Q2 2022 Novavax Inc Earnings Call

Okay.

Good morning, and welcome to Novavax second quarter, 2022 financial results and operational highlights conference call.

Good morning, and welcome to Novavax second quarter 2022 financial results and operational highlights conference call.

All participants will be in listen-only mode.

All participants will be in listen only mode.

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I would now like to turn the conference over to Silvia Taylor.

And your Vice President of Global Corporate Affairs, and Investor Relations. Please go ahead.

After today's presentation, there will be an opportunity to ask questions.

Good afternoon, and thank you all for joining us today to discuss our second quarter 2022 operational highlights and financial results and.

A press release announcing our results is currently available on our website at Novavax Dot Com and an audio archive of this conference call will be available on our website later today.

To ask a question, you may press star then one on your touchtone phone.

Before we begin with prepared remarks, I need to remind you that this presentation includes forward looking statements, including information relating to the future of Novavax. Its key strategic priorities plans and prospects for 2022 and financial guidance, including revenue and gross margin the ongoing development of our vaccine candidates, including anticipated.

The timing of trials and resolved the scope timing and outcome of future regulatory filings and actions.

Because these safety unintended utilization of our vaccine candidates the global market opportunity for our vaccine candidates the future availability of our vaccine candidates and key upcoming milestones. Each forward looking statements contained in this presentation is subject to risks and uncertainties that could cause actual.

Actual results to differ materially from those projected in such statements additional information regarding these factors appears under the heading cautionary note regarding forward looking statements and the slides that we issued this afternoon and under the heading risk factors in our most recent Form 10-K, and our second quarter Form 10-Q filed with the securities and exchange.

Emission and available at SEC Gov, and on our website at Novavax Dot com as well as subsequent filings with the SEC.

The forward looking statements in this presentation speak only as of the original date of this presentation and we undertake no obligation to update or revise any of these statements.

To withdraw your question, please press star then two.

Please turn to slide three.

During this conference call in order to provide greater transparency regarding our operating performance, we refer to certain non-GAAP financial measures that involve adjustments to GAAP results and non-GAAP financial measures presented should not be considered to be an alternative to financial measures required by GAAP. It should not be considered measures of liquidity and our.

Likely to be comparable to non-GAAP financial measures provided by other companies.

Any non-GAAP financial measures referenced on this call are reconciled to the most directly comparable GAAP financial measure in a table available in the investors section of our website.

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Please turn to slide four.

Joining me today is Dan <unk>, President and CEO , who will provide an overview of recent achievements and our upcoming strategic priorities. Additionally, Dr. Filip <unk> Chief Medical Officer will discuss our clinical development updates across our pipeline and John Trevino, Chief Commercial officer, and Chief business Officer will provide an update on the <unk>.

<unk> are a global COVID-19 vaccine rollout our recent progress in our label expansion in our global commercial strategy Finally, Jim Kelly, Chief Financial Officer, and Treasurer will provide an overview of our financial results Dr. Greg Glenn President of research and development will also be available for the Q&A section at the end of today's call.

Please note this event is being recorded.

I'd now like to hand, the call over to staff, Please turn to slide five.

I would now like to turn the conference over to Sylvia Taylor, Senior Vice President of Global Corporate Affairs and Investor Relations.

Thanks, Joe Thanks.

Thanks to everyone for joining us today to discuss Novavax second quarter results. Once again, we've had a very significant quarter of achievements. We continue to take trades make the transition to a commercial company and we continue to see more and more evidence that our vaccine platform.

Please go ahead.

Good afternoon, and thank you all for joining us today to discuss our second quarter of 2022 operational highlights and financial results. A press release announcing our results 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.

Good to know.

So the next few minutes.

And my team will share with you some of the many achievements of breakthroughs that are transforming the company.

Before we begin with prepared remarks, I need to remind you that this presentation includes forward-looking statements, including information relating to the future of Novavax, its key strategic priorities, plans, and prospects for 2022 and financial guidance, including revenue and gross margin, the ongoing development of our vaccine candidates, including anticipated timing of trials and results, the scope, timing, and outcome of future regulatory filings and actions, the efficacy, safety, and intended utilization of our vaccine candidates, the global market opportunities for our vaccine candidates, the future availability of our vaccine candidates, and key upcoming milestones.

Well, we do that.

Let me take a moment to address what is probably the most visible aspect of our earnings report.

Each forward-looking statement contained in this presentation is subject to risks and uncertainties that could cause actual results to differ materially from those projected in such statements.

Additional information regarding these factors appears under the heading Cautionary Note Regarding Forward-Looking Statements in the slide deck we issued this afternoon, and under the heading Risk Factors in our most recent Form 10-K and our second quarter Form 10-Q filed with the Securities and Exchange Commission and available at sec.gov and on our website at Novavax.com, as well as subsequent filings with the SEC.

Our revenue for this quarter came in well below projections.

The forward-looking statements in this presentation speak only as of the original date of this presentation, and we undertake no obligation to update or revise any of these statements.

Projections and with respect to all of 2022.

Please turn to Slide 3.

To fall short of our earlier projections.

During this conference call, in order to provide greater transparency regarding our operating performance, we refer to certain non-GAAP financial measures that involve adjustments to GAAP results.

For the quarter revenue was 186 million the significant shortfall for both the first quarter results.

Any non-GAAP financial measures presented should not be considered to be an alternative to financial measures required by GAAP, should not be considered measures of liquidity, and are unlikely to be comparable to non-GAAP financial measures provided by other companies.

And as I said from our expectations. The shortfall was the result of a couple of issues one of which is short term the timing of our shipments to Europe . The other is a broader issue and it will take some time to work through this.

Any non-GAAP financial measures referenced on this call are reconciled to the most directly comparable GAAP financial measure in a table available in the Investors section of our website at Novavax.com.

Please turn to Slide 4.

As there are changes in expectations from two major markets.

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[noise] globally.

And particularly with respect to <unk>, there was a surge in supply and when coupled with challenges <unk> had with the distribution into low and middle income countries. This woman to the need for them to order contracted product from us.

Other vaccine manufacturers.

The case of the U S. I believe we relate to the market.

And U S vaccination was driven by what was available and shown to work mrna vaccines and.

In addition, now that we are approved for primary vaccination.

Not yet approved for adolescents and boosted which are critical indications and we're making our way through this regulatory process. We are hopeful that we can get through this in days and weeks, but the absence of these indications slows the global rollout of our vaccine.

Although there have been and will continue to be many ups and downs in these markets. We are now projecting that we will have no new revenues 22 from the U S. Kovacs. Originally we had planned to have revenue from these two markets arising from the sale of a 110.

350 million doses, respectively.

In terms of where we go from here I'm happy to say that just since July one.

We have filled over $400 million in revenue.

Well, we're talking about the second quarter to date. This was such an extraordinary abigail each quarter three that I wanted to tell you what we have done through today.

From an operational standpoint.

We have again, one of the most productive and transformation transformative quarters in our history.

In the U S. Immunizations are currently underway with our COVID-19 vaccine, which is the first protein based vaccine offered to Americans. This fall under emergency use authorization that you did was recommendation from the <unk>.

Joining me today is Stan Erck, President and CEO, who will provide an overview of recent achievements and our upcoming strategic priorities.

<unk> Advisory Committee <unk> and the.

Cdc's Advisory committee on immunization practices.

Additionally, Dr. Philip Dubofsky, Chief Medical Officer, will discuss our clinical development updates across our pipeline, and John Trevino, Chief Commercial Officer and Chief Business Officer, will provide an update on the status of our global COVID-19 vaccine rollout, our recent progress in our label expansion, and our global commercial strategy.

Globally, we continued the rollout of our COVID-19 vaccine.

We have authorization in 43 countries today.

Today, we have delivered over 73 million doses around the world.

We initiated a new studies in adolescence in younger children and.

And we've made progress in expanding our label.

We have already received authorizations for boosting in adolescence in markets around the world with more to come.

And this past quarter, we announced new data for approach like back she joined the immune responses to our vaccines are proven to get broad protection against various which we think is a unique feature of our recombinant nanoparticle adjuvant vaccine.

We also showed data on her back sheets durability is breadth of response through 12 months.

At the same time, we know the market is quickly evolving during the quarter, we advanced our <unk> strain vaccine program.

Yeah.

I will say it one more time.

This was a transformational year for the company and we're building on a great vaccine platform.

Having said that we were in a very dynamic environment. We have all the opportunities is having a great product gives us but as I've already said, we also have a number of uncertainties that we are constantly managing its important to note that.

Some of our delivery schedules have been shifted into 2023 total demand under most apa's remains unchanged with.

With all this in mind today, we are revising our 2022 full year revenue guidance to $2 3 billion.

And we'll talk more about this during our call today.

Through our commercial readiness efforts global label expansion to date, we believe we are laying the foundation for a successful transition to a commercial market in 2023.

Poised to play a significant.

<unk> role in the future COVID-19 landscape.

With that I'd now like to hand, it over to Phil.

Finally, Jim Kelly, Chief Financial Officer and Treasurer, will provide an overview of our financial results.

Dr. Greg Glenn, President of Research and Development, will also be available for the Q&A section at the end of today's call.

Thanks, Dan Please skip to slide six and jump to slide seven.

Our clinical development program is collecting data to expand our label for additional indications in populations today I will discuss clinical updates for three key areas homologous August boosting expansion into younger pediatric populations and the development of our a crime berrien vaccine.

I'd now like to hand the call over to Stan.

Please turn to Slide 5.

Thanks, Sylvia, and thanks to everyone for joining us today to discuss Novavax's second, quarter results.

Okay, Let's go to slide eight nine please.

Once again, we have had a very significant quarter of achievements.

This is data recently made available by the U S government NIH scientists identifying a quote protection part of vaccine.

We continue to make the transition into a commercial company, and we continue to see, more and more evidence that our vaccine platform is second to none.

In the next few minutes, I and my team will share with you some of the many achievements, and breakthroughs that are transforming the company.

This quarter, our protection was identified in our U S. Mexico Phase III study, where a majority of the cases were caused by various studied concludes and wildlife pseudo neutralization and ITG conserve as close of protection.

While we do that, let me take a moment to address what is probably the most visible, aspect of our earnings report. Our revenue for the quarter came in well below anyone's projections, and with respect to, all of 2022, we're expecting to fall short of our earlier projections. For the quarter, revenue was $186 million, a significant shortfall for both the first, quarter results and, as I said, from our expectations. The shortfall was a result of a couple of issues, one of which is short-term, the timing, of our shipments to Europe.

The other is a broader issue and will take some time to work through, and this is our, changes in expectations from two major markets, the U.S. and the COVAX facility. And particularly with respect to COVAX, there was a surge in supply, and when coupled with, challenges COVAX had with the distribution into low- and middle-income countries, this limited the need for them to order contracted product from us and other vaccine manufacturers.

In the case of the U.S., I believe we were late to the market, and U.S. vaccination was, driven by what was available and shown to work, mRNA vaccines.

He seems to better predict protective responses.

On the bottom of the slide are the antibody levels associated with various levels of protection.

<unk> confirmed that ITG is critical to understand the protective efficacy of our vaccine.

Now, let's move to slide 10 please.

What's displayed here is the immune response kinetics from our U S. Australia study after two dose brining series boost at six months and another boost of 12 months you can see a peak following two doses, which decays over six months with a single dose followed by a slower decay over the subsequent six months and finally it very good.

In addition, now that we are approved for primary vaccination, we are not yet approved, for adolescence and boosting, which are critical indications, and we are making our way through this regulatory process.

We are hopeful that we can get through this in days and weeks, but the absence of these, indications slows the global rollout of our vaccine.

Although there have been and will continue to be many ups and downs in these markets, we are now projecting that we will have no new revenues in 2022 from the U.S. and from, COVAX. Originally, we had planned to have revenue from these two markets arising from the sale, of 110 and 350 million doses, respectively.

In terms of where we go from here, I'm happy to say that just since July 1st, we have filled, over 400 million in revenue. While we're talking about the second quarter today, this was such an extraordinary beginning, to quarter three that I wanted to tell you what we have done through today.

From an operational standpoint, we have, again, had one of the most productive and transformative, quarters in our history.

Boost with a fourth dose Okay give me a click.

I've highlighted the antibody levels. After the six month boost are completely remain over the level of associate with protection of our phase III study does it gives us confidence we can maintain a protective immune responses over time.

Okay, Let's go to slide 11 please.

Despite here is antibody candidates from our U S. Mexico Phase III study you can see a peak after two doses, which the case through a month 11 with a high boost with a single dose achieving a 27 fold increase from the previous levels, Okay and give you a quick.

In the U.S., immunizations are currently underway with our COVID-19 vaccine, which is the first, protein-based vaccine offered to Americans. This followed our emergency use authorization and unanimous recommendation from the FDA's, Advisory Committee, VRBPAC, and the CDC's Advisory Committee on Immunization Practice.

Globally, we continued the rollout of our COVID-19 vaccine. We have authorization in 43 countries, and as of today, we have delivered over 73 million, doses around the world.

And here when we got into overnight protected thresholds drive from the U S government scientists O'brien vaccine response.

You can see that seven months data predicts approximately 88% efficacy and importantly, after the boost heightening. Our sponsors are achieved that are associated with more than 95% protection.

We initiated new studies in adolescents and younger children, and we made progress in, expanding our label.

Okay, Let's go to slide 12.

Here, we've displayed the immune responses of our prototype vaccine what our prototype vaccine induces a I guess I'm trying to be a one stop variance using our validated assay.

We have already received authorizations for boosting in adolescents and markets around, the world, with more to come. And this past quarter, we announced new data for a prototype vaccine, showing that immune, responses to our vaccines have proven to give broad protection against variants, which we think is a unique feature of our recombinant nanoparticle adjuvanted vaccine. We also showed data on our vaccine's durability and breadth of response through 12 months.

At the same time, we know the market is quickly evolving, and during the quarter, we advanced, our Omicron strain vaccine program.

I will say it one more time.

You see a very similar pattern to what you saw on the previous slide and importantly, after boosting it 11 months the antibody levels are comparable so the prototype responses we saw on the previous slide.

Can you give me a belt.

And once again, we've applied the government corn, so protection thresholds you can see the significant protection can be expected after two doses and a 95 protective level as predicted after boosting dose that was delivered 11 months IRA.

This is a transformational year for the company, and we're building on a great vaccine platform.

And having said that, we are in a very dynamic environment.

We have all the opportunities that having a great product gives us, but as I've already, said, we also have a number of uncertainties that we are constantly managing.

I remind you that the model has developed from our data and the phase III study.

The majority of cases were caused by various suggesting relevance as part of this analysis.

It's important to note that while some of our delivery schedules have been shifted into, 2023, total demand under most APAs remains unchanged.

Okay, Let's go to slide 13.

With all this in mind today, we are revising our 2022 full-year revenue guidance to $2, to $2.3 billion, and we'll talk more about this during our call today.

Here on the left side are the immune responses. After two doses against prototype B, a one two and be five you can see there are 100% of the parts of the Cerro converted after two doses.

Through our commercial readiness efforts and global label expansion to date, we believe, we are laying the foundation for a successful transition to a commercial market in 2023 and are poised to play a significant role in the future COVID-19 landscape.

The right hand side, we display their sponsors after three doses.

After Bruce boosting for all the variance you can see we've achieved the levels comparable to those seen in the phase III study there was associated with over 90% protection.

Okay, Let's go to slide 14.

With that, I'd now like to hand it over to Philip.

And here, we see data in a multi dimensional presentation of the immune responses from our U S. Mexico Phase III study called Antigenic cartography.

Thanks, Dan.

Please skip Slide 6 and jump to Slide 7.

Our clinical development program is collecting data to expand our label for additional indications, in populations.

This is my third displays the ability of the vaccine induced antibodies to recognize varian spike proteins.

The prototype is indicated in dark blue and the closer to the various appear to the dark Blue circle are better than me our sponsors recognize the variants each square the grid represents a two fold difference in antibody levels. Thus two squares represent a thoughtful difference.

On the left hand side, we show antibody binding after two doses and priming series, while there was 100% seroconversion to all of them across some various after two doses the energy distance between the matched prototype strain and Donald Trump's a variance range from seven nine to 11.8 fold differently.

On the right hand side that for single dose Spanish I think since decreases for all of the omicron variance with be a five decreasing to just $2 nine fold difference, which could be considered mass response.

Melinda language.

This analysis leads us to believe that as we immunized with additional doses of our recombinant spike protein vaccine, we have minimized <unk>.

And it began to observe a more universal life responses against parents.

Today, I'll discuss clinical updates for three key areas, homologous and heterologous boosting, and the development of our Omicron variant vaccine.

Okay, Let's turn to slide 15 for a quick summary.

Clearly, we don't know what will emerge after be five so forward triple the key issue to be addressed for all Covid vaccines.

Okay, let's go to Slide 8 and 9, please.

This is data recently made available by the U.S. government and NIH scientists identifying, a core of protection for our vaccine. This core of protection was identified in our U.S.-Mexico phase 3 study where a majority, of the cases were caused by variants.

That technology may be an attractive option as it provides both high levels of antibodies, recognizing variance and a durable immune response.

The study concludes that while both pseudo-neutralization and IgG can serve as cores of protection, the IgG seems to better predict protective responses. On the bottom of the slide are the antibody levels associated with various levels of protection.

This study confirms that IgG is critical to understand the protective efficacy of our, vaccine.

Now let's move to Slide 10, please.

Although it's not certain events specific vaccine will provide significant clinical benefit whereabouts are waiting a number of cost structure in clinical studies and I'll describe those.

What's displayed here is the immune response kinetics from our U.S.-Australia study after, two-dose priming series, a boost at six months, and another boost at 12 months, is boosted with a single dose, followed by a slower decay over the subsequent six months, and finally, a very good boost with a fourth dose.

Okay.

Those studies in a couple of slides, but first let's move through slide 16 to slide 17, and talk about our pediatric development.

Give me a click.

This is the ongoing placebo controlled HD escalation study is evaluating the safety hematologic effectiveness and clinical efficacy in children six months to 11 years of age.

Here I've highlighted the antibody levels after the six-month boost are completely remain, over the level associated with protection in our Phase III study. This gives us confidence we maintain protective immune responses over time.

We will evaluate our standard two dose schedule six months boost.

Okay.

Study has three age band.

Thanks to the 11, two to five and six months to 23 months and the vaccine will be evaluated in a step wise approach.

So don't cohort in six to 11 year olds have already been enrolled and after the Cpus reviewed vaccination will continue.

It is ongoing in the U S and we plan to expand the study to the country as indicated on slide.

Let's go to slide 11, please.

Okay, Let's go to slide 19 to my last slide.

Right here is the antibody kinetics from our U.S.-Mexico Phase III study.

And this is the ongoing study that will compare the performance of our prototype vaccine to be one Barry in vaccine and it would be a 5 billion vaccine in adults, who have received two or more previous doses of mrna vaccine.

You can see a peak after two doses, which decays through month 11 with a high boost, with a single dose, achieving a 27-fold increase from the pre-boost levels.

Okay.

Group wide, it's been enrolled and I'll compare our prototype vaccine could be a one vaccine that's why it can be a one plus prototype format.

Give me a click.

And here what we've done is overlay the protective thresholds derived from the U.S. Government scientists over our vaccine response. You can see that seven months, this data predicts approximately 88 percent efficacy, and importantly, after the boost, high immune responses are achieved that are associated with more than, 95 percent protection.

Okay.

Let's go to slide 12.

We expect topline results towards the end of the third quarter and to initiate group two in the fourth quarter and the study will compare the various specific immune responses among the trial arms to support a data driven decision about the utility of Varian vaccines, if it applies to our adjuvant did recombinant protein technology.

Here we've displayed the immune responses of our prototype vaccine, what our prototype, vaccine induces against Omicron VA1 subvariants using our validated assay.

You see a very similar pattern to what you saw on the previous slide, and importantly, after boosting at 11 months, the antibody levels are comparable to the prototype responses we saw on the previous slide.

If it continues to be deemed desirable or goes to have varying vaccines ready for regulatory evaluation in the fourth quarter.

Okay.

Okay, Let me hand, it over to John for the commercial perspective.

Give me a build.

Thanks, Phil.

Now, let's discuss the status of our commercial rollout globally turning to the rollout.

And once again, we've applied the government correlative protection thresholds. You can see that significant protection can be expected after two doses, and a 95 protective, level is predicted after a boosting dose that was delivered at 11 months.

What I'd like to do is go to slide 21.

I remind you that the model was developed from our data in the phase three study in, which the majority of cases were caused by variants, suggesting relevance for this analysis.

Since the start of a commercial launch to date, we and our partners have delivered over 73 million doses of new Baxter that and kovacs around the world.

Okay.

Let's go to slide 13.

Jim mentioned this includes over 23 million doses delivered since the start of the third quarter, including $3 2 million doses delivered in the United States. We are pleased to report that our vaccine is now available in 47 states across the U S and vaccinations are underway.

Here on the left side are the immune responses after two doses against prototype VA1, VA2, and VA5.

You can see that 100 percent of the participants circumverted after two doses.

On the right-hand side, we display the responses after three doses.

After boosting for all the variants, you can see we've achieved the levels comparable to, those seen in the phase three study that was associated with over 90 percent protection.

Over 20 over 73 million doses delivered to date include deliveries by our partners into the old license territories serum Institute of India S. K Bioscience, and Takeda have all successfully delivered over 17 million doses to license territories since the start of our commercial launch including in Japan South.

Okay.

Let's go to slide 14.

And here we see data in a multidimensional presentation of the immune responses from, our U.S.-Mexico phase three study called antigenic cartography. This method displays the ability of the vaccine-induced antibody to recognize variants by proteins. The prototype is indicated in dark blue, and the closer the variants appear to the dark, blue circle, the better the immune responses recognize the variants. Each square in the grid represents a two-fold difference in antibody levels. Thus, two squares represent a four-fold difference.

On the left-hand side, we show antibody binding after two doses in the priming series.

While there was 100 percent circumversion to all Omicron sub-variants after two doses, the antigenic distance between the matched prototype strain and the Omicron sub-variants ranged from 7.9 to 11.8-fold different.

On the right-hand side, after a single dose, the antigenic distance decreases for all of, the Omicron variants, with VA5 decreasing to just 2.9-fold difference, which could be considered a matched response in the influenza language.

This analysis leads us to believe that as we immunize with additional doses of our recombinant, spike protein vaccine, we minimize the antigenic distance and begin to observe a more universal-like response against variants.

Okay, let's turn to slide 15 for a quick summary. Clearly we don't know what will emerge after BA5, so forward drift will be a key issue, to be addressed for all COVID vaccines, but boosting with our technology may be an attractive option as it provides both high levels of antibodies, recognizing variants, and a durable immune response.

Korea, India, Indonesia, and Thailand.

Receiving booster and adolescent label expansions globally has taken longer than expected and expanding our label as our core commercial priority.

When coupled with global oversupply this drove a shift in demand for our vaccine from the second quarter into the second half of the year and into 2023.

It is important to note that our total contracted demand remains mostly unchanged. Although after ongoing discussions with gaudy, we no longer expect to receive an order from the Quebec facility in 2022.

In the U K, we recently amended our supply agreement, which now includes the purchase of a minimum of 1 million doses and up to an additional 15 million doses contingent upon receiving supportive policy recommendations from the U K as policy, making body J C D I b.

The agreement also includes an option to purchase up to an additional 44 million doses through 2024.

And for Europe , we expect to deliver the remainder of our total order, which is currently 65 million doses from a previous 70 million doses in the second half of this year and into 2023.

Next label expansion, please turn to slide 22.

Although it's not certain a variant-specific vaccine will provide significant clinical, benefit, we're evaluating a number of constructs in clinical studies, and I'll describe those studies in a couple of slides, but first, let's move through slide 16 to slide 17 and talk about our pediatric development.

We're boosting today, we've received authorizations in Australia for homologous and heterologous boosting authorization in New Zealand and approval in Japan in partnership with Takeda.

Additionally, over a dozen policymaking body said issued guidance allow.

Allowing for the use of new the accident as a homologous and heterologous booster dose in adults, including Australia, Canada, Germany, South Korea and other markets.

Well boosting we've also completed additional submissions for authorization for boosting and the EU, Great Britain, and Switzerland, and will submit in the U S. By the end of this month.

For pediatric and adolescent label expansion today, we are expanding our label into adolescents ages 12 to 17, and we've already begun clinical development in Pediatrics ages six months.

11 years of age to support additional expansions to our label in the months to come.

For adolescents, we received authorization to date, and the EU, Australia, India, and Thailand, and partnership with serum Institute and in Japan in partnership with Takeda.

Importantly, following the European Commission's adolescent authorization at least two night tags in the EU has issued recommendations permitting the use of news accident as a third dose and or as the heterologous booster and adolescence 12 to 17.

We've also completed adolescent submissions in the U S. Great Britain, Canada, Switzerland, and New Zealand, Taiwan, and the World Health organization.

As I mentioned beyond adolescence, we also leverage data from our recently initiated phase II B three global clinical trial to pursue label expansion in younger children six months of age to 11 years six months to 11 years of age positioning us to capture significant market share in <unk>.

This is the ongoing placebo-controlled age de-escalation study that's evaluating the, safety, immunologic effectiveness, and clinical efficacy in children six months to 11 years of age.

We will evaluate our standard two-dose schedule with a six-month boost.

The study has three age bands, six to 11, two to five, and six months to 23 months, and the vaccine will be evaluated in a stepwise approach. The seven-month cohort in six to 11-year-olds has already been enrolled, and after the safety, is reviewed, vaccination will continue.

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The study is ongoing in the U.S., and we plan to expand the study to the countries indicated, on the slide.

Now please turn to slide 23.

Okay, let's go to slide 19, my last slide, and this is the ongoing study that will compare, the performance of our prototype vaccine to a BA1 variant vaccine and a BA5 variant vaccine in adults who have received two or more previous doses of mRNA vaccine. Group 1 has been enrolled, and we'll compare our prototype vaccine to a BA1 vaccine, as, well as a BA1 plus prototype format.

We expect top-line results toward the end of the third quarter and to initiate group, 2 in the fourth quarter.

In this study, we will compare the variant-specific immune responses among the trial arms to support, a data-driven decision about the utility of variant vaccines if it applies to our adjuvanted recombinant protein technology.

As we continue to supply our vaccine globally, we remain confident in our competitive product profile, including our vaccines efficacy well tolerated safety profile durability of protection and ability to address both current and future variant strains.

Recognizing our vaccines utility and the ongoing fight against COVID-19, our commercial efforts are also focused on driving uptake of a prototype vaccine.

And we've deployed branded and unbranded advertising campaigns in various markets to build awareness and promote broad a broad market access.

And finally, we are broadening our global commercial footprint and have established additional officers to execute locally in key markets around the world, including our new European Regional office in Switzerland, and expense and expansion into Asia Pacific currently underway in Australia and Singapore.

Looking ahead, we expect to see a transition from the pandemic phase to a more traditional commercial market in 2023, and the U S and other key high income country markets.

Now moving on to manufacturing regarding manufacturing over the past few years, we have rapidly built a global manufacturing and supply infrastructure to produce both antigen and adjuvant <unk>.

We are collaborating with our core partners and we are manufacturing at a consistent run rate that enables us to produce sufficient supply to meet global customer demand.

Our partner serum successfully passed a moat surpassed multiple regulatory inspections in the quarter and as our primary manufacturing partner for most of our global supply.

Our recent progress includes the addition of the S K bioscience to our EU manufacturing network.

And an expanded agreement with SK bioscience to support Overcrowd manufacturing.

S. K Bioscience will also manufacturer our vaccine and pre filled syringes. In addition to serum Institute in 2023.

Therefore, providing widespread availability of a pre formulated single dose pre filled syringe well maintaining two to eight C refrigerated stability and an expectation of up to 12 months of data.

Additionally, we continue to make progress to bring.

Our <unk> facility in.

In the Czech Republic, all along we remain on track to add no Vac CZ is the manufacturing node for our European supply and we now expect to submit to EMA in the third quarter.

Combination of serum Institute S. K bio <unk> facility provides for a robust manufacturing infrastructure for supply of Covid vaccine and others into the foreseeable future.

We expect that in 2023 with indications achieved four boosting adelaar.

Adolescence chills.

Children six months of age and older.

Our bivalent N or monovalent variant vaccine option.

And our strong global manufacturing network, we will be poised for success in our commercial market.

With that I'd now like to turn it over to Jim to discuss our financial results.

Alright, Thank you John .

Please turn to slides 24 and 'twenty five.

I'll begin by providing an overview of our second quarter 2022, total revenue performance net income and cash position.

Then I'll discuss our quarterly results in additional detail and provide commentary on our revised full year 2022 to revenue guidance.

In the second quarter of 2022 we recorded a $186 million in total revenue.

Our net loss.

$510 million.

We ended the period with one 4 billion in cash.

Please turn to slide 26, well provide a comprehensive overview of our second quarter results.

The second quarter of 2022, we recorded total revenue of 186 million compared to 298 million in the second quarter of 2021.

Total revenue for the second quarter included $55 million in product sales based on 3 million doses sold by Pneumovax.

23 million of royalties and other revenue, including the recognition of a $20 million milestone payment from Takeda related to our first commercial sale in Japan.

And 108 million in grant revenue from the U S.

Government.

Grant revenue for the second quarter of 2022 was lower as expected given the decrease in activities under our agreements with U S government and completion of the SAPIEN related activities in 2021.

We entered 2022 with approximately 800 million of funding remaining under our $1 8 billion of U S government agreements.

Back to record at least $400 million of this amount during 2022 with the remainder in 2023.

Our cost of sales for the second quarter of 2022 with <unk>.

271 million.

This in a bit more detail on the next slide.

R&D expenses for the second quarter of 2022 were $290 million compared to 571 million for the comparable period in 2021.

The decrease in the current quarter was primarily the result of lower clinical development activities for our COVID-19 vaccine.

The capitalization of manufacturing cost.

And a net benefit from previously recognized embedded lease costs for manufacturing supply agreements.

We expect our full year 2022, R&D expenses to be lower than 2021.

Additionally, we recorded selling general and administrative expenses of 108 million from the second quarter of 2022 compared to $73 million in the second quarter of 2021.

The increase quarter over quarter was the result of the commercial launch costs associated with our COVID-19 vaccine.

We expect our full year 2022, SG&A costs to increase compared to 2020 one.

We continue to enhance our commercial capabilities.

In 19 vaccine.

For the second quarter of 2022 we recorded a net loss of $510 million compared to a net loss of 352 million in the second quarter of 2021.

And finally, we continue to maintain a full tax valuation allowance and we ended the second quarter of 2022 with $1 4 billion in cash.

Please turn to slide 27, well discuss our cost sales in more detail.

Cost of sales for the second quarter of 2022 were $271 million and this includes $255 million related to excess obsolete or expired inventory and losses on firm purchase commitments under our third party supply agreements.

The recognition of these costs were driven by a substantial reduction of our expected deliveries to kodak's deferral of deliveries to other customers.

As a reminder, during 2021 and prior to regulatory authorizations for our COVID-19 vaccine certain manufacturing costs were expense research and development that would otherwise have been capitalized inventory.

Not for the reduced cost of inventory for the period full cost of sales in the second quarter would have been approximately $208 million.

We expect to utilize the majority of our reduced cost inventory during 2022.

Based on our standard costs, our COVID-19 vaccine.

<unk> gross margins on sales to high income countries are expected to be between 75% of product sales.

Please turn to slide 28, where we will provide an overview of our financial guidance for 2022.

As stated earlier, we are revising our full year 2022 total revenue guidance to two to $2 3 billion.

As a reminder, total revenue reflects all sources, including product sales something of accident by Novavax grants revenue royalties and other revenue.

Our revised guidance takes into account the demand and market supply dynamics discussed on the call today.

We look forward to sharing additional updates as we progress in coming quarters.

With that I'd like to turn it over to Stan to discuss.

Strategic priorities.

Thank you Jim.

In the coming months, we will remain focused on achieving our key strategic priorities for 'twenty two into that include continuing delivery of our vaccine globally maximizing our label with the addition of boosted in adolescent populations. This is critical to access global demand completing development of our own crime containing vaccines and piloted in the fourth quarter.

If it continues to be deemed desirable, our goal is to have variant vaccines ready for, regulatory evaluation in the fourth quarter.

<unk> and progression into phase II for COVID-19, influenza combination vaccines fall to enable initiation of our phase III study in 2023.

Okay, let me hand it over to John for the commercial perspective.

I believe that over time.

We're going to show that our vaccine will Dan.

Demonstrate longer lasting protection and other platforms that will show that uses a booster our vaccine can protect against a broader range of buyer experience.

It will be easier to use and it will be a minimal to combinations of respiratory viruses, including influenza.

Right.

It should translate into long term to our ability to build a significant share of the recurring COVID-19 work.

Thank you for your attention.

Thanks, Philip.

Now, let's discuss the status of our commercial rollout globally.

Now I'll turn it over to the operator for Q&A.

We will now begin the question and answer session.

Turning to the rollout, what I'd like to do is go to slide 21.

That's a question you May press Star then one on your touch on phone.

If youre using a speakerphone, please pick up the handset before pressing the keys.

To withdraw your question. Please press Star then two.

At this time, we will pause momentarily to assemble our roster.

Okay.

Okay.

Okay.

Our first question comes from Jordan Giordano with Cowen and co. Please go ahead.

Since the start of our commercial launch to date, we and our partners have delivered over, 73 million doses of Nuvaxavid and Covax around the world. As Stan mentioned, this includes over 23 million doses delivered since the start of the third, quarter, including 3.2 million doses delivered in the United States.

We are pleased to report that our vaccine is now available in 47 states across the U.S., and vaccinations are underway.

Our over 73 million doses delivered to date include deliveries by our partners into their, licensed territories. Serum Institute of India, SK Bioscience, and Takeda have all successfully delivered over, 17 million doses to licensed territories since the start of our commercial launch, including in Japan, South Korea, India, Indonesia, and Thailand.

Receiving booster and adolescent label expansions globally has taken longer than expected, and, expanding our label is our core commercial priority. When coupled with global oversupply, this drove a shift in demand for our vaccine from, the second quarter into the second half of the year and into 2023.

Hey, guys. Thank you so much for taking our questions maybe Larry can you just help me understand.

It is important to note that our total contracted demand remains mostly unchanged, although, after ongoing discussions with Gavi, we no longer expect to receive an order from the, COVAX facility in 2022. In the UK, we recently amended our supply agreement, which now includes the purchase, of a minimum of 1 million doses and up to an additional 15 million doses contingent upon receiving supportive policy recommendations from the UK's policy-making body, JCBI.

The agreement also includes an option to purchase up to an additional 44 million doses through 2024.

Exactly how the contract with the EU works you had previously said that they were 27 million doses.

And for Europe, we expect to deliver the remainder of our total order, which is currently 65, million doses from a previous 70 million doses in the second half of this year and into 2023.

Scheduled to be delivered in Q1, and 42 million doses for Q2 did that the current revenue. It looks like you felt the deliberate those doses like can you just explain like how exactly we should expect the revenue to be flowing and why.

Next, label expansion.

Please turn to slide 22.

We're only three months deliberate this quarter and then I have a couple of follow up.

Yeah. So this is Stan so actually we delivered the doses in the first quarter and then we delivered the doses or the second quarter. All those doses were actually in our warehouse or distribution center in Europe .

And the problem was as we had a.

<unk>.

It took longer to get through all of the internal whether it'd be internal I mean in country.

<unk> is to get the vaccine.

<unk> released and to the customer on time, so that we can book it in by June 30th and Unfortunately June 30th as a non movable master and we missed by a few weeks and so we had to actually all those doses.

Invoiced in July as I mentioned, we have I think since July 1st over $400 million worth of revenue just in that period alone.

That belongs in the second quarter, but we Miss June 30th.

Do we expect.

So I guess for Q2. The original agreement was for 42 million doses do you expect to realize or I guess invoice all of that was 42 million in Q3.

With the exception for.

I think either of them.

So I think as John mentioned.

All in all of these so these orders all the customers want to want to look and see whether they could get a delivery of the second quarter versus they're now moving to third or second or fourth is where we're trying to accommodate all of the customers requests by moving doses around so it's.

Bit of a moving target we don't see right now we don't see them, reducing their orders what we see is them reduce it would see the spread it out over.

An extra quarter or two.

So that's that's what we're looking at right now.

And so it's hard to say, what what's really going to happen there because it's hard to say with the surge in the fourth quarter is good day we.

We will do to those orders in.

For boosting to date, we've received authorizations in Australia for homologous and heterologous boosting, authorization in New Zealand, and approval in Japan in partnership with Takeda. Additionally, over a dozen policy-making bodies have issued guidance allowing for the use, of Nuvaxavid as a homologous and heterologous booster dose in adults, including Australia, Canada, Germany, South Korea, and other markets. For boosting, we've also completed additional submissions for authorization for boosting, in the EU, Great Britain, and Switzerland, and will submit in the U.S. by the end of this month.

For pediatric and adolescent label expansion, today, we are expanding our label into adolescents, ages 12 to 17, and we've already begun clinical development in pediatrics ages 6 months to, 11 years of age to support additional expansions to our label in the months to come. For adolescents, we've received authorizations to date in the EU, Australia, India, and Thailand, in partnership with Serum Institute, and in Japan in partnership with Takeda.

But the use of our vaccine as a booster.

Importantly, following the European Commission's adolescent authorization, at least two NITAGs, in the EU have issued recommendations permitting use of Nuvaxavid as a third dose and or as a heterologous booster in adolescents 12 to 17.

We've also completed adolescent submissions in the U.S., Great Britain, Canada, Switzerland, and New Zealand, Taiwan, and the World Health Organization.

As I mentioned, beyond adolescents, we also leveraged data from our recently initiated, Phase 2b3 global clinical trial to pursue label expansion in younger children, 6 months to 11 years of age, positioning us to capture significant market share in 2023.

We will do and how quickly that'll take our products. So it's it's a but we so there is moot.

But we haven't lost orders yet.

Got it. Thank you and then just as a follow up.

On what you just mentioned.

Q4.

Can you talk about nearly.

Jurisdictions.

Jinan Omicron adapted vaccine in default.

Can you talk about how do you see that regulatory question do you believe that you mentioned you don't expect any additional revenue.

Do you believe that you will be able to actually deliver.

Or.

Any.

Conspecific doses this year all of them.

And how does the regulatory process, Tim just given the fact that you are not going to have immunogen.

Immunogenicity data in time.

Yeah again, it's complicated times and it would take to what we're going to see us are having.

Now, please turn to slide 23.

As we continue to supply our vaccine globally, we remain confident in our competitive product, profile, including our vaccine's efficacy, well-tolerated safety profile, durability of protection, and ability to address both current and future variant strains.

Recognizing our vaccine's utility in the ongoing fight against COVID-19, our commercial efforts, are also focused on driving uptake of our prototype vaccine.

To that end, we've deployed branded and unbranded advertising campaigns in various markets to, build awareness and promote broad market access.

And finally, we are broadening our global commercial footprint and have established, additional offices to execute locally in key markets around the world, including our new European regional office in Switzerland and expansion into Asia Pacific currently underway in Australia and Singapore.

I guess, probably daily discussions about the use of our Wuhan $23, 73, vaccine, which which we have shown today a bit of the data that we've generated which shows that our vaccine is a booster actually is very effective.

Similarly, neutralizing protective levels of antibodies against five four P. A one.

So.

There is a discussion that we're having as to whether that should be used as a booster not just in other parts of the world who are also not convinced that may be evident.

By Valens as a way to go.

It's just it's not an answer a question you had it in the U S. We're having a discussion as to whether we should we should be shipping whether they should be buying or 'twenty.

23 73 for boosting.

It's all up for the year. This is August it's something that one would hope would be sold by now resolved by now but it's not.

So.

So we're.

We're we're in the mix of that discussion we.

We have good data for 'twenty 373, we will have.

Five vaccine, but as you pointed out it'll be later in the quarter and and I'm not sure if needed.

Got it.

So.

So just to confirm your you don't expect that the.

The army.

Omnicom specific b five.

You'll be able to deliver that this year.

No I didn't say, we won't be able to deliver this year just it'll be later is not gonna before October usage.

Got it thank you.

Yeah.

Thank you so much.

Our next question comes from Roger song with Jefferies. Please go ahead.

Great. Thank you for taking the question maybe just a couple.

Clarification.

Can you just provide that granularity for the Q2 two points can be built in I would say that the guidance specifically how.

How much does the U S government grant will be included because I've.

I think a weird U.

Crude the flying in Milan, I see that once you're into Q each quarter you get the number.

We recorded a 100 million per car that you expect another 200 million in the second half also in terms of the product sales I understand you say you have you can see Q deliberate or there may be the outstanding order.

I agree.

By a million doses.

Right.

I'm not counting what is the breakdown between that promise.

Yeah.

Sure.

Alright.

Grant.

Yeah, I'll I'll take care of the product sales to the U S government.

Second half.

We've decided we've we've we've we've.

So the government $3 2 million doses that are currently being used.

Sided with without more clarity from the U S government and we're just not going to put it in our forecast.

And I'm not sure that's my expectation, but that's all we know right now and so we're being very conservative on our forecast for the grant related I think Jim has said numbers mind, yeah. So.

The credit related for the remaining of the year should be just over should be over $200 million.

When you look at the midpoint of guidance relative to our sales.

Year to date.

Year to date.

Total revenue of 900 million, which leaves approximately one quarter of billion.

So I just shared that the grant revenue would be over.

200 million and therefore, the remaining billion would go towards E P D and loyalty.

Got it okay. Thank you.

And understanding that.

And shifts and particularly for the on the crop containing vaccine availability.

Maybe if you can share with that.

Expectation for that 20 County city and beyond particularly you mentioned the commercial market in the high income countries, including the U S. You and what do you think about the pricing environment.

The volume on the market share.

Florida Pneumatics.

Yeah.

Our vaccines.

Yeah.

Well, that's a very good question and I don't think we have.

Forecast for 'twenty three that we can share it I do think that maybe John can talk about it it will shift into our commercial work at a different price in a lot of different.

Looking ahead, we expect to see a transition from the pandemic phase to a more traditional, commercial market in 2023 in the U.S. and other key high-income country markets.

Yeah, I think we're expecting a shift out of the pandemic period into the commercial market in 'twenty, three but I think you're going to see that taking place at various times for various countries.

Couple of things here.

Now moving on to manufacturing. Regarding manufacturing, over the past few years, we have rapidly built a global manufacturing, and supply infrastructure to produce both antigen and adjuvant.

Today, we are collaborating with our core partners and we are manufacturing at a consistent, run rate that enables us to produce sufficient supply to meet global customer demand. Our partner, Serum, successfully passed multiple regulatory inspections in the quarter and, is our primary manufacturing partner for most of our global supply.

It's all.

Our recent progress includes the addition of SK Bioscience to our EU manufacturing network, and an expanded agreement with SK Bioscience to support Omicron manufacturing. SK Bioscience will also manufacture our vaccine in pre-filled syringes in addition to Serum, Institute in 2023, therefore providing widespread availability of a pre-formulated single-dose pre-filled syringe while maintaining 2 to 8C refrigerated stability and an expectation of up to 12 months of dating.

Additionally, we continue to make progress to bring our Novavax CZ facility in the Czech, Republic online. We remain on track to add Novavax CZ as a manufacturing node for our European supply, and we now expect to submit to EMA in the third quarter.

Based upon our assessment of where the market is heading which is a bit of a challenge as you can imagine, but a couple of fundamental pieces that were were confident about one is that this virus is not going away. It is gonna be a need for at least some annual re vaccination.

The combination of Serum Institute, SK Bioscience, and our CZ facility provides for a robust, manufacturing infrastructure for supply of COVID vaccine and others into the foreseeable future.

We expect that in 2023, with indications achieved for boosting adolescents, children 6 months, of age and older, a bivalent and or monovalent variant vaccine option, and our strong global manufacturing network, we will be poised for success in a commercial market.

We expect that that's probably going to look like something greater than the existing influenza market.

Could be from anywhere from 25% to 52% market size greater than what the current flu market is.

We would also reasonably expect that pricing will will will vary again country by country, but would look a lot like again, the premium priced influenza market in the U S. Proportionately that will be different in Europe and in other other countries you know as we said.

Said in the presentation. There are a number of things that have been obstacles for us in 'twenty two.

Booster label adolescent pediatric label and access into the U S market there for all of those obstacles I think will be cleared as we head into 2023.

I think as we get through 'twenty, three and get to peak non pandemic, but peak commercial revenue, we should expect to have a you know.

An expectation in the 20% to 25% market share of that commercial market going forward again all of this is very.

Speculative in nature, but based upon our analysis of the market to date and what we expect the total COVID-19 vaccine marketplace to look like going forward.

With that, I'd now like to turn it over to Jim to discuss our financial results.

Okay.

Great. Thank you and Florida kind of maybe just a last one related to the financial guidance.

Thank you, John.

Okay.

Can we get a sense of that a D.

The cash flow.

That's kind of where you are maybe.

Please turn to slides 24 and 25.

Particularly I think in the at the moment since may be related to the Opex I think you haven't seen the outback nowhere.

But the last year, but to what extent and also how should we think about next year.

Thank you.

Yeah.

You know, Mike we best to leave.

Leave the 2023 to a to a future conversation as we as we fully build out.

Commercial footprint.

With respect to to current year.

You you've got SG&A that came in.

Why not wait for the quarter, we do expect that to continue to trend up.

We build out our capabilities.

R&D.

We do expect R&D to be materially lower year over year than last year.

And of course, that's a point to the factors I mentioned previously everything from capping of supply of inventory to at least for the first half of the year or political spend and then finally, some favorability related to lease accounting.

And if so.

When you think about our cash position at 630, which reflected $1 4 billion in cash.

I'll begin by providing an overview of our second quarter 2022 total revenue performance, net income, and cash position.

He receivable of 200 million.

You add to that the feedback we just shared that we had colleague.

Call it orders in hand to today's call.

And the range of 400 million.

Yeah.

Good about our cash position as we continue to execute in the back half of 2022.

Yeah.

Great. Thank you think again, yeah, that's it that's.

Goodbye.

So I'll take the question.

Our next question comes from Matt Young.

Tony.

B Riley. Please go ahead.

Then I'll discuss our quarterly results in additional detail and provide commentary on, our revised full year 2022 revenue guidance. In the second quarter of 2022, we recorded $186 million in total revenue, a net loss, of $510 million, and we ended the period with $1.4 billion in cash.

Thanks for taking our questions and difficult number Mr. Digest here, so maybe just to.

Follow up on the under delivery versus in licensing process can.

Can you just clarify.

How does that differ for you versus ex EU territories, like Canada, Australia, and UK and and.

If you are able to comment on.

There is a real time inventory stand right now.

And just going back to Jim's comment on how should we think about this.

You know right down sort of going forward and if that needs to be monitored into into cost of sales going forward and then I haven't got the follow ups.

Okay.

Please turn to slide 26 where I'll provide a comprehensive overview of our second quarter results.

I'm happy to take of course, the Rev Rec piece.

And then I'm glad to speak to the 255 million charge, we took this quarter to Cogs and what it means prospectively.

For the second quarter of 2022, we recorded total revenue of $186 million compared to, $298 million in the second quarter of 2021. Total revenue for the second quarter included $55 million in product sales based on 3 million, doses sold by Novavax, $23 million of royalties and other revenue, including the recognition of a $20 million milestone payment from Takeda related to our first commercial sale in Japan, and $108 million in grants revenue from the U.S. government.

So with respect to our revenue recognition.

Grants revenue for the second quarter of 2022 was lower as expected, given the decrease, in activities under our agreements with the U.S. government and completion of the CEPI related activities in 2021. We entered 2022 with approximately $800 million of funding remaining under our $1.8 billion, in U.S. government agreements and expect to record at least $400 million of this amount during 2022 with the remainder in 2023.

Our cost of sales for the second quarter of 2022 were $271 million.

I'll discuss this in a bit more detail on the next slide.

R&D expenses for the second quarter of 2022 were $290 million compared to $571 million, for the comparable period in 2021. The decrease in the current quarter was primarily the result of lower clinical development, activities for our COVID-19 vaccine, the capitalization of manufacturing costs, and a net benefit from previously recognized embedded lease costs from manufacturing supply agreements.

Uniform globally.

We expect our full year 2022 R&D expenses to be lower than 2021.

Additionally, we recorded selling general and administrative expenses of $108 million, for the second quarter of 2022 compared to $73 million in the second quarter of 2021. The increased quarter of the quarter was the result of commercial launch costs associated, with our COVID-19 vaccine. We expect our full year 2022 SG&A costs to increase compared to 2021 as we continue to, enhance our commercial capabilities for our COVID-19 vaccine.

For the second quarter of 2022, we recorded a net loss of $510 million compared to a net, loss of $352 million in the second quarter of 2021. And finally, we continue to maintain a full tax valuation allowance and we ended the second, quarter of 2022 with $1.4 billion in cash.

And in all cases, it is upon transfer of title to our customers, which is a uniformly win when a customer takes possession of our product at their location.

Please turn to slide 27 where I'll discuss our cost of sales in more detail. Cost of sales for the second quarter of 2022 were $271 million and this includes $255 million, related to excess, obsolete, or expired inventory and losses on firm purchase commitments under our third party supply agreements. The recognition of these costs were driven by a substantial reduction of our expected, deliveries to COVAX and a deferral of deliveries to other customers.

As a reminder, during 2021 and prior to regulatory authorizations for our COVID-19 vaccine, certain, manufacturing costs were expensed to research and development that would otherwise have been capitalized to inventory. If not for the reduced cost of inventory for the period, full cost of sales for the second quarter would have been, approximately $280 million. We expect to utilize the majority of our reduced cost inventory during 2022.

Based on our standard cost, our COVID-19 vaccine gross margins on sales to high income countries are expected to be, between 70 and 85% of product sales.

So that's that is true in Europe and elsewhere.

Please turn to slide 28 where we'll provide an overview of our financial guidance for 2022.

With respect to the $255 million charge.

As stated earlier, we are revising our full year 2022 total revenue guidance to $2 to $2.3 billion. As a reminder, total revenue reflects all sources including product sales of Novavax, grant revenue, royalties, and other revenue. Our revised guidance takes into account both the demand and market supply dynamics discussed on the call today.

We look forward to sharing additional updates as we progress in coming quarters.

With that, I'd like to turn it over to Stan to discuss our upcoming strategic priorities.

This is a function of both.

Koufax.

Omission of our expectation to deliver against AR and inventory build that we had otherwise.

Thank you, Jim.

In the coming months, we will remain focused on achieving our key strategic priorities for 2022 that include continuing delivery of our, vaccine globally, maximizing our label with the addition of boosting in adolescent populations.

This is critical to access global demand, completing development of our Omicron-containing vaccine and filing in the fourth quarter, and progressing into phase two for our COVID-19 influenza combination vaccine, all to enable initiation of our phase three study in 2023.

I believe that over time, we're going to show that our vaccine will demonstrate longer-lasting protection than other platforms.

That's meant that we had otherwise been make it too.

To supply cutbacks.

For quite some time.

In addition to that.

As we watched the market dynamics play out with respect to global supply and demand.

Certain raw materials and semi finished goods.

We're subject to potential expiry.

So.

What you are seeing in for us this quarter.

Reflection of that.

Call It recalibration.

And.

I'm not sure you're you're tracking the earnings for a call it COVID-19 peers.

Very similar story elsewhere as well.

Absolutely gasification, Thank you and yes that is the case.

So and then on the boosted illegal EU and also importantly, when you did your C V I.

It will show that used as a booster, our vaccine can protect against a broader range of virus variants.

It will be easier to use, and it will be amenable to combinations of respiratory viruses, including influenza.

Could you fill it if you could give some update.

If I'm right, these attributes should translate in the long term to our ability to build a, significant share of the recurring COVID market.

Update on how far along we are in.

And also on the.

The U K shipments, what's the expectation to do that.

To commence so appreciate the update on the revised contract you have and just maybe a higher level question as you've tracked market share country by country that you do have the booster approval.

In any case studies.

One good draft, then to sort of think.

Think of a new accelerated market share tracking versus tied up for a booster shot up her mind any vaccine.

Right. So just as far as where we are with the booster indication in Europe and other territories, but those are in process I would say they have all the information. They have the same information that was evaluated by the regulators in Japan, Australia, and New Zealand, where we received.

Favorable approvals and we're just working through their process and.

My expectation is that we'll be hearing us from those regulators in the next handful of.

Days to weeks.

We don't control that process obviously.

What we do know.

Where the data is available where where our vaccine is available alongside other vaccines.

People are making choices.

We are seeing people ask for vaccines and booster indication, even when we don't have a label indication in certain territories, such as in Korea or Australia on site.

That's the only reason would change, but when we look at the historic data before we got the label indication there.

So we know people are choosing to go there.

The exact amount and how frequently they do that is really a function of the policy recommendations in each territory. So we know where we have a relatively.

Good recommendations such as Korea is happening at a very high rate compared to where we have more restrictive recommendations lets say in Germany.

Thank you for your attention.

Yeah.

Thank you and my final question on the capital allocation.

Given the dynamics you guys talked about sort of cash growing them.

And revenue recognition guidance.

How long would you be thinking of.

Looking like that might be coming up in February .

I'll now turn it over to the operator for Q&A.

Could you provide some comments on that.

We will now begin the question and answer session.

To ask a question, you may press star then 1 on your touch-tone phone. If you are using a speakerphone, please pick up the handset before pressing the keys.

Yes, certainly certainly.

So for folks who aren't familiar with our balance sheet. There's a 325 million convert that matures in February of next year.

To withdraw your question, please press star then 2.

At this time, we will pause momentarily to assemble our roster.

Our first question comes from Georgi Yordanov with Cohen Co.

We have not stated a specific intent to two.

To do anything with respect to for example, refinancing or perhaps just simply paying off.

We continue to have confidence in our <unk>.

Forward looking your ability to.

Deliver on our sales and generating cash flow and we'll evaluate our options in the coming months and should we think it best serve shareholders and and dependent of course on capital market's dynamics.

Please go ahead.

Thanks for taking my questions.

Hey, guys.

Our next question comes from Eric Smith.

With J P. Morgan. Please go ahead.

Hi, good evening, thanks for taking the questions I just wanted to pick up on the Cogs expectation in the second half.

The write downs this quarter.

Looking at third party data, there's still seemingly a fair amount of inventory in the EU, that's yet to be.

And distributed so I guess can you talk a little bit about expectations for <unk>, how much of the current inventory could rollover into 2023 should we anticipate significant.

I guess some amount of inventory on hand being at risk in the second half.

And then.

Just coming back to the U S revenue piece, if I heard correctly, you don't anticipate any there's no chronic.

Product revenues from the U S. This year.

Nevertheless, I am curious to know whether additional orders are made whether they would count against the balance under the BARDA agreement of 110 million doses or whether you might look to move toward more traditional our traditional traditional purchasing model.

Sort of outside the existing contracts, an earlier timeframe for 'twenty three and beyond thanks.

Yes.

Okay.

Yeah.

So so.

So Eric there's a couple of pieces to parse out there so.

The revenue and the write off of product are somewhat related and so Jim can talk more to that but any any expectation that we would have inventory.

That would not be shipped.

Jim has already reserved amazing adjustment for that any of the product that we expect to ship for the balance of the year will be on top of whatever inventories are sitting there there are inventories that that all our inventory that fall under what Jim's assessment would be and then there are inventories that have already been invoiced.

Two the customer shipments.

Shipments in Q3, and Q4 and shipments that have been pushed off into Q1 and Q2 of next year.

Will remain unaffected by those inventory levels and in fact, you know we we we see this expecting expected wave.

All the additional vaccine Bush was taking place in the fall I think that that will help reduce some of the existing inventories of product that has been shipped and then we already have or are planning out what those shipments would be as I said for for Q3, and Q4, and then whichever pushed into into 2023. So.

I think that captures that piece Jim.

Maybe shelf life.

Currently we're at nine months and in most markets.

We would expect as we get later on theory that shelf life, what it would extend it to 211 months, but don't have that shelf life extension yet.

Right.

With respect to the charge in the period with $255 million.

Approximately 150 of that or $1 55 is that related to inventory in various stages. You know you've got raw materials semi finished and finished goods the.

Share of that which we felt could be subject to pretty weak.

Space.

And then.

With respect to the remaining 100 this has to do with unavoidable.

Purchase commitments in future periods.

Simply feel we no longer need to procure either manufacturing slots or certain raw materials and so we took a charge for that as well. So that's the breakdown of the components.

Now in terms of forward looking.

Well, if if we felt like there was more we would have of course reserve for it today and therefore, when we speak about our expected margins on a go forward basis and specifically tie.

Think of market share.

Third that we expect gross margins in the area.

And the range of 70% to 85% based upon our standard cost.

That certainly continues to be the case.

Yeah.

Okay, great. Thanks for taking the questions.

Yeah.

Our next question comes from Alex Stranahan with Bank of America. Please go ahead.

Thank you so much for taking our questions.

Oh, Hey, guys. Thanks for taking our questions just two quick ones from us.

First could you talk a bit more about the phase III design for the combo vaccine.

Have you reached an alignment with the FDA on an end points at this point and how should we think about a ballpark for for enrollment to reach a meaningful effect size given the.

The expected attack rate for both viruses and secondly, and apologies. If this was already asked but curious whether your current P. T. A's include Optionality for strain specific vaccines should they become available or whether this would trigger for sure at this point.

Contracts.

Maybe first, can you just help us understand exactly how the contract with the EU works?

So probably the first question is for me. So so we have not had our a pre phase III meeting with the agency yet for I'm, assuming you're talking about the influenza.

You had previously said that there were 27 million doses that were scheduled to be delivered, in Q1 and 42 million doses for Q2.

Covid combination vaccine and we're going to do that after we get the results from our next study.

Clearly there are data driven and they're gonna want to see that data before they can give his final.

Opinions on it although people have been running phase III studies against Blue for a while so our we have a pretty good idea at least what we'd like to do.

We haven't commented on the specifics of what that looks like.

As far as strange as provisions there are some of the agreements that will allow for flexibility and.

Strained changed and frankly that is fine with us given where we stand on our development activities that provides for upside.

Opportunity and the ability to ship.

Varian strain product no.

There's not been a whole lot of clarity.

On a country by country basis as to what they want most specifically in definitively has been the U S market.

Seeking at least the bivalent before the mrna vaccines, but all of the conversations we've been having with U K Europe , Australia.

New Zealand, Canada et cetera.

There have not been absolute decisions made regarding a strange strange product.

Thank you.

Does that, the current revenue looks like basically you failed to deliver those doses?

Our next question comes from Matt <unk> with B Riley.

Yeah, Hey, Thanks for taking my follow up just really quick you did I'll.

Can you just explain how exactly we should expect the revenue to be flowing and why we're, only getting those delivered this quarter?

Get us a lot about the you know the timeline so it'd be one specific vaccine, which you have in the clinic and sort of the CMC scale up process. How that's kind of go guys. Ben you know if you are looking to build any inventory for that versus you know wanting to work on the BFA specific vaccine could you just.

Sort of comment a little bit on board.

Both data and then the CNC specific activities for that vaccine.

And then I have a couple of follow-ups.

Yeah, Hey, Hey, this is Greg here.

So the clinical trial as Phil noted has been enrolled.

Thank you.

We're doing the assays and so we expect towards that towards the end of quarter three to provide the clinical result, it where we're actively working on a it will be five and you. Our expectation is we can have a stockpile of material. However, you know we have to of course submit the regulatory package.

Yeah.

Sometime in quarter, four and so after that we're not sure what the timing will be how long will take the F. D. A to you to review that.

Well, just you know we'd like to kind of recapitulate, what Phil said, however in both instead as well we're increasingly.

Convinced that our current vaccine is suitable for the deployment in the context of a boosting said as you know we provide very good data showing that our vaccine induces broadly recognition of antibodies are broadly recognized various including B five very nicely.

We're.

I think there's a fair amount of discussion currently with many of the customers wouldn't exactly what to do we think there's a lot of merits in deploying their curve.

On a vaccine that is authorized in many cases, it's being used as a booster and obviously in our data. It is really strongly inducing this broad recognition of antibodies. It broadly recognized do varies when we boost and we think that's very strong theres, a very strong case for deployment of that vaccine.

Got it appreciate you taking the follow ups. Thank you Dan.

So this is Stan.

Thank you.

So actually, we delivered the doses in the first quarter and then we delivered the doses, in the second quarter. All of those doses were actually in our warehouse, our distribution center in Europe.

And the problem was is we had a, it took longer to get through all of the internal, what I, mean internal, I mean in-country processes that get the vaccine released and to the customer on time so that we could book it by June 30th.

And unfortunately, June 30th is a non-movable master and we missed by a few weeks. And so we had actually all those doses got invoiced in July, as I mentioned.

We have, I think since July 1st, over $400 million worth of revenue just in that period, alone that belonged in the second quarter, but we missed June 30th.

This concludes the question and answer session I would like to turn the conference back over to Stan <unk> for closing remarks.

Do we expect, so I guess for Q2, the original agreement was for 42 million doses.

Do you expect to realize, or I guess invoice all of those 42 million doses in Q3 with the, exception for Q3?

So I think as John mentioned, all of these, so these orders, all the customers want to, look and see whether they can get a delivery in the second quarter versus they're now moving to third or second or fourth, and we're trying to accommodate all of the customers' requests by moving doses around. So it's a bit of a moving target.

We don't see, right now, we don't see them reducing their orders.

What we see is them reducing, what, seeing them spreading it out over an extra quarter, or two.

And so that's what we're looking at right now.

You know, and so it's hard to say what's really going to happen there because it's hard to, say what the surge in the fourth quarter is going to, will do to those orders and.

Thank you.

Thanks to everyone for joining today's call, let me close by thanking all of those who made possible. This could progress through the second quarter, including all of our employees selfish surplus contributions of their trial participants for the continued support from our partners around the world.

And we look forward to reporting on additional milestones in the coming months. So.

It could be another tool.

The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

Thank you all for joining us today.

We're going to be talking a little bit about what the use of our vaccine as a booster will do and how quickly that will take a product.

So it's moved, but we haven't lost orders yet.

You may now disconnect.

Can you talk about clearly most jurisdictions are now expecting an Omicron adaptive vaccine in the fall?

Can you talk about how do you see that regulatory process?

Do you believe that you mentioned you don't expect any additional revenue in the U.S.?

Do you believe that you will be able to actually deliver any Omicron-specific doses this year?

And how does the regulatory process stand, just given the fact that you are not going to have immunogenicity data in time?

Yeah, again, these are complicated times, and I think that what we're going to see is we're having, I guess, probably daily discussions about the use of our Wuhan 2373 vaccine, which we have shown today a bit of the data that we've generated, which shows that our vaccine is a booster.

Our vaccine is very effective simulating neutralizing and protective levels of antibodies against BA5, BA4, BA1.

So there's a discussion that we're having as to whether that should be used as a booster, not just in other parts of the world who are also not convinced that maybe having a BA5 bivalent is the way to go.

It's not an answered question yet.

And in the U.S., we're having a discussion as to whether we should be shipping, whether they should be buying our 2373 for boosting in the United States.

It's all up in the air.

This is August.

It's something that one would hope would be solved by now, resolved by now, but it's not.

So we're in the mix of that discussion.

We have good data for 2373.

We will have a BA5 vaccine, but as you point out, it will be later in the quarter, and I'm not sure it's needed.

Got it.

So just to confirm, you don't expect that all the concepts of BA5, you'll be able to deliver that this year?

No, I didn't say we won't be able to deliver it this year. It just will be later.

It's not going to be for October usage.

Got it.

Thank you.

Thank you so much.

Our next question comes from Roger Song with Jeffries.

Please go ahead.

Great.

Thank you for taking the question.

Maybe just a couple clarifications.

Can you just provide the granularity for this 2 to 2.3 billion updated guidance, specifically how much this U.S. government grant will be included?

Because last time, I think you included 400 million.

I see the 1Q and 2Q, each quarter you delivered, you recorded 100 million per quarter.

Do we still expect another 200 million in the second half?

Also, in terms of the product sales, I understand you say you have EU and 3Q delivery order, maybe the outstanding order of another 500 million.

We've sold the government 3.2 million doses that are currently being used in the U.S.

And we decided without more clarity from the U.S. government that we're just not going to put in a forecast, and I'm not sure that's my expectation, but that's all we know right now, and so we're being very conservative on that forecast.

For the grant-related, I think Jim has that number in his mind.

Yeah, so the grant-related for the remaining of the year should be just over, or should be over $200 million.

When you look at the midpoint of guidance relative to our sales year-to-date, year-to-date total revenue of $900 million would leave approximately one and a quarter billion at the midpoint.

So I just shared that the grant revenue would be over $200 million, and therefore the remaining billion would go towards EPAs and royalty income.

Got it.

Okay, thank you.

And understanding this demand shift, and particularly for the Omicron-containing vaccine availability, maybe, Stan, if you can share with us the expectation for the 2023 and beyond.

Particularly, you mentioned the commercial market in the Hong Kong country, including U.S. and EU, and what do you think about the pricing versus the volume or the market share for Novavax against other vaccines?

Yeah, so, well, that's a very big question, and I don't think we have a forecast for 2023 that we can share.

I do think that maybe John can talk about it.

It will shift into a commercial market at different prices, a lot of different...

Yeah, I think we're expecting a shift out of the pandemic period into the commercial market in 2023, but I think you're going to see that taking place at various times for various countries.

A couple of things here, and it's all based upon our assessment of where the market is heading, which is a bit of a challenge, as you can imagine, but a couple of fundamental pieces that we're confident about.

One is that this virus is not going away. There's going to be a need for at least some annual revaccination.

We expect that that's probably going to look like something greater than the existing influenza market.

It could be from anywhere from 25% to 52% market size greater than what the current flu market is.

We would also reasonably expect that pricing will vary, again, country by country, but would look a lot like, again, the premium-priced influenza market in the U.S.

Proportionally, that will be different in Europe and other countries.

As we said in the presentation, there are a number of things that have been obstacles for us in 22, booster label, adolescent pediatric label, and access into the U.S. market.

Therefore, all those obstacles, I think, will be cleared as we head into 2023.

I think as we get through 2023 and get to peak non-pandemic but peak commercial revenue, we should expect to have an expectation in the 20% to 25% market share of that commercial market going forward.

Again, all of this is very speculative in nature, but based upon our analysis of the market to date and what we expect the total COVID vaccine marketplace to look like going forward.

Great.

Thank you.

Thank you, Stan for the color.

Maybe just the last one related to, the financial guidance.

Can we get a sense of the cash flow and the EPS this year, maybe beyond?

Particularly, I think the moving piece may be related to OPEX.

I think you have been saying the OPEX is lower this year versus last year, but to what extent and also how should we think about next year and beyond?

Thank you.

Yeah.

You know, likely best to leave the 2023 to a future conversation as we fully build out our commercial footprint with respect to current year.

You know, you've got SG&A that came in at 108 for the quarter. You know, we do expect that to continue to trend up as we build out our capabilities.

R&D, we do expect R&D to be materially lower year over year than last year. And of course, that's linked to the factors I mentioned previously.

Everything from capping of supply to inventory to at least for the first half of the year, lower clinical spend.

And then finally, some favorability related to lease accounting.

And so, you know, when you think about our cash position at 630, which reflected $1.4 billion in cash and a receivable of $200 million, you add to that the feedback we just shared that we have, call it orders in hand through today's call, in the range of $400 million, we feel good about our cash position as we continue to execute in the back half of 2022.

Great.

Thank you.

Thank you, Jim.

Yeah, that's it for us.

Thank you for taking the question.

Our next question comes from Mayong Montani with Beer Alley.

Please go ahead.

Thanks for taking our questions and difficult numbers to digest here.

So, maybe just to, follow up on the delivery versus invoicing process.

Can you just clarify, you know, how does that differ for EU versus ex-EU territories like Canada, Australia, and UK?

And if you are able to if you are able to comment on, you know, where does the real-time inventory stand right now?

And just going back to Jim's comment on, you know, how should we think about this, you know, write down sort of going forward and if that needs to be modeled into cost of sales going forward.

And then I have a couple of follow-ups.

Okay.

I'm happy to take, of course, the REVREC piece, and glad to speak to the $255 million, charge we took this quarter to COGS, and what it means perspectively.

So with respect to our revenue recognition, it's uniform globally, and in all cases, it, is upon transfer of title to our customers, which is uniformly when a customer takes possession of our product at their location. So that's true in Europe and elsewhere.

With respect to the $255 million charge, this is a function of both the COVAX omission of, our expectation to deliver against an inventory bill that we had otherwise, an investment that we had otherwise been making to supply COVAX for quite some time.

In addition to that, as we watch the market dynamics play out with respect to global supply, and demand, certain raw materials and semi-finished goods were subject to potential expiry.

And so what you are seeing for us this quarter is a reflection of that, call it recalibration, and I'm not sure you're tracking the earnings for our COVID peers, it's a very similar story elsewhere as well.

Helpful clarification, thank you, and yes, that is the case for the peers also.

And then on the booster label with EU and also importantly with UK GCVI, could you, Philip, if you could give some update on how far along we are, and also on the UK shipments, what's the expectation for that to commence?

I appreciate the update on the revised contract you have.

And just maybe a higher level question, as you track market share country by country, where you do have the booster approval, are there any case studies one could reference to sort of think of new activated market share tracking versus the third or fourth booster shot of mRNA vaccine?

Right, so just as far as where we are with the booster indication in Europe and other, territories, well, those are in process, they have all the information, they have the same information that was evaluated by the regulators in Japan, Australia, and New Zealand, where we received payroll approvals, and we're just working through the process.

My expectation is that we'll be hearing news from those regulators in the next handful, of, you know, days to weeks.

We don't control that process, obviously, they do.

What we do know.., where the data is available, where our vaccine is available alongside other vaccines, is that people are making a choice.

We are seeing people, ask for our vaccines in the booster indication, even when we don't have a label indication in certain territories, such as in Korea or Australia, let's say.

Australia recently changed, but when we look at the historic data before we got the label indication there.

So we know people are choosing to go there.

The exact, amount and how frequently they do that is really a function of the policy recommendations in each territory.

So we know where we have, relatively good recommendations, such as Korea, is happening at a very high rate compared to where we have more restricted recommendations, let's say in Germany.

Thank you.

And my final question on the capital allocation, you know, given the dynamics you guys talked about for cash flow and revenue recognition cadence, how might you be thinking of the convert that might be coming up in February?

Could you provide some comments on that?

Yes, certainly.

So for folks who are familiar with our balance sheet, there's a, 325 million convert that matures in February of next year.

To date, we have not stated a specific intent to, do anything with respect to, for example, refinancing or perhaps just simply paying off.

We continue to have confidence in our, you know, forward-looking ability to, deliver on our sales and generate cash flow, and we'll evaluate our options in the coming months as we think it best serves shareholders and dependent, of course, on capital markets dynamics.

Thanks for taking our questions.

Our next question comes from Eric Joseph with JP Morgan.

Please go ahead.

Hi, good evening.

Thanks for taking the questions.

I just wanted to pick up on the COGS expectation in the second half, given the write-down this quarter.

If we're looking at third-party data, there's still, you know, seemingly a fair amount of inventory in the EU, and we're still looking at a fair amount of inventory in the US. If we're looking at third-party data, there's still, you know, seemingly a fair amount of inventory in the EU that's yet to be, and distributed.

So, I guess, can you talk a little bit about shelf-life expectations for Nivaxavid?

How much of the current inventory could roll over, into 2023?

Should we anticipate significant, I guess, amount of inventory on hand being at risk in the second half?

And then, just coming back to the US revenue piece, if I heard correctly, you don't anticipate any additional chronic revenues from the US this year.

Nevertheless, I am curious to know whether, if additional orders are made, whether they would count against the balance under the BARDA agreement of 110 million doses or whether you might look to move to a more traditional purchasing model sort of outside the existing contracts and earlier time frame for 2023 and beyond.

Thanks.

So, Eric, there's a couple of pieces to parse out there.

So the revenue and the write-off of product are somewhat related, and so Jim could talk, more to that.

But any expectation that we would have inventory that would not be shipped, Jim has already, reserved and made an adjustment for that.

Any of the product that we expect to ship for the balance of the year will be on top, of whatever inventories are sitting there.

There are inventories that are our inventory that fall under what Jim's assessment would, be.

And then there are inventories that have already been invoiced to the customer.

Shipments in Q3 and Q4 and shipments that have been pushed off into Q1 and Q2 of next, year will remain unaffected by those inventory levels.

In fact, you know, we see this expected wave of additional vaccine boosters taking place, in the fall.

I think that that will help reduce some of the existing inventories of product that has, been shipped.

And then we already have – are planning out what those shipments would be, as I said, for Q3 and Q4 and then whatever is pushed into 2023.

So I think that captures that piece, Jim.

And then maybe shelf life.

Currently we're at nine months in most markets.

We would expect as we get later on in the year that shelf life would extend to 11 months, but don't have that shelf life extension yet.

Exactly.

You know, with respect to the charge in the period of $255 million, approximately $150, of that or $155 of that related to inventory in various stages. You know, you have raw materials, semi-finished and finished goods, the share of that which, we felt could be subject to expiry, we expensed.

And then with respect to the remaining $100, this has to do with unavoidable, you know, fixed purchase commitments in future periods where we simply feel we no longer need to procure either manufacturing slots or certain raw materials.

And so we took a charge for that as well.

So those – that's the breakdown of the components.

Now, in terms of forward looking, well, if we felt like there was more, we would have, of course, reserved for today and therefore when we speak about our expected margins on a go forward basis and specifically to high income markets, you know, I shared that we expect gross margins in the area of – in the range of 70 to 85 percent based upon our standard cost.

And that certainly continues to be the case.

Okay, great.

Thanks for taking the questions.

Our next question comes from Alex Stranahan with Bank of America.

Please go ahead.

Hey, guys.

Thanks for taking our questions.

Just two quick ones from us.

First, could, you talk a bit more about the phase 3 design for the combo vaccine?

Have you reached an alignment with the FDA on endpoints at this point?

And how should we think about a ballpark for enrollment to reach a meaningful effect size given the expected attack rate for both viruses?

And secondly, and apologies if this was already asked, but I'm curious whether your current ATAs include optionality for strain-specific vaccines, should they become available, or whether this would trigger additional contracts?

Thanks.

The first question is for me.

So we have not had our pre-phase 3 meeting with the agency, yet for, and I'm assuming you're talking about the influenza COVID combination vaccine.

And we're going to do that after we get the results from our next study.

You know, clearly, they're data-driven.

They're going to want to see that data before they can give us final opinions on it.

Although people have been running phase 3 studies against flu for a while, so we have a pretty good idea, at least what we'd like to do.

But we haven't commented on any specifics of what that design looks like.

As far as strain change provisions, there are some of the agreements that will allow, for flexibility in strain change.

And frankly, that is fine with us, given where we stand in our development activities.

That provides for upside opportunity and the ability to ship variant-strain product.

Now, there's not been a whole lot of clarity on a country-by-country basis as to what they want.

Most specifically and definitively has been the U.S. market seeking at least a bivalent for the mRNA vaccines.

But all the conversations we've been having with U.K., Europe, Australia, New Zealand, Canada, et cetera, there have not been, absolute decisions made regarding a strain change product.

Thank you.

Our next question comes from Mayank Mamtani with B Reilly.

Hey, thanks for taking my follow-up.

Just really quick, we get asked a lot about the, timelines for BA1 specific vaccine, which you have in the clinic and sort of the CMC scale-up process, how that's kind of progressed.

And, you know, if you are looking, to build any inventory for that versus, you know, wanting to work on the BFI specific vaccine, could you just sort of comment a little bit on both data and then the CMC specific activities for that vaccine?

Yeah, hey, it's Greg here.

So, the clinical trial, as Phillip noted, has been enrolled and we're doing the assays.

And so we expect towards the end of quarter three to provide the clinical result.

And we're actively working on, you know, BA5 and, you know, our expectation is we can have a stockpile of material.

However, you know, we have to, of course, submit the regulatory package sometime in quarter four.

And so after that, we're not sure what the timing will be, how long it will take the FDA to review that.

So what just, you know, I would like to kind of recapitulate what Phillip said, however, and both, and Stan as well, you know, we're increasingly convinced that our current vaccine is suitable for deployment in the context of a boosting study.

As you know, we provide very good data showing that our vaccine induces broadly recognized, you know, antibodies have broadly recognized variants, including BA5 very nicely.

And, you know, we're, I think there's a fair amount of, you know, discussion currently with many of the customers on exactly what to do.

We think, you know, there's a lot of merits in deploying our current, you know, Wuhan vaccine that is authorized and in many countries being used as a booster. And obviously in our data, it is really strongly inducing this broad recognition of antibodies that broadly recognize new variants when we boost. And we think that's a very strong, there's a very strong case for deployment of that vaccine.

Thank you.

Got it.

I appreciate you taking the follow-up.

Thank you very much.

Thank you.

This concludes the question and answer session.

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

Thank you.

Thanks to everyone for joining today's call.

I'd like to close by thanking all those who have made possible the significant progress, during the second quarter, including all of our employees, selfless contributions of our trial participants, and the continued support from our partners around the world.

And we look forward to reporting additional milestones in the coming months, so thanks, for being on the call.

The conference is now concluded.

Thank you for attending today's presentation.