Vaxcyte Inc (PCVX) 2020 Q4 法說會逐字稿

Good afternoon. My name is Sarah and I will be your conference operator today. At this time, I would like to welcome everyone to the Vaxcyte fourth-quarter and full-year financial results conference call. (Operator Instructions). I will now turn the call over to Andrew Guggenhime, President and Chief Financial Officer of Vaxcyte. Please go ahead, sir.

Thank you, operator, and good afternoon, everyone. I would like to welcome you to Vaxcyte's earnings conference call to discuss the financial results for the quarter and full year ended December 31, 2020, and to provide a business update. I am joined today by our CEO, Grant Pickering; our COO, Jim Wassil; and our VP of Research, Jeff Fairman.

Earlier this afternoon, Vaxcyte issued a news release announcing the Company's results. Copies of our news releases, latest corporate presentation, and SEC filings can be found in the investors and media section of our website.

Before we begin, I would like to remind you that during this call, we will be making certain forward-looking statements about Vaxcyte, which are subject to various risks and uncertainties. These include statements regarding the anticipated process and timing of the development of our vaccine candidates, the timing of our IND application submission and top-line data from our clinical proof-of-concept study for VAX-24, the potential benefits and market of our vaccine candidates and technology platform, the impact of the COVID-19 pandemic on our business, the payment of milestones, and our expected uses and sufficiency of cash and other funding to support our development programs and other operating expenses.

Any forward-looking statements are based on facts and assumptions as of today and we undertake no obligation to update them. Our actual results may differ materially from these statements. Investors should read the risk factors set forth in Vaxcyte's Form 10-K for the year ended December 31, 2020, and any subsequent reports filed with the SEC.

With that, I would now like to turn the call over to Grant Pickering. Grant.

Thanks, Andrew. And to all of you on the call and webcast, thanks for joining us today. The past year has been transformational for Vaxcyte as we have made meaningful progress across all areas of our business. This was highlighted by the progress of our vaccine pipeline, which continue to illustrate what we believe are the unique competitive advantages and scalability of our technology platform to enable us to deliver broader spectrum and/or more immunogenic vaccines.

Our lead vaccine candidate is VAX-24, a 24-valent pneumococcal conjugate vaccine or PCV. For this program, we have achieved several key manufacturing milestones to support our IND application submission to enable the initiation of our clinical proof-of-concept study. VAX-24, along with VAX-XP, form the basis of our PCV franchise strategy targeting the existing $7 billion pneumococcal vaccine market.

VAX-24 is designed to improve upon the standard of care in this market by covering the additional strains that are responsible for the majority of residual pneumococcal disease currently in circulation. Based on the data we've generated to date, we believe VAX-24 has the potential to protect against the strains collectively covered by the leading PCV, Prevnar 13, and the older, less immunogenic form of vaccine called Pneumovax 23.

We believe that VAX-24 has the opportunity to replace both standard-of-care vaccines with a single broad spectrum PCV. Our site-specific conjugation technology creates a competitive advantage that allows us to engineer broader spectrum PCVs designed to avoid carrier suppression in ways that we believe will afford our PCV franchise an opportunity to surpass the coverage of our competitors, which has been the key adoption determinant in this market.

For VAX-XP, we continue to lay the groundwork to support our level of readiness to push the spectrum of coverage even further to address newly emerging strains and extend our competitive advantage. Today, we are announcing compelling new data generated with our latest conjugates produced at larger scale at Lonza, our CMO.

We also made significant progress on our prophylactic vaccine candidate, VAX-A1, which is designed to prevent Group A Strep infections. This work led to nominating our final vaccine candidate in the first quarter of this year, accomplishing one of our stated 2021 milestones. The global need for a vaccine to treat Group A Strep is clear.

Based on our recently published data, we are increasingly excited about the potential to deliver a best-in-class and first-in-class vaccine for multiple age groups. We also continue to advance VAX-PG, our vaccine designed to treat periodontal disease, and anticipate nominating the final candidate in the second half of this year.

Behind the scenes, we are also making progress with earlier stage vaccine discovery programs that leverage our platform. Aside from our pipeline progress, we executed two successful financings in 2020, raising gross proceeds of $110 million in our Series D financing in March, and $287 million in our IPO in June. As a result, our balance sheet remains strong to fund our programs through the anticipated key VAX-24 clinical proof-of-concept milestone.

And finally, we added a number of key leaders and team members to support the advancement of our pipeline, our transition to being a public company, and the overall growth of our business. While we achieved several significant IND enabling milestones over the past year for VAX-24, we are changing our estimate to the timing for our anticipated IND submission from the second half of 2021 to now between January and June of 2022.

This change is due primarily to additional time required to complete the ongoing drug substance manufacturing along with capacity constraints at our CMO and the impact from the COVID-19 pandemic. Jim will share additional background on this shortly.

With respect to our Phase 1/2 clinical study that will follow the IND submission for VAX-24, we expect to deliver the top-line data between late 2022, which is within our prior guidance and early 2023.

Given the magnitude of the market opportunity and the attractive profile of our PCV candidates, we are committed to taking the necessary steps in time to deliver the 24 conjugated drug substances that we believe will maximize our potential for long-term success. We believe the scalability of our technology platform is unrivaled, so as to deliver the broadest spectrum PCVs, while still honoring the key conventions of proven PCVs, which have been tremendously successful to date.

Vaccine developers, particularly those targeting invasive pneumococcal disease, generally have been focused on overcoming two challenges. The first is carrier suppression, and the second is antigenic competition. To date, the preclinical data for VAX-24 have demonstrated the potential for our platform to overcome these challenges. This is further exemplified by VAX-XP where the latest preclinical data that we are sharing today show robust immunogenicity across the board with an even broader spectrum PCV when compared to the standard-of-care vaccines.

The results are available for review on our 10-K and updated corporate overview presentation that is now available on our website. These data give us further confidence that we have a PCV franchise that has the potential to attain a leadership position and maintain that position in the long run despite spirited competition.

I will now turn it over to Jim to give you a more detailed update on our pipeline beginning with VAX-24.

Thanks, Grant. Before I get into our accomplishments for VAX-24 and status update, I think it would be helpful to review the manufacturing process for this program and the remaining activities necessary to enable the IND application submission.

As we've previously shared, the manufacturing process for VAX-24 includes the following four steps. First, we manufacture eCRM, our proprietary protein carrier. Second, we manufacture 24 pneumococcal polysaccharides, one for each of the serotypes included in VAX-24.

Third, we manufacture 24 conjugated drug substances, which consist of three discrete stages; first, each of the 24 polysaccharides is sized to a targeted molecular weight and then a linker is attached to each of the 24 sized polysaccharides to generate 24 activated polysaccharides. And finally, the 24 activated polysaccharides are conjugated or covalently linked to the eCRM carrier protein resulting in the 24 conjugated drug substances.

The fourth and final step of the process includes manufacture of the drug product by mixing the 24 conjugated drug substances and filling into vials.

To date, we've made significant progress towards our IND filing including a number of key accomplishments in the past year. We've successfully completed the GMP manufacture, testing, and release of both the eCRM carrier protein and the 24 pneumococcal polysaccharides. For the conjugated drug substance, we've now successfully sized and activated each of the 24 polysaccharides and are in the midst of the manufacturing of each of the 24 conjugated drug substances.

Earlier this year, we've successfully manufactured our initial drug product batches with our 24 conjugates at Lonza. These batches will serve as the source of our lead lot stability data for our IND. We also successfully completed manufacturing of drug product batches used in the GLP toxicology studies and initiated the GLP toxicology study in the first quarter of this year.

Now before we submit our IND, we still have a few outstanding items which include: first, completion of the GMP manufacturing, testing, and release of the conjugated drug substances and drug product; second, completion of the GLP toxicology study that is currently underway; and third, generation and submission of stability data resulting from the GMP drug product.

As Grant mentioned, we are updating our guidance for the VAX-24 IND submission as a result of a few factors, which I will provide more detail on. First, as we have progressed through the manufacture of the 24 drug substances, we experienced some process-related issues as we transitioned into GMP production at Lonza. In and of themselves, these only caused minor delays across the three stages of production, but taken together, have resulted in a meaningful cumulative delay to the campaign.

While these adjustments are typical for this stage of the vaccine development and our initial guidance has accounted for process modifications, we underestimated the cumulative impact of these changes. As I noted, we have now progressed successfully through the first two stages of the drug substance production campaign and are in the midst of the final stage of conjugating the 24 drug substances.

Ultimately, before we were able to complete the final conjugation stage, we encountered an interruption of the drug substance manufacturing campaign at Lonza. Now, working with a world-class CMO such as Lonza has many benefits. However, they also have numerous clients with late-stage clinical and commercial products. As a result, our GMP conjugate manufacturing campaign was unfortunately interrupted due to Lonza's prior customer commitments.

The good news is that we have resumed our manufacturing campaign, the early data of which are encouraging and working towards completing the 24 conjugated drug substances.

Finally, the COVID-19 pandemic created some operational headwinds. Travel restrictions delayed the qualification of key analytical equipment and in -person CMO oversight. We also saw raw material supply chains slowed. Fortunately, we do believe these issues have now been resolved.

All in all, we have made substantial progress towards delivering the VAX-24 IND and look forward to completing the remaining deliverables per our current guidance.

As Grant noted, we are also announcing today new immunogenicity data for our VAX-XP, our PCV candidate with expanded breadth of coverage of at least 30 strains. The strains in VAX-XP cover over 90% of invasive pneumococcal disease currently circulating in the United States. The new data demonstrates the potential scalability and robustness of our technology platform. Importantly, they also demonstrate that during the scale up and tech transfer to Lonza, the fidelity of the process was maintained.

In the study conducted in rabbits, we compared VAX-XP to more than 30 different pneumococcal serotypes including all those contained in Prevnar 13. The results showed that VAX-XP immune responses were at least comparable to Prevnar 13 and superior to polysaccharide only serotypes like those contained in Pneumovax 23.

Before turning it over to Jeff to provide an update on the status of VAX-A1, our prophylactic vaccine candidate designed to prevent Group A Strep infections, I want to touch upon the increasing global need for a vaccine to address this serious pathogen.

Group A Strep is a ubiquitous disease causing an estimated 700 million cases of disease globally. The majority of these are pharyngitis, or strep throat, which result in significant usage of antibiotic prescriptions and consequently are a source of increased antibiotic resistance. Group A Strep can also have grave outcomes. There are an estimated half a million deaths per year globally due to the combination of rheumatic heart disease and other invasive diseases.

While traditionally thought of as a childhood disease, the rate of invasive disease in the elderly has increased substantially over the past decade. In the US, the estimated rate of invasive disease in adults 65 and over has more than doubled since 2012 and is now more than three times the rate of invasive pneumococcal disease when the CDC recommended Prevnar 13 for the adult population.

This creates an opportunity to develop VAX-A1 not only for children but also adults. We believe VAX-A1 has first-in-class and best-in-class potential to address this significant need. With that, I'll turn it over to Jeff to provide a program update.

Thanks, Jim. VAX-A1 leverages one of the key applications of our cell-free protein synthesis platform, the ability to produce site-specific polysaccharide protein conjugates. The resulting conjugate is designed to ensure optimal exposure of both the B and T cell epitopes on the protein carrier to confer robust, boostable, and durable protective immune responses.

VAX-A1 is designed to confer broad protection against subtypes of Group A Strep. It includes a conserved polysaccharide, polyrhamnose, conjugated to a Group A Strep specific immunogenic protein carrier using our site-specific conjugation technology, along with two highly conserved protein virulence factors that when left unchecked, interfere with the body's ability to respond to the infection.

By using these conserved antigens, we believe that our investigational vaccine could address the full range of pathogenic serotypes of Group A Strep. We continue to make solid progress with this program.

Earlier this year, we nominated our final vaccine candidate consistent with our target timeline. In connection with this nomination, we recently completed the first phase of our award under our agreement with CARB-X.

In addition, at the beginning of this year, we announced the publication of preclinical data from our program in the journal, Infectious Microbes & Diseases. In the published study, which was carried out in collaboration with researchers at the University of California, San Diego, VAX-A1 showed broad and significant protection against systemic and soft tissue infection after animals were challenged with near lethal amounts of Group A Strep bacteria.

Broad-based cross-reactivity with multiple serotypes of Group A Strep was observed in the serum of vaccinated animals. No cross-reactivity was detected with human heart or brain proteins, which is a key leading indicator of vaccine safety. Looking ahead, we expect to initiate IND-enabling activities in the second half of this year, and are currently working with CARB-X to finalize the next potential phase of our cost reimbursement research award with them.

VAX-PG, our novel therapeutic vaccine designed to treat periodontal disease, leverages another key application of our cell-free protein synthesis platform: the ability to produce tough-to-make protein antigens.

Periodontal disease affects an estimated 65 million adults in the United States. Globally, severe periodontal disease afflicts 10% to 15% of the adult population resulting in productivity losses estimated at nearly $54 billion. Periodontitis has also been shown to be associated with increased risk of heart attack, stroke, cardiovascular disease, and Alzheimer's disease.

VAX-PG targets Porphyromonas gingivalis, the keystone-pathogen responsible for periodontitis. VAX-PG incorporates protein antigens that we believe are uniquely enabled with our technology due to their inability to be produced in conventional production vectors either at all, or at sufficient yields, to permit commercial scale supply.

We have established preclinical proof of concept for this program based on the data published in the Journal of Clinical Periodontology. In this study, VAX-PG demonstrated robust protein-specific IgG responses following immunization and protected mice from P. gingivalis-elicited oral bone loss, which is a clinical manifestation of periodontitis. We are advancing the program toward our corporate target to nominate our final vaccine candidate, which we expect to occur in the second half of this year.

The third novel dimension of our platform technology is the ability to conjugate immunomodulatory molecules to candidate antigens. Earlier this month, we and our collaborators published a paper in scientific reports where we demonstrated an enhanced CD8-positive T cell response by directly conjugating an adjuvant to the candidate antigen. This expansion of our site-specific technology platform has the potential application in viral vaccines where an enhanced CD8 T cell response is required.

I will now turn it over to Andrew for a financial update.

Great, thanks, Jeff. Before turning it over to Grant for some closing remarks, a few financial highlights -- first, with respect to the income statement. The details of our fourth-quarter and year-end 2020 results are reflected in our press release and 10-K filings along with the key variance drivers.

In summary, the year-over-year increase in R&D expenses was primarily a function of the advancement of our VAX-24 program, while the increase in G&A expenses was driven primarily by our transition to public company status and our overall growth. As we look forward, based on our plans to advance our pipeline programs led by VAX-24 and to increase the size of our organization to support these efforts, we expect R&D and G&A expenses to increase substantially over 2020 levels.

Second, as to the balance sheet and cash runway, we ended 2020 with a strong balance sheet with $386.2 million in cash and cash equivalents compared to $397 million as of the prior quarter-end, and up substantially from the prior year-end due to the series D and IPO financings during the year.

Going forward, we expect that our balance sheet will be sufficient to fund our operating expenses and capital expenditure requirements through, at least, the completion and announcement of the topline data from our Phase 1/2 clinical proof-of-concept study of VAX-24 in adults, which as noted, we expect between late 2022 and early 2023; and to continue to advance our pipeline of other vaccine candidates.

With that, I'll now turn the call back over to Grant for some closing remarks before we open up the line for Q&A. Grant.

Thanks, Andrew. Our mission at Vaxcyte is to improve global health by developing superior and novel vaccines designed to prevent or treat some of the most common and deadliest infectious diseases worldwide.

In light of all the external headwinds in 2020, our progress last year and the continued momentum this year represent substantial strides toward achieving our mission. I want to thank all of our employees and collaborators, including the team at Lonza, for persevering through a tremendously challenging moment in history.

For the remainder of 2021, our primary areas of focus will be to deliver on our remaining VAX-24 IND-enabling milestones, invest in VAX-XP to maximize our PCV franchise optionality and value, advance VAX-A1 into IND-enabling activities, nominate the final vaccine candidate for VAX-PG, and advance our earlier-stage discovery programs.

With that, I want to thank you all again for joining us today, and your continued interest in Vaxcyte. Before we close our prepared remarks, I'd like to thank Kurt von Emster, who previously had held the position of our Board Chair for agreeing to serve in this role on an interim basis as we initiate a search for a permanent Board Chair. We look forward to your questions today and speaking with you in the weeks and months ahead. Operator.

(Operator Instructions). Jason Gerberry, Bank of America.

Hi, guys. Thank you for taking my questions. Can you remind us -- and apologies if I missed this, but how many of the conjugated drug substances has Lonza successfully completed? Just trying to get a sense of where you are at in that process and ultimately the range of outcomes for timing of IND submission, I think it is like six months.

Can you give us a sense of what are the key variables that drive that range ultimately? I assume it is not the GLP tox study; I assume that's probably pretty straightforward once you complete some of the other steps along the process, and if you can also just remind us how long the stability testing is. Thanks.

Yes. Hi, Jason. Thank you for that question. So as we've mentioned in the prepared remarks, this DS campaign consists of three different stages, so we've completed those first two stages. And as you say, we are now in the process of making the 24 conjugates themselves. We're going to stay away from getting into full specificity as to the number that we've made, but I would characterize it as being well on our way to having made the 24.

And ultimately, we'll only be able to declare victory once we've made all 24 of those and they pass all of the analytical tests required that meet our critical quality attributes.

So you've got it exactly right that the GLP tox study is already underway. We don't expect that to be rate-limiting, so the deliverables that are going to actually result in the ultimate IND submission timing are this completion of the DS conjugates, and them being formally released. So we have to make them and then complete that battery of analytical tests.

Once we complete that, that will allow us to follow through with the drug product campaign to make each of the three different doses that we'll take into the clinical study. And then, of course, there will be an analytical series of tests that are run on those in order to declare victory there.

And then as it relates to the stability, we've already put the tox lots of the drug substances and the DP on stability, so those lead lot stability studies have already started. And then, what we'll need to deliver with regard to the stability, ultimately, to permit the IND filing -- Jim, correct me if I get this wrong -- I think it is one month stability but, Jim, you should correct me if I'm off on that.

No, that's correct.

And Jason, this is Andrew, let me just chime into your question about the range of the guidance we've provided. We talked about these process-related adjustments really are expected and standard in the course of drug development. And as we look forward at this point, if we see -- and we expect them going forward, if we see fewer than we expect, that would put us in a position of delivering the IND submission at the early end of the range, so call it the early part of 2022. If we see more than we anticipate, that would put us in the back end of the range. So that's the rationale for the window we provided.

Got it. Okay, thank you.

Biren Amin, Jefferies.

Yes. Hi, guys. Thanks for taking my questions. Maybe just one on VAX-24. Clearly, if you are at the back end of the range in June 2022 for IND, and your guidance for topline data at late 2022 early 2023, how feasible is that early 2023 timeframe?

The topline data range, Biren, generally corresponds with the IND application submission range. So if we're in a position to deliver the IND application submission in the early part of 2022, we believe that would put us in a position of having the topline data by the end of the year. If alternatively, we're at the back end of the IND application submission range in, call it Q2 up to June 2022, in that scenario, we are more likely to have data in the early part of 2023.

Okay. And then, I guess, a question on VAX-XP. So congrats on the progress there. Can you just maybe talk about readthroughs that you can take on VAX-24 manufacturing to the XP program, and whether manufacturing can be expedited as a result of the key learnings that you've made on VAX-24?

Yes. Thanks, Biren. We're really excited about the VAX-XP data. Obviously, this just further shows the sort of scalability that the platform can deliver with regard to the spectrum of coverage; and we all know that's been the key adoption feature in this market, so very encouraged with this immunogenicity data.

And just to put a slightly finer point on it, so the incremental conjugates that are on top of VAX-24 that were included in this study, these are conjugates that were made at Lonza, these are conjugates that were made at a substantially larger scale than we had produced previously here at Vaxcyte. So this is a 15-fold scale-up akin to what we had done with VAX-24.

So it's very encouraging to see the consistency of the immunogenicity across those incremental strains. But then, I would also point out, the 24 conjugates that were included that are in VAX-XP that are also in VAX-24, these were the conjugates that we made in the tox batch that we made at Lonza that went into the nonclinical tox study.

So we are seeing this continued immunogenicity across, now over 30 conjugates, but another data point with the 24 that are in VAX-24 that look really encouraging and show noninferiority relative to all of the strains in Prevnar; and then, certainly superior immune responses to polysaccharide-only including all 23 that are in Pneumovax, and then obviously quite a number beyond that.

And when can we expect the IND for XP?

It's too early to say what that timing is going to look like for that, Biren. It's going to pivot off the ultimate timing for the VAX-24 IND. We're also going to key off the epidemiological data and the demand for some of these incremental strains. We're already seeing them becoming more and more important, but as that data evolves, that's also going to guide us.

And to a lesser extent, we're obviously going to be monitoring the competition as well, but for us, VAX-24 is the fastest path to the market. Those 24 strains are really the most important strains that we need to get a solution out there as soon as practicable; and we think that that is going to be very competitive relative to the other PCVs that are in development.

And we believe that this would put VAX-24 in a position to, not only be the broadest spectrum PCV, but the one that would enable the withdrawal of Pneumovax 23 from continued use, which would open the door for a prime boost in adults where it would really be valuable for older adults to get that second significantly higher boost to create longer-lasting protection.

Great. Thank you.

Yes. Thanks, Biren.

Louise Chen, Cantor Fitzgerald.

Hi, congratulations on all the progress during the quarter, and thanks for taking my questions here. So I had a few. The first question I had is how do you think ACIP will update its guidelines if new PCVs get introduced? There are going to be two new ones likely in the near term and then yours and others to follow that with broader coverage. Do you think pricing is going to be a factor here?

And then, the second thing I wanted to ask you was just do you think COVID changes the importance of PCVs for patients? How have doctors felt about that that you've spoken with?

And the last question I had for you is just on OpEx for 2021. You talked about a substantial increase, and I know you gave some guidance on how long your cash runway goes out until. But maybe, if you could just give us a little bit more color on what substantial -- what qualifies for substantial in your mind and then that breakout between R&D and SG&A, how should we think about that? Thank you.

Yes, great. Thanks, Louise. So I heard three questions, essentially. I'll take one, I'll pass the other to Jim, and then Andrew will comment on the financials. But maybe I can just start with the COVID-related question before Jim, who is our resident ACIP expert, comments on how we expect some of these other PCVs to impact the market.

But certainly, as we think about greater risk associated with circulating COVID, especially with the variance in older adults, I think it clearly shows the importance of having more broad vaccination with the pneumococcal vaccines that are out there; and we saw that very early on as the pandemic took hold last year that the rate of vaccination in Europe and even in the US was up substantially.

That was prior to people sheltering and having poor access to physicians, but as we know, these viral pandemics usually result in weakened immune systems in older adults, which allows them to fall prey to existing bacteria, and Strep pneumonia is precisely the bacteria that you'd be worried about.

So I think this is only going to increase the rate of vaccination in adults with pneumococcal vaccines and is going to put additional pressure on the spectrum of coverage that's available to create protection for what is clearly a preventable infection. So, yes, I think it only is going to have a positive impact on the pneumococcal vaccine space as a business and as a societal benefit. With that, let me hand it to Jim to make some comments about the ACIP, and then we'll hand it to Andrew. Jim.

Thanks, Grant. Louise, when you looked at the February ACIP presentations on pneumococcal vaccines, they did outline, basically, what they think they're going to do. With the June ACIP, they are going to review cost effectiveness and do their Evidence to Recommendation and their grading; and they think that if the products are licensed that they potentially could have a vote in October.

When you try and figure out what it is that they're going to make in terms of a recommendation, they made a list of policy questions that are under consideration by the working group as well as questions with regard to what they need to evaluate from a health economic perspective; and I think that gives us some insight into where they are going. They are asking the question, should PCV-15 or 20 be given at age 50 and above or 65 years of age and above.

So they are potentially considering to lowering the age of recommendation down to 50. I think they'll keep 65, but it is interesting that they are considering lowering that to 50. They also asked if PCV-15 or PCV-20 should be recommended in younger adults with underlying medical conditions. I do think that they will recommend PCVs for the 18 to 49 or 18 to 65 age group that have certain pre-existing conditions.

Then finally, they asked, should they give PCV-15 and 20 alone or in a series with Pneumovax 23; and all indications are pointing towards they will continue with giving the PCVs first, and then a year later with PPSV 23 to ensure that they get the breadth of coverage. We are hoping, of course, with 24 covering all of the same strains in PCV-13 or 15 and 20 as well as Pneumovax 23, that ultimately, we can reduce the number of shots and not have to do that series going forward.

And then, Andrew, I guess you can answer the financial questions.

Yes, no, sure, thanks, Jim. Louise, yes, you are correct. We did not provide point estimates or range estimates for 2021 operating expenses other than to say, as you noted, that we expect both G&A and R&D expenses to increase substantially. I guess a couple of data points I would offer as you think about that that, hopefully, will be helpful.

Our G&A expenses over the course of 2020, increased quarter-over-quarter as we continued to build our organization, obviously, upon the transition to a public company in June where we saw the effect of things like D&O insurance expenses and higher stock-based compensation levels. We do expect year-over-year 2021, compared to 2020, to see a substantial increase in G&A.

I think that increase, if you look at annualized Q4 of 2020, that increase is far more modest because we've largely built out that, which is required to support our public company status. So relative to Q4 annualized, more modest growth.

From an R&D perspective, it's a very different story. Unlike G&A, which kind of grows sequentially quarter-to-quarter, R&D expenses are far more volatile and fluctuate just given the nature of the underlying principally manufacturing activity. So depending on where we are, for example, with Lonza in the midst of a manufacturing campaign that we've moved to testing phase, that can dictate -- it very much dictates the flow of R&D expenses.

So year-over-year, again, expecting a substantial increase. If you look at 2020, our peak R&D quarter was actually in the first quarter of 2020 just given the nature of activity that was occurring at that time. And we still expect a substantial increase in 2021 compared to the annualized R&D number in Q1, although, again, we expect that number to fluctuate more in 2021 just given the nature of the underlying activities over the course of the year.

Okay, thank you. Actually, you broke up a little bit when you said your peak R&D was which quarter?

Our peak R&D in 2020 was actually the first quarter just given the nature of the activities at that time, which were in eCRM and polysaccharide manufacturing activities. For 2021, we expect to see an increase over the annualized Q1 2020 level as well.

Okay, thank you very much.

Joseph Stringer, Needham & Company.

Hi, everyone. Thanks for taking our question. Just a few quick ones on VAX-A1 and VAX-PG. You laid out some timelines for IND-enabling studies. When could it be possible that both of those could enter the clinic, and is there a preference for advancing either one of those programs at a faster pace or, I guess, a prioritization on one program over the other or will they be advanced in parallel fashion? Thank you.

Great, Joe. This is Andrew. I'll take the first part, and then, maybe take a crack at the second with my colleagues to follow. I would say, for each of the programs, VAX-A1 and VAX-PG, we are at this moment not providing IND guidance.

As you heard on the prepared remarks for VAX-A1, having nominated the final candidate in Q1, which was on our timeline, we expect to initiate IND-enabling activities in the second half of this year. Among the activities included for VAX-A1 are the selection of a CMO partner and the determinant of the CMC path forward. So it really wouldn't be until that point where it would be prudent for us to set forth IND guidance, but you should expect us to do that once we have a clear path with respect to the CMO partner.

And then, for VAX-PG, it's a little further behind at the moment. We have yet to nominate our final candidate consistent with our previous timelines. We now expect to do so in the second half of this year, again, consistent with what we've previously outlined. And then at that point, much like I mentioned for VAX-A1, we'd expect to select a CMO partner in a path forward, at which time we likely will be in a position to offer our IND guidance.

I would say, overall -- and Jeff or Grant can comment, just from a timeline standpoint, VAX-A1 is ahead on the timeline vis-à-vis VAX-PG, at least at this point in time.

Hey, Joe, this is Grant Pickering. I would chime in and just say that A1 is ahead. It also has the benefit of a substantial offset from CARB-X, so there is a nice efficiency there. We are really excited about the data that we're seeing from that program. We are buoyed by the notion now that there's an opportunity to develop this vaccine as, not only a potential addition to the pediatric regimen, but now it's having potential as an adult vaccine as well; so really excited about that program.

And the VAX-PG program we think has huge potential as well. So we are really not expecting to really pick one over the other. We are anticipating that we're going to move both those programs forward based on the potential that they each bring to the Company. So for now, we are moving them along and we're in a position to do that.

Thank you.

Thanks, Joe.

Thank you. There are no further questions at this time. I would now like to turn the call back to Grant Pickering for closing remarks.

Yes. Thanks, Sarah. I'd just like to thank you all for your support of the Company. We really appreciate you dialing in. Obviously, we are disappointed that we're not going to be able to hit the original IND guidance.

We made huge strides last year. We don't feel that there's anything in particular that is going to get in our way. There's a lot of operational activity required to deliver on a vaccine like VAX-24 with the level of complexity that we're looking at. So we are confident in the guidance that we provided today.

We really appreciate all of your support and I appreciate all the work that the team has put into this and our colleagues at Lonza as well. So thank you all very much for your attention today and take care.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.