Q1 2023 Novavax Inc Earnings Call

Good morning, and welcome to <unk> first quarter 2023 financial results and operational highlights conference call. All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.

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

To ask a question you May Press Star then one on your Touchtone phone to withdraw your question. Please press Star then two please.

Please note. This event is being recorded I would now like to turn the conference over to Erica Schultz Senior Director Investor Relations. Please go ahead.

Yeah.

Good morning, and thank you all for joining us today to discuss our first quarter 2023 operational highlights and financial results. Our 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. Please.

Please turn to slide two.

Before we begin with prepared remarks, I need to remind you that this presentation includes forward looking statements, including information related to the future of Novavax. Its key strategic priorities operating plans objectives, and prospects and its future financial or business performance conditions or strategies.

Including projections on revenue and reductions in expenses and its global restructuring and cost reduction initiatives.

Key commercial goals, including transitioning to a traditional commercial model future product demand trends the ongoing development of our vaccine candidates, including advancing multiple variant strains strain selection anticipated timing of trials and results.

Hope timing and outcome of future regulatory filings and actions.

The efficacy safety and intended utilization of our vaccine candidates, including against Covid variance the global market opportunities for our vaccine candidates, our manufacturing capacity and the future availability of our vaccine candidates.

A key upcoming milestones.

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 statement.

Additional information regarding these factors appears under the heading cautionary note regarding forward looking statements in the slide deck, we issued this morning and under the heading risk factors in our most recent Form 10-K, and subsequent form 10, Qs filed with the security and Exchange Commission and available at Www Dot.

C C duck off.

And on our website at Www Dot 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.

Please turn to slide three.

This presentation also includes references to non-GAAP financial measure, which is forward looking information for R&D and SG&A expense as adjusted to exclude one time restructuring costs as described on this slide.

Please turn to slide four.

Joining me today is John Jacobs, our President and CEO , who will provide an update on our progress during the quarter for our three key priorities.

Additionally, Dr. Phillip Dubowsky President of research and development will discuss our Covid variant strain development and pipeline and John <unk>, Chief Commercial Officer, and Chief business Officer will provide an update on our commercial activities.

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

Rick Crowley Chief Operations Officer will also be available for the Q&A section at the end of today's call.

I would now like to hand, the call over to John Jacobs, Please turn to slide five.

Thank you Erica and thank you everyone for joining us today to discuss our first quarter 2023 financial results and operational highlights.

We have an especially eventful call today because in addition to our first quarter results. We will also be discussing significant measures, we have taken to reduce our costs and restructure our organization.

And we look forward to sharing some encouraging topline phase two results for our combination flu Covid program.

The last time, we worked together was in February for the Q4 earnings call.

When I was only a few weeks on the job as the new CEO of Novavax.

At that time I shared with you why I was excited to join the company My early observations and what our near term top priorities are based on those early observations first delivering a competitive product for the upcoming fall season.

Second reducing our rate of spend managing our cash flow and evolving our scale and structure.

And finally, driving additional value from our technology platform and portfolio.

Now as I joined you for the second time with a full quarter of listening and learning behind me I must say that this recent experience has further strengthened my resolve and confirmed for me the strong potential that our company has to make a positive difference in global public health.

As we continue to execute on our priorities if successful I believe we will place novavax in a stronger position for future growth and value creation.

I'm encouraged by the progress we've made to date.

And while we know there are still significant challenges ahead of us before we can claim success.

The leadership team and I will remain completely focused.

During the quarter, we have taken decisive actions and made progress on each of our three priorities, which I would like to outline for you next.

Let's talk about our first priority <unk>.

Delivering a competitive product for the upcoming 2023 fall vaccination season.

This includes aligning our COVID-19 vaccine with regulatory and public health guidance on strain selection and making our product available in the right quantities and in a smaller unit competitive product presentation.

Throughout the quarter, we have made significant progress on this priority a critical component of which has been the collaborative relationship with the FDA and other global regulatory authorities as we prepare for the fall campaign.

As part of that effort and as we noted in the Q4 earnings call. We have been advancing multiple variant strain vaccine candidates in order to optimize our readiness for final strain selection for the upcoming fall season by the U S for a pack on June 15th.

Following the Fda's decision, we will then focus all necessary resources on advancing the required variant strain vaccine with the intent of having our product on the market for the fall vaccination campaign.

For the U S, which will be the first market to evolve to a commercial purchasing model John <unk>, Our chief commercial officer will talk about how we are preparing to make our vaccine available across the major distribution channels for the upcoming fall season.

This includes significant progress in our U S commercial team build out and our ongoing discussions and negotiations with customers ahead of the season.

Outside of the U S. We are pleased to report that we have secured approximately $800 million in potential API orders for 2023.

We are encouraged by our progress in this area and excited about the potential we have to positively impact global health of their updated vaccine this year.

Assuming we execute successfully on our plans for the U S and ex U S. We expect total revenue in the range of one four to $1 $6 billion for the year inclusive of product sales and grants.

Let's now move on to priority number two which is to reduce our rate of spend manage our cash flow and evolve our scale and structure.

Today, we announced that we are implementing a global restructuring and cost reduction initiatives, which will significantly reduce our expenses, while retaining the capabilities, we need to help drive results and build value in the future.

When fully implemented we expect these actions will reduce our combined annual R&D and SG&A expenses for 2024 by approximately 40% to 50% when compared to 2022.

Included in the plan, that's an approximate 25% reduction of our global workforce as well as a consolidation of our global facilities and infrastructure.

While reducing our workforce was certainly a difficult decision.

This was necessary as part of a comprehensive effort to better align our infrastructure and scale to the current global opportunity for our vaccine.

And ultimately to enhance our ability to help protect global health.

In addition to significantly reducing our scope scale and expense base in R&D and SG&A, we are aggressively addressing our significant onetime current liabilities.

To this end we are pleased to report that since our last interaction we've made significant progress in reducing these liabilities.

You'll hear more today about our cost management, our restructuring and cash flow from Jim Kelley, Our CFO later in the call.

And finally, let's discuss priority three which is to leverage our technology platform, our capabilities and our portfolio of assets to drive additional value beyond new backs of it alone.

We continue to explore opportunities and strategies to unlock additional value from our pipeline and our technology platform, including our matrix M adjuvant.

Regarding our pipeline we are pleased today to announce positive results from our phase II Covid influenza combination and standalone influenza vaccine dose confirming trial Dr.

Dr. Phillip Dubowski will update you on these data later in the call.

Depending on the outcome of the full data set which we expect to receive over the coming months, we will evaluate our options to advance this program through strategic collaborations and our other financing alternatives.

These positive results further validate our technology platform and are another example of the potential of our science to contribute to global public health.

Additionally, regarding our matrix M. Adjuvant, we continue to evaluate opportunities in advanced partnerships to leverage this unique asset this.

This includes our ongoing partnership with the serum Institute of India for their malaria vaccine or 'twenty, one that is formulated with our matrix M adjuvant.

This vaccine has now been authorized in Ghana and Nigeria.

The approval of this novel malaria vaccine with our matrix M. Adjuvant is another example of how we are working to extract additional value from our technology platform and our assets.

Regarding business and corporate development, we've been enhancing our internal focus and efforts on business and corporate development opportunities with the intention of positioning novavax to build additional value and opportunity through our proven technology platform and our pipeline of early and mid stage vaccine candidates.

This includes the potential for out licensing collaborations partnerships joint ventures ventures co promotion and other types of opportunities over time.

As I mentioned in my opening comments my experience at Novavax. The past several months has helped to reinforce my belief in the potential of our company and I am encouraged by our recent progress.

I also believe that our core business is robust and that our strategy is the right one to help us achieve our objectives.

Let me summarize those objectives, one more time for you as I close my opening comments.

First we intend to make our business even stronger through the successful development and launch of a competitive product for the fall vaccination season at.

At the same time, we are working towards building a solid financial foundation to help support long term growth and value creation and finally, we are working to leverage our proven technology platform pipeline of early and mid stage assets and fully integrated global capabilities to drive additional value over the long term be a clinical business and corporate.

Development activities.

As I noted during our Q4 call we intend to routinely shared with you both our potential opportunities as well as the challenges, we face and to provide balance and perspective on our business.

With that in mind, let me be clear.

2023, we will continue to be a challenging year for novavax.

Yes, we have made progress during the quarter, but we still faced several challenges and have significant work to do before we can fully achieve our objectives for the year.

In the coming months, our commitment is that we will continue to focus on our three priorities and put forward our best efforts in all that we do.

And we will do so with gratitude for the ongoing support of our key stakeholders.

Now I'd like to hand, it over to additional members of the team to discuss our results from the quarter and then more detail beginning with Philip Dubowski to discuss updates for our pipeline and Covid Varian strategy Philip.

Thanks, John Please turn to slide six.

Our research and development program remains focused on our Covid vaccine, while we have multiple ongoing studies to generate additional data needed to expand our label today I will update you on our business strategy in preparation for the 23 fall vaccination season, which as John discussed is our number one priority.

We also continue to advance our standalone influenza and Covid influence a combination vaccine candidates.

Show you some preliminary topline data from our phase II study.

Development of our other pipeline assets, including RSV remains paused, allowing us to focus our resources on the programs that are critical to our near term success.

Okay, let's turn to slide seven and discuss our bedroom strategy.

On our last earnings call, we describe our approach to developing and evaluating vaccines for different variants.

We've executed that strategy and continue to refine bearing strained development based on the evolving equity much of data and ongoing dialogue with the global regulators.

Displayed in this table are the recent appearance we are progressing through our various development platform.

Whenever a new variant emerges we manufacture the varian spike protein conduct preclinical studies to understand the variance ability to cross neutralized or escape immune responses from other strains.

The variance it continues to be a concern or an advanced into production of GMP Max of our seed and then to large scale manufacturer if warranted.

It's manufactured vaccine can be used for clinical studies or for commercial release.

Based on regulatory input are currently candidate is <unk>, one five which we have progressed into manufacturing of multiple 6000 liter batches.

You'd be one six is also entrust and although there's only a single amino acid difference the receptor binding domain from excuse me one five we're making mastercard seat to be prepared for the vaccine composition announcement.

Based on our close interaction with global public health agencies, we remain optimistic that this strategy has the potential to minimize the time between strain selection and delivering our vaccine this fall.

Please move to slide eight so I can remind you of our ongoing stringent study.

In the first quarter or two of study 311 depicted on the right hand side of the slide to evaluate our prototype strain vaccine <unk>, Barry and vaccine and a bivalent continuing prototype plus five enrolled.

Enrollment is complete and we expect top line results midyear.

This study is one of the prerequisites for seeking regulatory approval for the new composition for the 'twenty three 'twenty four vaccine. We previously conducted a companion study would it be a one variant and bivalent and therefore anticipate similarly successful results in the current study.

Okay, let's turn to slide nine and 10 to discuss our Standalone influenza and Covid influenza combination vaccines.

Before I share preliminary data from the phase two trial I want to remind you that we previously reported in our successful phase III study with quadrivalent influenza as well as the phase two combination study, which demonstrated that the influence of Covid vaccine is feasible with our technology and.

In fact, we believe our technology is particularly well suited for combination vaccines, because large amounts of antigens can be incorporated without impacting tolerability. This is a feature that not all vaccine platform sure.

So, let's turn to slide 11 and review the Phase II study design.

This is a phase II dose confirming study and is not a provisional registrational trial. In fact, the primary endpoint is evaluating safety, although there are multiple secondary and exploratory immunogenicity endpoints.

And avoiding tour designed to inform which formulations could be advance into late stage development for the combination vaccine by evaluating different antigen and adjuvant dose ranges no hypothesis testing was pre specified.

As you can see this is a complicated design of experiment study with 20 different treatment groups. Once all the data is available it will be entered into a three dimensional computational model to identify the optimal dose levels. We also took the opportunity to explore higher dose COVID-19 vaccine formulations, which I'll share with you later.

We enrolled 1575 adults 50 to 80 years of age 95% had previously received three or four doses of Covid vaccine with the last dose of median of 28 weeks prior to being enrolled.

The data that is available today is safety through day, 21, and anti S Agg and cooking translation responses.

Well as wild type Hai for the four strains included in the vaccine.

Additional immunogenicity data will be available over the next two to three months, including cellular immune responses influenza micro neutralization responses.

The responses to drifted strains and hei against adaptive strains.

Advance the slide 12 to look at a high level of safety.

Overall, the Standalone influenza in combination vaccines had a reassuring preliminary safety profile and their reaction. So he was clinically indistinguishable from the licensed influenza competitors.

As we expected from the small data set there were no adverse events of special interest no potential immune mediated medical conditions and no treatment related <unk>.

Unsolicited adverse events occurred in less than 25% of any group and were consistent with diagnoses in older adult populations.

The local and systemic symptoms were mostly mild and moderate credit rates comparable to the licensed influence our competitors.

We did not absorb a consistent pattern of increased <unk> is the adjuvant an adage in loads were increased.

It seems to be a hallmark of our technology and it is an appealing feature when developing combination vaccines.

Let's go to slide 13, we describe the key competitors for our Standalone flu vaccine.

For the Standalone quadrivalent influenza vaccine, we evaluated three different hemagglutinin dosage levels formulated with 75 micrograms of matrix M adjuvant.

These were compared to two licensed premium price vaccines. Some preliminary data is presented on slide 14.

Presented here are the wild type hei results of our vaccine with $30 45, and 60 micrograms of each strained compared to Fluzone high dose and adjuvant is fluid.

The 60 microgram dose as our selected dose level and was used in the previous phase III study.

Although the non inferiority endpoint, so is that pre specified or specifically powered for this and AD hoc analysis indicated immuno sponsors were not appear for all four strains for both competitor vaccines.

H one N one the hei for our vaccine was 44% greater in both Fluzone high dose and fluid.

<unk>, which has been a problem for all vaccines in recent years, we were 89 and 55% better.

B, Victoria, we were non inferior to Fluzone high dose and 31% greater for <unk> and for being on my God, We're not appear to Fluzone high dose and 32% greater than <unk>.

We've seen lower Hai Fob Yamagata in previous studies and expect this difference to resolve when we eventually received the micro neutralization data.

Also be yamagata is that circulating over the past couple of years, I mean that'd be irrelevant.

While we still need to analyze other immune responses data supports our belief that our technology may play a role in developing a better influenza vaccine.

Let's go to slide 15, and talk about combination vaccines.

We evaluated three different Kobe dosage levels, three different hemagglutinin dosage levels and two different matrix M levels for a total of 11 independent formulations.

The anti F and Covid neutralization responses were compared to our authorized COVID-19 vaccine and to influence hei or compared to Fluzone high dose and adjuvant it's fluid.

Won't show you all data for all 11 formulations instead I'll show you data for a couple of formulations that performed well.

Until we receive and analyze the rest of the immune data, we won't be able to make a final determination of the formulation that you tend to advance, let's turn to slide 16.

On the left hand side of this slide are two combination vaccines and blackened teal compared to our authorized COVID-19 vaccine depicted here and a solid red bar the.

The combination vaccine achieve both ITG initializing levels comparable to <unk> 73.

In fact, the new charters were about three fold higher than seen in our successful phase III study and unpriced adults, giving us additional confidence of its potential performance.

On the right hand side of the slide the two combination formulations are compared to Fluzone high dose.

The Orange bar and fluid and a solid purple bar.

A strange combination levels were greater than that for Fluzone high dose flu add for the lease rates that responses were similar although furby Yamagata hydro's Fluzone did have a higher point estimate.

Clearly these results would have been more favorable than the competitor.

Could use where the standard dose licensed influenza vaccine.

Overall based on preliminary data, we believe we have identified at least two combination vaccine formulations that could be advance into late stage development.

Okay, Let's go to slide 17, and look at some high dose Covid data.

Shown here is a dose ranging from five micrograms to 35 micrograms of Spike antigen and 50 micrograms of matrix M adjuvant.

And these well private individuals we hypothesize a larger antigen dose will lead to a better immune response.

But this was not true in Kobe, naive individuals', where five micrograms and twenty-five performed comparably.

We will be looking not just for increase in magnitude, but also durability and breath of immune response.

The highest dose COVID-19 vaccine achieved a statistically significant increase of approximately 30% or anti S agg and neutralization compared to Novartis prototype COVID-19 vaccine.

We're planning to conduct a phase II study in the third quarter of this year to explore the use of high dose <unk> accident is an annual vaccine for older. Adults. The study will be done with actually be one five vaccine.

Please turn to slide 18, and I'll sum this up.

So far our Standalone flu vaccine, we observed safety indirectly GNC profile that was comparable to the two licensed influenza vaccines, but the immune responses were favorable compared to these market leaders. If we have selected a standard dose comparator difference. So this would've been even greater.

The additional GNC endpoints will further define the value of this vaccine, but in my opinion the data that we've shared today significantly increases probably of technical success for future clinical development.

Our COVID-19 influence a combination the records and let's see what was once again comparable to licensed influenza vaccines.

And based on the anti Covid and influence ACI responses. We believe we've identified at least two formulations that could be advanced into late stage development.

Essentially the combination vaccine appears to be immunologically on par with the authorized and license competitors.

We wait for the data to make a final selection.

And for our high dose Covid vaccine candidate, we believe the preliminary safety and Tolerability profile looks promising and there is some indication of higher immune responses with higher dosage levels. We're planning a phase II study with HBV one five in third quarter as the next stage of development with special attention paid to the breath durability of immune responses.

We also know that our vaccine induces mucosal immune responses in nonhuman primates. So we plan and measuring those as we select our final high dose formulation, where annual vaccination with that I'll hand, it over to John <unk> to provide an update on our commercial activities.

Thanks, Philip Please turn to slide 19, and then slide 20.

As key markets transitioned to more traditional commercial models, we are gaining more visibility into the expected size of the long term COVID-19 vaccine market.

We remain confident in an ongoing need for annual seasonal vaccine nation with a likely demand in the U S. In 2023 of approximately 100 million doses. We believe it is reasonable to think this is a approximately $7 billion U S market with a total global demand greater than $15 billion.

Please turn to slide 21.

I'd like to discuss our recent progress and commercial readiness efforts to prepare for the 2023 fold vaccination season in the U S and rest of world.

Beginning with the U S. We delivered doses during the first quarter under our modified agreement with the U S government for up to 1.5 million doses, which importantly maintain access to our protein based option in advance of the fall season.

This included initial delivery of our product and a five dose vial presentation in March 2023.

In parallel we are preparing for the transition to a commercial market in the U S utilizing the existing flu vaccine logistics and go to market infrastructure.

Today, we have a fully deployed commercial team across the U S, Canada, EU and U K that have established relationships with key commercial stakeholders and vaccine providers across all distribution channels, who are actively working towards ensuring our vaccine is available to consumers our key points.

Service for the fall season.

This includes ongoing discussions with all major retail pharmacies nationwide.

<unk> health care providers, and pharmacists about our COVID-19 vaccine across the country.

Engagement with distributors physician buying groups doctors offices and integrated delivery networks.

Coordinating with the U S government to provide vaccines through various national public health programs, and we are finalizing our participation and the CDC Dfc in VA programs. This season.

We are closely monitoring the COVID-19 vaccine market to inform our pricing strategy. We expect our strategy will allow us to be competitively positioned in the U S market and will provide support from public and private payers consistent with established vaccine payer infrastructure.

We are also preparing our BLA submission and expect to file with the FDA in the second half of 2023. While this is an important milestone we will be able to sell our vaccine in the fall season under emergency use authorization.

Now I will review key global commercial activities for 2023 full vaccination season and beyond.

We are enabling reliable access to vaccinate by leveraging our commercial footprint in priority markets to drive demand.

And we plan to continue to deliver doses against our outstanding Apa's and have secured approximately $800 million and a P. E orders for 2023 based upon committed delivery schedules subject to updated various manufacturing and regulatory approvals.

We expect to deliver the remainder of our a P. As in 'twenty four and 'twenty five.

In the EU, we previously did not anticipate new sales during the first quarter due to the emerging seasonality of Covid vaccines. However, we accelerated our planned shipments and delivered doses committed under our existing API during the first quarter to ensure our customers maintain supply in market.

We expect to deliver the remaining 20 million doses of committed doses under our API in the EU in 2023.

In both Europe , and APAC Asia Pacific, We continue to service these customers through our existing Apa's at the same time, our commercial teams are engaged with key decision makers at both the regional and local levels to prepare for the transition to tender and private markets in 'twenty four and 'twenty.

Five.

We are confident in our product benefits and policy support to capture market share as an important protein based option.

Importantly across all of our priority markets. We are engaged with policy, making bodies to advance policy recommendations for new Baxter that which will be critical to enabling broad market access and capturing market share during the upcoming fall season.

Finally, as John discussed earlier, our top organizational priority remains delivering a competitive product for the upcoming 2023 full vaccination season.

We are transitioning to a smaller dose presentation, which will be important to further differentiate our vaccine and market. This includes in the U S where our product will be available in single dose vials.

Both variant strain update and single dose presentation, our key product attributes that we believe will contribute to a strong market acceptance for our adjuvant did protein based vaccine.

Market Research tells us that there is a demand for a non mrna COVID-19 vaccine when we asked health care providers in the U S for their preference they indicated an approximately 31% preference share for our vaccine.

This tells us that there is a significant market share available to us as we are working towards an unrestricted policy recommendation for the fall season.

And as Philip outlined today, we advanced our variant strain development, our head of regulatory guidance on strain selection for the fall season.

In the coming months, we will remain an ongoing dialogue with our customers and commercial stakeholders as we seek to ensure our vaccine is aligned with market needs and competitively positioned in the portfolio of Covid vaccines.

With that I'll hand, it over to Jim Kelly to discuss our financial results.

Thank you John .

Please turn to slide 22.

This morning, we announced our financial results for the first quarter of 2023 DT.

Details of our results can be found in our press release issued today and our 10-Q filing.

I'll begin by providing an overview of our first quarter 2023 results and progress to date on our liability management.

Then I'll provide more details regarding the global restructuring and cost reduction initiative announced today.

Finally, I will share financial guidance for the full year 2023.

Please turn to slide 23.

For the first quarter of 2023, we recorded combined R&D and SG&A expenses of $360 million.

This reflects a 120 million or 25% decrease compared to the first quarter of 2022, and a $60 million or 14% decrease compared to the fourth quarter of 2022.

This improvement represents the initial impact of our cost reduction initiatives, putting us on a path towards a significantly lower cost structure as we transition novavax has size and scope to align with the <unk> opportunity.

We recorded $81 million in total revenue for the first quarter of 2023, which is consistent with an emerging seasonal demand pattern for COVID-19 vaccines.

Importantly, we reduced our outstanding current liabilities for a $541 million, including funding the maturity of the 325 million convertible debt.

And finally, we ended the quarter with $637 million in cash compared to $1 3 billion at the end of 2022.

Please turn to slide 24.

Beginning with revenue, we recorded 81 million in total revenue for the first quarter of 2023 compared to $704 million in the first quarter of 2022.

Of note you will see we recorded a net $7 million reversal of product sales in the first quarter of 2023.

This relates to a $65 million credit that resulted from a single lots sold to the Australian government that upon a preplanned six months stability testing was found to have fallen below the defined specifications and therefore was removed from the market.

This credit will be applied against the future sale of doses to this customer.

Our cost of sales for the first quarter of 2023 were 34 million compared to $15 million in the first quarter of 2022.

This includes $20 million related to excess obsolete or expired inventory and losses on firm purchase commitments.

Yeah.

Research and development expenses for the first quarter of 2023 were $247 million compared to $383 million for the first quarter of 2022.

The decrease was primarily due to a reduction in clinical and manufacturing spend.

Selling general and administrative expenses for the first quarter of 2023 were $113 million compared to $96 million in the first quarter of 2022.

The increase is related to expansion of our commercial sales operations in Europe and commercial investment in preparation for the fall 2023 vaccination campaign.

Partially offset by certain cost containment measures to reduce our operating spend.

For the first quarter of 2023, we recorded a net loss of $294 million compared to net income of $203 million in the first quarter of 2022.

Again, reflecting the emerging seasonality of our business.

Please turn to slide 25.

In addition to making great strides to reduce the rate of spend during the first quarter of 2023. We also made significant progress to reduce our outstanding current liabilities from $2 5 billion to $1 9 billion.

The $541 million decrease including funding of the maturity of the 325 million convertible debt in January of 2023.

And 190 million reduction to payables.

During April 2023 we addressed additional liabilities totaling $140 million.

Supportive of funding. This April activity is 100 million payment to Novavax secured for the second quarter of 2023 related to our renegotiated EPA that I will describe in more detail shortly.

As of March 31, 2023, the 858 million other current liabilities balance includes approximately $700 million related to the ongoing copy arbitration and $113 million related to a 2023 U K EPA.

Payment.

Eliminating the more significant near term liabilities is a key component of our objectives. This year and combined with our significant cost reduction initiative is intended to strengthen and stabilize our cash flow position as we seek to position <unk> for future growth.

Please turn to slide 26.

Today, we announced that we are implementing a global restructuring and cost reduction initiatives, which will significantly reduce our expenses, while retaining the capabilities, we need to drive results and build future value.

When fully implemented we expect these actions will reduce our combined R&D and SG&A expenses for 2024 to below 1 billion.

<unk> and approximately 40% to 50% decrease when compared to 2022.

For 2023, we expect to realize about half of that amount are 20% to 25% reduction as compared to 2022 due to timing local laws and regulations and other factors.

For the full year 2023, we expect combined R&D and SG&A expenses to be between $1 3 billion and $1 4 billion as adjusted to exclude one time restructuring cost.

This global restructuring cost reduction initiative is targeted to result in a more focused investment in our Covid program a reduction in our pipeline spending the continued rationalization of our manufacturing network and.

And approximately 25% reduction to our global workforce of which 80% of those impacted or full time employees.

As well as a consolidation of facilities and infrastructure.

We believe these decisive actions were necessary as we establish a path forward towards long term financial health and align novavax to the opportunity ahead.

Please turn to slide 27.

For the full year 2023, we expect to achieve total revenue of between one four and $1 6 billion from a combination of grant revenue and product sales in <unk>.

Our projected product sales includes approximately 800 million and EPA orders secured for 2023 based on committed delivery schedules and currently and contracted U S market sales.

Each subject updated variant manufacturing and regulatory approvals.

For expenses, we expect to lower our combined R&D and SG&A expenses for the full year 2023 to between one three and $1 4 billion as adjusted to exclude one time restructuring cost, which had mid point is approximately $375 million lower than 2002.

Two.

This expense guidance reflects our COVID-19 standalone business cost structure and excludes potential cost associated with a phase III flu program.

We plan to evaluate our positive phase III flu kick results announced today to frame our options to advance and finance this program via strategic collaborations and door available finance alternatives.

Our ongoing 2023 cash management, and resulting cash flow are important to help enable the delivery of our vaccine for the fall 2023 season.

And the combined second and third quarters of 2023, we expect to receive cash inflows of over $500 million from product sales of our prototype Wuhan vaccine government grants and a 100 million payments secured for the second quarter 2023 related to a renegotiated.

Yeah.

This 100 million payment is excluded from full year 2023 sales guidance and we plan to continue to negotiate for additional 2023 payments from our committed EPA book of business as we explore a full range of non dilutive and dilutive funding alternatives to <unk>.

Vance our business.

If successful in achieving the full year 2023 guidance outlined today. We believe this will support the funding of our operations for the next 12 months.

And our 10-Q filing you will see that we have provided an update on our going concern disclosure, which we first provided in our 10-K filing in February specifically that this forecast continues to be subject to significant uncertainty related to revenue for the next 12 months funding from the.

U S government and pending arbitration.

With that said I'd like to turn the call back to John for some closing remarks.

Thank you Jim Please turn to slide 28.

I'd like to underscore that as I've learned more about our organization and our people in recent months that I've seen a passion across our company to advance our mission and deliver innovative vaccines to improve global public health.

As the team demonstrated today, we've taken decisive actions on the priorities we outlined in our February call.

Including our intent to advance our updated vaccine for the fall campaign strategically manage our investments and dramatically reduce our spend and work to derive additional value from our pipeline and technology platforms.

We continue to operate with this focus on fiscal responsibility and parallel with making the investments needed to achieve our three key priorities.

The reductions to our workforce that we announced today, where a difficult decision.

But we felt they were a necessary one to put the company on a better pathway towards financial strength and sustainability letting.

Let me say that we deeply appreciate the contributions made by those employees, who have been adversely impacted today, and we will appropriately support them as they make the transition to new opportunities.

The positive phase two data, we announced today further reinforces our belief in the value of our recombinant protein nanoparticle plus matrix M adjuvant technology platform at Novavax.

Our prior positive phase II results for both our Covid and flu vaccines plus this new phase two data provide additional confidence for us to move toward phase III for one or more of these products potentially in the future. It is our intention to leverage this technology to build a robust portfolio of vaccines to further support our mission.

Positively impacting global health.

As we continue to execute on our strategy and key priorities. We're confident that we're taking the right steps with the goal of positioning novavax for success and delivering positive results for our stakeholders in 'twenty three and over the long term and with that we will now take your questions.

Thank you we will.

Now begin the question and answer session.

To ask a question you May Press Star then one on your Touchtone phone.

If youre using a speakerphone please pick up your 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.

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

Thank you.

Thanks for that day, and they're taking all the questions a couple from us. So the first one is regarding this the revenue guidance.

Do you provide this revenue.

Revenue guidance in ex U S $800 million.

Hey.

Just wanted to.

Some additional comments or needed to how confident you are about this 88, given the reason you they have some.

Proposed deal with your competitor.

And in terms of the breakdown within that 800 million can you provide additional color around the timing geography.

Maybe last portion last part of the question there Steve.

Related to the remaining eight last quarter, you're saying, you'll have 2.1 billion in total seats.

Things you are doing some renegotiation just curious.

What's left to be delivered in 2024 and 2025, thanks a lot.

Thank you Roger I appreciate the question John because you know would you like to take that one sure.

Roger Theres a couple of components to your question, let me try to parse them out first of all the $2 1 billion is still a true kind of adherence to the original value of all of those contracts and we expect that and to date still have.

Our confidence in that value now that's going to be some of that is going to flow into 'twenty, four and 'twenty five the $800 million for 'twenty three.

Our locked in orders committed orders allocated to be shipped doing various.

Various quarters over the balance of this year, so confident in the $800 million.

That settlement that's happening in Europe with Pfizer I think there is still some details to be determined there, but that will not affect revenue generation. During the period are there or possible implications to that in the future when we go to tender.

In private markets, so I, but have already had multiple conversations with the.

Our opinion Commission director General and his staff about the need for a protein based vaccine in the vaccine portfolio. So critical is it awareness and the need to make sure that our vaccine is available.

Contracts and Apa's support the $2 $1 billion and the $800 million is locked in deliveries scheduled for 2023.

And Roger you had a question about the.

The allocation of that $2 1 billion relative to 2023 versus future periods. So the items, we discussed today, where the 800 million secured apa's for delivery and I also mentioned 100 million payment of which came from a renegotiated EPA that expense.

Secured for the second quarter. So that gets you to 900 million total of the 2.1 that leaves an additional $1 2 billion outstanding and as I mentioned in our remarks that these are available for delivery. There of course are committed and we are going to actively.

Seek to renegotiate some of these Apis as a mechanism for non dilutive financing and certainly more on that in future calls as we move forward.

Excellent that's very helpful. Thank you.

For the comment and then so moving on to the U S market understanding you are.

Doing the inventory for the stream change and that you will have that data.

To potentially support a strange change just curious what additional data you needed one the OPEC meeting June 15th decided which drains chain to select what additional data you need to.

To be able to deliver in the U S market for the fall.

Related to that is to for the last for the U S market seems that's also part of the revenue guidance outside of the 800 million.

How much.

You know you are building for the U S market at all it's kind of upside you know you'll have that range of that revenue guidance, maybe towards the upside of.

That revenue guidance. Thank you.

Philip would you like to take the first part of Roger's question.

Sure I'll at least take the first part of the first part of Roger's question.

That's really the main thing were waiting for is the is the strained competition selection right are the study that we're conducting will read out as you mentioned and you know we've done this before and we're successful with that study. So we don't see why it should be any different.

Additional details that need to be part of that file are in fact manufacturing details and that includes the stability of the strained at selected et cetera, and that's all part of the regulatory timeline that we've developed and we've discussed.

Multiple times with global regulatory agencies, so they understand the kinds of barriers, we have to putting that the vaccine in the market and we're pretty confident about that right now.

Thank you, Phil and Jim maybe you could take the second part of Roger's question, Hey, certainly and thanks for asking because it gives me the opportunity to walk you through in a little more detail our revenue guidance. So we've guided to total revenue of one four to $1 6 billion of course mid point at one five and that guidance does include.

So both our product sales and grants and ill begin with grants.

Grants at.

At the midpoint is $350 million a range of $3 40 to 360.

As folks know we've been operating with the U S government under operation Warped speed to fund much of our clinical activity and that continues through this year and is the basis for grants revenue.

For product sales our guidance is 1.6 billion to $1, two 4 billion and that's inclusive of both the $800 million. We spoke of just a moment ago, which is for secured EPA delivery and if you subtract that.

Results in U S at $260 million to $440 million or $350 million at the midpoint.

So hopefully that's helpful. Thank you Jim.

No. That's helpful. Okay understand basically the balance of that 800 million outside of your product sales. That's the U S market got you okay great.

<unk> for the last a one question celebrated TR.

Nicole this little combination therapy data looks pretty robust but.

And noticing I think John you mentioned you are moving towards the partnership maybe some strategic collaborations for to move forward. This program.

Just maybe elaborate on your plan there what will be the next immediate next step for that Campbell and some other kind of Standalone a vaccine.

Different from what you already have do you need a phase III efficacy study before you move into the phase III just didn't even more details there would be I. Appreciate it. Thank you. Thank you for your question Roger Let me answer it this way and I can I can speak let Philip address the phase II B question et cetera.

We noted in our call and in our prepared comments you know our focus this year is on our three priorities our top priority at Novavax.

Is launching our updated new accident in line with the regulatory authority requirements for this fall season, and a competitive product profile and on time for our customers as the fall season emerges. That's our number one goal in parallel with that is reducing our costs and resizing the company and addressing our near term and current liabilities aggressively.

We've demonstrated some some decisive actions that the leadership team and I have taken with the support of our board in that direction, a very clearly now in the first quarter.

We're excited and encouraged about the data. This is a phase III top line results and if we continue to execute on our plan successfully this year, we should be able to position novavax in a stronger place from a financial perspective. So we can have options next year on how to bring forward. These unique and interesting assets that are that are in development right now.

And we'll continue to learn from the data in the coming months and have discussions with regulatory authorities on how to best bring these forward Filipe would you like to add additional commentary on Roger's question around what type of studies may be an extra these assets yeah. I mean, a lot of that really depends on regulatory guidance. We would clearly not go into pivotal study with very firm regulatory guidance and that may well depend on.

What we see in the rest of the data.

Additionally, if we do move forward with a strategic partner that ultimate design and timeline would be determined collaboration with such a partner now what we are planning on doing right. Now is doing a phase II study with our high dose COVID-19 product and that is going to be done with that actually would be one five format.

I mentioned that earlier and the idea there is going to be to really explore the optimal formulation, including the antigen as well as adjuvant dose levels to optimize immune response alright.

Alright.

You followed us for a long time. So you know that we did our initial dose ranging in naves at the very beginning of the pandemic and we thought there was no difference when you change the antigen dose level, but were in a different place now where people are heavily primed and we are seeing evidence that as we increase the dose level in these private individuals we do get a better immune response. So we're looking to develop a high dose form.

Relation to be used for annual vaccination, primarily in the elderly market similar to what has been done in influenza.

Thank you for your questions Roger.

Our next question comes from Derek Joseph with J P. Morgan. Please go ahead.

Hey, guys. Good morning, Thanks for taking the questions.

So I just wanted to come back on launch preparedness for the fall season and just.

And kind of get a sense of where your confidence comes from being able to launch ahead of us.

A BLA approval and I guess as currently planned proceeding under EUA can you talk about whether there are any amendments or expansions of the existing <unk> that are necessary.

Facilitate a commercial launch.

In the U S.

Jonathan would you like to take that question from Eric Yes. So we have been in constant coordination with the with the FDA on where we are today under emergency use authorization as well as submission of the BLA and the timing of the BLA submission and where that leaves us under emergency use authorization. So we have emergency use authorization for the.

That is today approved a labeled by the FDA and around the globe, we will need an additional emergency use authorization similar to all of the other manufacturers for the new strain in the new format, which is yet to be decided.

Based upon those conversations with the FDA it is our expectation.

And specifically based upon conversations we've had with them that we will be operating under emergency use authorization without restriction.

I think that really says all that we need to know at this point and that means that all of the activities that I talked about during our planned remarks with access to pharmacies access to all health care providers access to distributors will be unrestricted.

Okay.

Sure.

Maybe just a follow up on the.

Manufacturing so any can you just talk about sort of the manufacturing lead time.

After appropriate strain selection.

It sounds like in June I guess what.

<unk>.

Ultimately what those quantities do you think can be supplied.

Our market ready at launch and also a little more detail on sort of where supply is being sourced from.

There it is for sure more other facilities.

Thank you Eric right now, we're not disclosing specific quantities of our production plan in the public domain, but that's a very good question and we've as we've said on our prior call. We've changed the way, we're working with FDA and the way we're working internally with our project teams to do everything we can to appropriately minimize the time it takes to be ready for the fall season and that <unk>.

<unk>.

Quite a nice shift in the dynamic with FDA, we've seen an excellent partnership from both FDA and global regulatory authorities, who have expressed to us that they value a protein based option in the marketplace for consumers around the globe and we've made significant progress as we said before in bringing multiple strains forward and that's key because we're able to get the <unk>.

Data assess the data on which strains are becoming predominant and bring several strains forward and Philip discussed that during his prepared remarks earlier and we have some slides on that so we feel that we're currently on track to be ready.

Spine, it potentially taking protein based vaccines, a little bit longer from the very beginning of go to get finished we've been taking steps right now already to prime that pump and to be ready to bring the vaccine forward. John Cristina would you like to add any color or comment to that and Rick Crowley as well who leads our manufacturing is here I think that pretty well.

That of course, Eric you can imagine that as we are anticipating revenue generation and product availability, we're thinking through exactly all of those timelines.

And it's in its manufacturing timelines fill finish getting product to the right distribution centers.

Making sure that the regulatory approvals are in place. So end to end those timelines have been examined and scrutinized to make sure that we have product available at the start of the fall season.

Okay.

Okay, great. Thanks for taking the questions.

Thank you Eric.

Our next question comes from.

Van <unk> with B Riley. Please go ahead.

Good morning team, thanks for taking our questions and appreciate the level of detail this morning, including the progress on balance sheet and the Opex savings.

Do provide any idea on how.

Fiscal year 'twenty, three introduction will be split between R&D and SG&A.

In terms of workforce restructuring also 2022 with the 'twenty 'twenty four and any level of detail would be helpful. And then I have a couple of follow ups.

Thank you Mike Jim Kelly would you like to take Mikes question, Hey, certainly and good morning, Mike.

You know as we announced this morning, I mean, we have a significant global restructuring and cost saving initiatives that touches each corner of our organization, both functionally and geographically.

That means that.

We will among other things.

Focus on our core priority of delivering a vaccine. This fall so you're watching a sharpening of our investment or our Covid program. The cost structure that we're describing today is the COVID-19 standalone cost structure I described in more detail that it did not include at this time advancement of pipeline, including based.

On some of the great fluke kick results, we saw it today. So when we look back to these reductions.

It's a it's a sharpening of our focus on the Covid business. It is a portion of our pipeline.

It includes a continued rationalization of our manufacturing network as we size it for the endemic opportunity.

It also includes a 25% reduction in our total workforce inclusive approximately of 80% of those and impacted our full time employees and then also the consolidation of facilities and infrastructure.

When you look at where this from 22 to 24 I will hit in different aspects of R&D plus SG&A. It is primarily.

Going to be in the R&D realm, and this is because as we continue to make investments in our commercial footprint to ensure success in.

In the marketplace and are in our priority markets of the U S Europe and select APAC, what we're seeking to do is further reduce our G&A and infrastructure to enable that investment so watch us.

Seek to hold steady as best possible SG&A.

And then when you look at the reductions from 'twenty two to 'twenty for a significant amount will be reflective of those.

Those steps I just described.

So hopefully that's helpful.

Yes Super helpful.

And on that topic. If you could comment also on the liability reduction program, obviously, great updates on the bar and UK government payment, but.

A number of other things in the works like Avi if you could provide any update on that that'd be helpful.

Okay.

Okay.

Yes, Jim do you want to just cover the liability question first Hey, certainly.

Beginning with the liabilities, we made significant progress this quarter, reducing our current liabilities by over $541 million and you will see that one of the key components of that was funding the maturity of our convertible notes for $325 million, but also.

So you saw a significant reduction in our payables.

Approximately $190 million. So that's that's a part of a really important step for us to address in some cases onetime liabilities as we better put this company on strong financial footing.

So hopefully that covers at least through 331. Your question, but we also made sure. We made folks are aware that we addressed another $140 million in liabilities in April including resolution of the par arbitration for $27 million and then also we did make that payment to the U K.

Her EPA of $113 million and that related to the terms of the agreement.

That had previously been discussed.

Now one of the things that is helpful. Here is I announced that we had secured $100 million payment under our renegotiated EPA. So that's incredibly helpful to help fund those liabilities and I also described in our remarks that during Q2 and Q3, we expect inflows of cash flow.

Of over $500 million.

So.

It is the combination of <unk>.

The ability management progress to date.

Our expectations around future cash flow into Q2, and Q3 that we find important to put us on the right footing towards being prepared for the fall vaccination season.

And then Mike you did ask about coffee. So look there's obviously not much I can say related to the legal matters that the companies addressing but what it can do is confirm that we're currently in the arbitration process with coffee regarding this matter and to restate Novavax has position that we did not believe we owe the money. That's in question and obviously, we cannot predict the outcome of any RV.

<unk>, but what I can say is we'd like to put the matter behind us as soon as possible and then frankly, we are frustrated by the situation and that's because we believe we share. The same mission is gabby to help improve global public health and to provide high quality vaccines to people in low income countries and we're frustrated that the current matters not yet resolved and it has the potential of impeding our ability to fulfill it.

This mission to the best of our capabilities.

This concludes your for your question.

This concludes our question and answer session I would like to turn the conference back over to John Jacobs for any closing remarks, just like to thank everyone for joining US today. We appreciate your time and your confidence in us. Thank you very much I appreciate it.

Yeah.

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

Okay.