a couple of things.

I think our expectation is, is that we will have higher HAI levels as in the Phase III trial, and particularly, we expect to repeat much higher PCI levels in the H3N2 and on drifted strains.

And we think that will be noticeable.

And then secondly, we have cell-mediated immunity responses that are, compared to -- we compare it to Flublok and Fluzone High-Dose, and theirs were approached 0 in terms of CCMI responses, and ours were very potent and robust.

And so that will be a differentiating factor.

But -- so there's a couple of things that make our vaccines stand out.

And then, of course, that will be followed by an efficacy trial.

And that trial will start -- as we get license, that trial will start right away.

And that -- all those things, including the cell-mediated immunity, should translate into improved efficacy.

So I think our goal all along has been we will go up and show differentiation against all vaccine products and make sure we're not just a me too.

We can't be just as good as, we will be better than.

And so that's what we have so far, and we expect to build on that.

And our next question comes from the line of Eric Joseph with JPMorgan.

This is Turner on for Eric.

So just a couple from us.

Are there plans to expand NanoFlu outside the U.S.?

And if so, do any additional trial work need to be performed internationally to enable registration with the EMA?

And then I have 1 quick follow-up after that.

So yes.

Of course, we would expect, once we have U.S. licensure for us to expand to, in particular, the EU, I think once the common technical document would allow us the opportunity to apply rather quickly after submission of our BLA in the U.S. And of course, there is a robust marketplace in the EU for a differentiated vaccine with our recombinant technology.

I think there are other markets.

Yes.

There are other markets like China, which are just starting on the way up and booming in China, I think, now.

And so lots of opportunities.

Okay.

And then do you plan on marketing NanoFlu yourselves?

Or would you anticipate partnering out (inaudible)?

And then in the latter case, what does an ideal partner look like to you?

And when could we potentially expect the timing of a partnership announcement?

Yes.

So not before data.

And the partnership -- we haven't decided.

We have -- since we started this program, we have considered commercializing the RSV and flu vaccine in the U.S. on our own and finding partners who are outside the U.S. We've not made any decision to do that.

That will depend in part upon the cost of capital at the time that we make that decision and our talks with partners.

Partnering would look like something pretty standard.

Either you would go partner with Sanofi, who's got the best market share right now in competing products and who would consider this -- they'd have to demonstrate that they considered this something that they would put in front of the other products.

But you've got number 2s and number 3s of GSK and Seqirus who are -- would like to be #1.

And this is a vaccine that we think can make them #1.

So there are plenty of potential partners out there and plenty of potential reasons.

We just have to get -- we're so close to our Phase III data.

We just need to get the Phase III data.

And I think that will pave the way for those discussions.

And our next question comes from the line of Charles Duncan with Cantor Fitzgerald.

Congrats on the progress.

1 month to enroll that trial is pretty impressive.

I had a quick question, though, regarding timing of data and then timing of an accelerated BLA.

I'm wondering if you can imagine a scenario in which you'd be able to get all that done before the next flu season.

It seems like that would be a big ask, but what are your thoughts there?

Yes.

We have already started at risk to do some of the things necessary to file a BLA, and they focus mainly on the CMC, the manufacturing issues and making product for consistency lot trials and clinical lot trials.

And the -- so it's the long pole in the tent.

We're trying to make that pole as short as possible.

So we've started working on those areas in the summer, and we continue to do so.

But as a practical matter, we will not be able to have all those data by the end of this year.

So this year's BLA is not in this next flu season.

We will not be there for the next flu season.

So not 2020 flu season but perhaps '21 flu season seems like a reasonable guess?

That would be a target.

Okay.

And then the second question that I had for you is Day 28 sera samples.

Can you help me understand kind of the rate-limiting steps between now and data?

And then secondarily, if there were any other clinical studies that you needed to do, anything else that you needed to do before you file that BLA, non-clinical or otherwise?

Yes.

Well the clinical ones are -- well, they should be the last studies that we need to do before filing the BLA.

The -- all the -- the only rate-limiting -- the rate-limiting step between the Day 28 sera and data, the reason it's in the fourth quarter, not November, December is because we have 2,650 samples from Day 28 and Day 0 to assay for probably 8 or 9 different virus strains because we're going to do the 4 strains that are in the vaccine, and we test our vaccine against the drifted strains, where we know -- where we have demonstrated in the past, the superior response to the competitor.

And then we're going to do cell-mediated assays.

So there's a lot.

There's a ton of work to do, and we're having people schedule themselves 6 days a week through the Christmas season and January to get the data out.

So that's the rate volume step for data.

Okay.

Got it.

And last question, Stan, is related to the actual clinical trial population that you ran and whether or not there were any, kind of, call it, special groups, for example, the healthy old of greater than 85 years old, that were represented.

And then finally, could you anticipate possibly conducting or starting the efficacy study, though it's not required for approval in the '20 -- for the 2020 flu season here in the states.

So the answer to the first question, Greg, do you have...

The ambulatory healthy adults 65 and ages over and we did a little bit of stratification.

So -- but I think we'll see the demographics when we announce the results.

So it was not -- we did not try to collect, as you suggest in the very old, this trial.

Yes.

And Charles, timing is -- will depend upon what data we get.

And again, we go back to cost of capital as to whether we would try to start it by the end of next year.

It's not a bad suggestion.

It would speed up the process of getting, obviously, efficacy data.

We have choices every 6 months as to whether you start these things in the Northern Hemisphere and the Southern Hemisphere.

And so we'll make that as we get there, so.

And we haven't designed this trial yet.

Although -- we have to -- we haven't designed the trial yet, although we have to design the trial before -- obviously, before licensure starts.

And so -- and we don't know whether which -- what the size of the trial is and, et cetera.

Thank you.

This does conclude our Q&A portion for today's conference.

And I would like to turn the conference back over to Stan Erck for any further remarks.

Okay.

I think that's about it.

Thanks for participating.

Thanks for asking good questions.

And we'll be in contact with you as data comes up.

Okay.

Ladies and gentlemen, this concludes today's conference call.

Thank you for participating.

You may now disconnect.