Q2 2023 Novavax Inc Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to the Novavax second quarter 2023 financial results and operational highlights conference call.
At this time all participant lines are in a listen only mode should you need assistance. Please signal conference specialist by freshness Starkey followed by zero.
After today's presentation there'll be an opportunity to ask questions to ask a question Press Star then one you touched on phone.
To withdraw from the question queue. Please press Star then two.
Be advised that today's conference is being recorded.
I would now like to hand, the conference over to your speaker today, Erica Schultz you may begin.
Good morning, and thank you all for joining us today to discuss our second quarter 2023 operational highlights and financial results.
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.
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 relating to the future of Novavax.
Its key strategic priorities operating plans objective and prospects full year 2023 financial guidance, its future financial or business performance conditions or strategies, it's partnerships anticipated timing and outcome of future regulatory filings and actions.
And the ongoing development of its vaccine candidates the global market opportunity for a vaccine candidates.
Our manufacturing capacity and the future availability of our vaccine candidates and 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 statements.
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 forms 10-Q filed with the Securities and Exchange Commission and available at.
Www Dot SEC dot com and on our website I'd never Vacs Dot com.
As well as subsequent filings with the SEC.
The forward looking statements in this presentation speak 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 expenses 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 the three key priorities.
Additionally, John Trevino, Chief commercial officer, and Chief Business Officer, who will provide an update on our commercial activities and Dr. Philip Dubowski President of research and development will discuss our Covid clinical development and pipeline.
Finally, Jim Kelly, Chief Financial Officer, and Treasurer will provide an overview of our financial results Rick Rowley Chief operations Officer will be also available for the Q&A section at the end of today's call.
I would now like to hand over the call to John Jacobs, Please turn to slide five.
Yeah.
Thank you Erica and thank you everyone for joining us today to discuss our second quarter 2023 financial results and operational highlights.
Since our last earnings call. The entire organization has continued to focus on our three priorities for the year.
First delivering an updated product for the upcoming fall season.
Reducing our rate of spend managing our cash flow and evolving our scale on structure.
And third driving additional value from our technology platform and portfolio via the advancement of our pipeline and business development activities.
I am pleased to share with you today the significant progress we've made on all three of these priorities for Novavax.
Let's start with our first priority delivering an updated product for the upcoming 2023 fall vaccination season.
Thanks to our comprehensive strained changed strategy and commercial readiness efforts, we are well positioned to achieve this objective and reiterate our plan to deliver our updated vaccine on time for the fall season.
Importantly, we believe we have a competitive product profile and have produced an ample supply to meet anticipated demand this season.
We have initiated our filing for authorization in the U S and are preparing to file our submissions in the coming weeks and other key markets.
For the U S. Our commercial team is fully deployed and focused on ensuring our vaccine is widely available and accessible.
Outside of the U S. Our sales continued to be driven by existing apa's with committed orders intended for delivery in the fourth quarter of this year.
We are confident in our readiness.
To deliver an updated differentiated and competitive vaccine for this fall season.
In most of our key target markets, including the U S. Our vaccine if authorized would be the only non M. RNA protein based option available and we're excited about the potential to offer our vaccine is an important alternative to consumers around the world.
John <unk>, who will share more about our commercial readiness later in the call.
So let's move on to priority number two which is to reduce our rate of spend manage our cash flow and evolve our scale and structure.
We continued to make significant progress towards strengthening our financial position during the second quarter with the intent of building a solid financial foundation for long term value creation.
Commercial execution is an important contributor to our financial health and for the second quarter. We recorded total revenue of $424 million, which brings us to over $500 million in revenue for the first half of the year.
During the quarter, we also successfully executed and amended a P. A with Canada, our long term valued customer.
This agreement established a foundation for ongoing supply of our Covid vaccine and negotiated up to $350 million in cash payments to Novavax for 2023 further strengthening our cash position as we head into the fall season.
The enhanced partnership with SK Bioscience that we announced earlier today includes an $85 million equity investment in Novavax at a 59% premium to the stocks 90 day volume weighted average price.
This mutually beneficial arrangement evolves our relationship with SK from a contract manufacturing organization to a strategic business partnerships, extending SK biosciences commercialization rights in certain markets, providing novavax with the milestone payment and future royalties for product sales in key APAC markets and its.
Significantly improves our financial position by eliminating a $195 million outstanding liability from our balance sheet in 2023.
We are also on track with a global restructuring and cost reduction plans announced last quarter.
As of today have reduced current liabilities in 2023 by over $1 billion, ending the second quarter with over $900 million in cash and receivables.
You will hear more today about our cost management liability management cash flow and full year 2023 outlook from Jim Kelley later in the call.
Finally lets discuss priority number three which is to leverage our technology platform, our capabilities and our portfolio of assets to drive additional value beyond new Baxter that alone.
Starting with our pipeline.
As COVID-19 evolves into a seasonal public health challenge along with other respiratory viruses, we are keenly aware of the emerging need for combination vaccines.
Therefore, as a first step Novavax has made it a strategic priority to develop our combination vaccine for Covid and influenza.
Based on what we see is a robust emerging need and market opportunity, our improving balance sheet and recent progress on our corporate priorities, we have decided to make strategic stage gate investments in 2023, and 24 to independently prepare this new product candidate for late stage development and.
And importantly can do so in line with our stated financial targets.
In parallel we will continue to evaluate the potential to partner this program.
And look forward to sharing updates with you as the program progresses.
Moving on to matrix M collaborations our matrix M. Adjuvant is one of the keys to our unique technology platform and continues to offer potential value for both novavax and our business partners.
The <unk> 21 matrix M. Adjuvant did malaria vaccine developed by Oxford University, and Matt and manufactured by serum Institute of India.
Has received authorizations in multiple countries this year and it has the potential to be an important tool in the fight against malaria around the globe.
As part of this arrangement novavax expects to supply and receive payment for matrix M. In support of launch readiness and will be eligible to receive royalties on future product sales.
We also recently announced a new collaboration with the Bill and Melinda Gates Medical Research Institute for use of our matrix M adjuvant in preclinical vaccine research.
We have also expanded our discussions to explore the use of our matrix M adjuvant and clinical development programs and we look forward to our continued partnership and important work towards our shared goal of improving global public health.
As I have said since I joined <unk> as CEO in late January of this year we.
We intend to share our successes and opportunities as well as our challenges and risks with you in a transparent manner.
So let me be clear.
While we are all excited about the progress we've achieved year to date on our key priorities I want to be clear that there is still significant execution risk for our business ahead of us as we seek regulatory authorizations for our first updated version of <unk>.
And prepared to compete in the U S market as it converts to a commercial model for the first time.
Our success as a company will depend in large part on our continued ability to deliver on these priorities and on the emerging opportunity for Covid vaccination around the globe as the pandemic enters endemic phase.
As we continue to prepare for what should be an exciting opportunity. This fall season, I am personally encouraged by the commitment and energy of our management team and all of our employees and sincerely grateful for the support of our loyal investors.
You have our continued commitment to give you our best effort and our focus on the key priorities we have outlined.
Now I would like to hand, it over to additional members of the team to discuss our results from the quarter and in more detail beginning with John <unk> to discuss our commercial updates John .
Thanks, John Please turn to slide six.
Nobody vaccines Covid vaccine is authorized for use in over 40 countries around the globe leading into the 'twenty three 'twenty four full vaccination season. Many of these countries are still purchasing COVID-19 vaccines under advanced purchase agreements.
While in the U S moves to traditional vaccine purchasing and commercial operations today, I will be discussing specific activities and readiness for each region. Please.
Please turn to slide seven.
The U S. As planned is exiting the pandemic phase and entering a more traditional seasonal vaccine market with many similarities to seasonal annual influenza vaccine distribution.
We have been preparing for commercialization in the U S. Throughout the pandemic phase and we are ready organization wide for availability of product as soon as September of course dependent on our F. D. A strain specific authorization and ACI Pea recommendations for us.
As you would expect there has been significant collaboration of course, many U S agencies and within HHS to ensure that this transition is executed smoothly and there was vaccine available for anyone interested in receiving a COVID-19 vaccine.
Critical updates and prioritization of public health objectives over the past few months have provided greater clarity for the upcoming vaccination season and focused our preparation.
Let me highlight some of the most important and significant items.
Just on the evaluation and recommendation from <unk>. The FTA selected the <unk> one five as the monovalent stray for the 'twenty three 'twenty four COVID-19 season.
No <unk> has been manufacturing this new variant strain of commercial scale based on the final strained recommendations in June .
Our updated Xb Covid vaccine is on track to be in our U S facility in September and immediately available for distribution and use upon authorization.
Two HHS Secretary, Sarah outlined four priorities for the transition to traditional commercial access of Covid vaccines.
<unk> is working to support these priorities by producing sufficient supply of vaccine.
Ensuring low income and underserved populations have ready access to the vaccine.
Whereby we will be participating in the bridge access program with leading retailers to provide free vaccine to those without insurance coverage.
Providing a competitively priced vaccine that removes pricing as a barrier to access.
And working with the U S government to share distribution and vaccination data for our SBB Covid vaccine.
Three the CDC plays a critical role on multiple fronts for the success of this first season and I am pleased to report that <unk> has contracts and negotiated pricing in place with the CDC and other entities, including that for the vaccine for children's program funding that is.
Made vaccine available for low income children since 1994.
For Novavax believes based on its own analysis and consensus across multiple sources that the U S market demand for Covid vaccine. This fall will range from 80 million to 100 million doses of course market demand and the number of doses needed across all <unk>.
Sandoz and populations in the U S can only be estimated and we will only know for sure is the respiratory disease season unfolds.
What we do know with more certainty is that COVID-19 vaccine strengths continue to circulate and there is great value in a safe and effective vaccine to help prevent and to reduce the most severe complications of COVID-19 disease.
And that <unk> is on track to be ready this fall with ample COVID-19 vaccine supply and support of U S public health needs.
With these imperatives in mind, we have put forth tremendous effort to ensure that we are organization wide ready for the 'twenty three 'twenty four COVID-19 season.
Please turn to slide eight and allow me to detail specific activity.
Our core focus for us as manufacturing readiness, we have been manufacturing our updated X P. B COVID-19 vaccine at commercial scale, which will enable us to supply tens of millions of doses of our vaccine in line with our planned demand for the fall season, we expect to have doses in our U S warehouse and Advair.
<unk> of Fda's authorization and ACI P. As policy recommendations to ensure that we can quickly ship initial stocking orders to customers in September .
We are also keenly focused on our commercial readiness central to our fall initiatives has been the execution of our targeted commercial contracting strategy. We continue to believe that the COVID-19 vacs in market dynamics and the channels of distribution will be comparable to the annual seasonal influenza vaccine market.
This market intelligence drives our strategy to make our vaccine available to the to the commercial.
Government and public health official affiliated network of vaccine program of stakeholders that are responsible for administering the majority.
Vaccinations.
This target group consistently offers and administers greater than 150 million flu vaccinations across the country every fall and winter respiratory virus season.
Execution of this strategy means we will make our COVID-19 vaccine available via three key health care provider channels and buying groups. This would include but may not be limited to the following.
Retail pharmacy of course, all national regional and independent pharmacies integrated delivery networks and physician buying groups.
And public health access via the C. D. C V F C Department of Defense and Indian Health services there.
This strategy is also dependent on and requires the utilization of the network of well known and highly experienced vaccine distribution partners to deliver our product to the various points of service across the country.
To that end once authorized any vaccinating health care provider or Vaccinating organization interested in acquiring our vaccine will have a familiar selection of participating distributors that should provide for easy access to our vaccine.
Having spent time in my career.
And the vaccine distribution space, a truly understand and value with our distribution partners bring to novavax, our customers and to the consumers who will receive or vaccine.
To date, we have established critical relationships with key provider and retail buying groups and executed distribution contracts that ensure national widespread availability to hcp's and ensure consumer choice and their COVID-19 vaccine selection.
<unk> progress includes the following.
Distributors contracts signed or are in process that covers 100% of three priority health care provider channels pharmacy contracts side or progress representing approximately 80% of vaccines administered in pharmacies.
CDC and other government services, such as V E D O D and Indian Health service contracts are signed and coordination is in process for a dose availability per their respective agreements.
G P O and PPG contracts.
<unk> buying group contracts signed or in final stages will provide access to office based providers associated with the top integrated delivery networks and major medical groups that drive 90% of the vaccinations within these organizations.
These relationships will ensure we have availability and broad access to key providers and pharmacies to support patient choice of their COVID-19 vaccine.
We feel confident that our overall strategy will create convenient nationwide access to our vaccine for any consumer seeking it as well as any health care provider, who would like to acquire our vaccine for their Covid vaccination program. This fall.
And finally, we have implemented a commercial pricing strategy that will reflect the overall value that our vaccine delivers allowing us to achieve broad access to competitively position our vaccine.
We continue to see a significant market opportunity in the U S based upon our commercial readiness efforts, we remain confident our ability to capture meaningful market share during the upcoming fall season and beyond.
Please turn to slide nine.
Ex U S. We expect total revenue of approximately $700 million from a P. E orders for 2023 based on committed dose delivery schedules subject to updated variant manufacturing regulatory approvals.
I'd like to share some details about how this breaks down.
In the EU, we will be completing our COVID-19 vaccine shipments against the original Apa's before the end of this year when we expect to deliver the remaining $17 million committed doses.
The relationships established during the pandemic remains strong across the EU and our commercial.
Organization deployed against the key EU markets, including Germany, Spain, France, Italy, and Switzerland.
We look forward to 2024 and the shift to traditional commercial vaccine distribution, both in the private and tender markets.
We expect to continue to grow share in these key markets based upon the express need for the non mrna option and <unk> position as a safe and effective protein based vaccine approved for use in the EU.
In Canada.
We amended our E P, a which provided for payment of forfeited doses in 2023.
Reinforced our commitment to establish in country manufacturing in 'twenty four 'twenty five and also extended dose purchasing commitments into 'twenty four and 'twenty five.
We are excited to have strengthened our partnership with Canada and establish a foundation for continued vaccine supply.
Finally in Asia Pacific, We have similarly created strong relationships with our country partners in this region, we continue to supply against existing Apa's, Two Australia, New Zealand, Singapore, Taiwan and Israel.
Some apa's continue into 'twenty, three and 'twenty four.
We are beginning to execute against traditional vaccine tender purchasing policy.
Interest in vaccine choice remains high with specific focus on the need for a non mrna choice of a protein based vaccine.
Regarding ongoing label expansion and policy recommendations across all of our priority markets. We are engaged with regulatory authorities and policymaking bodies to expand our label and advanced policy recommendations that will enable broad market access.
We are generating data from our phase two b slash three global clinical trial to support expansions to our label in younger children six years of age to 11, which Philip will discuss in more detail shortly.
And we are making important progress towards ensuring access to our products through supportive policies. As an example, Germany's policy body. The Robert Koch Institute recently expanded their recommendation for vaccines or this fall to include all licensed and variant adapted vaccines regardless of technology.
Platform.
This increasing policy support further drives our confidence that our updated xb COVID-19 vaccine will be accessible this fall.
We are also pursuing full approvals in key markets, which will establish the foundation for future regulatory approvals of our updated vaccine.
Last month, we received our first full marketing authorization in the EU as the primary series for ages 12, and older and as a booster dose in adults. We are also preparing to file for full approval in other key markets in the U S. We have initiated a rolling submission of our BLA filing and we intend to submit the <unk>.
A major of our data over the coming months.
While full approval via the BLA process will be an important milestone for US early next year, we will be able to sell and market. Our updated <unk> COVID-19 vaccine for the upcoming 2023 full vaccination season under emergency use authorization.
Regarding competitive product profiling and positioning and the majority of countries, where we have a P A's and in the U S. Our vaccine if authorized would be the only non mrna X P protein based COVID-19 vaccine option, allowing our vaccine to serve as an important alternative to.
<unk> and health care professionals.
As we prepare to deliver our updated vaccine for the fall we remain confident in our competitive product profile of our vaccine.
With that said I'd like to hand, it over to Philip to discuss updates for our clinical development and pipeline.
Thanks, John Please turn to slide 10 and 11.
Today I'd like to cover three topics first I'll update you on our strained change study, which is our number one priority.
I'm going to share some new pediatric data before I touch base on plans for a clinical pipeline.
Please move to slide 12.
<unk> hundred 11 part two is the key study upon which our ACB strained changed your regulatory filing is based.
This study compared our prototype vaccine to be a five and a bivalent vaccine with prototype plus five and 750 adults.
The study design was agreed upon with regulatory agencies to support the upcoming strain change filing and poor excuse me one five.
Here are important findings from the study.
We achieved all three co primary endpoints the bivalent vaccine induced a superior neutralizing response against B, a five compared to the prototype strain vaccine.
It also generated an RMT or be a five zero conversion response to non inferior neutralizing response to prototype.
As an aside the monovalent be a buyback scene was more immunogenic than the bivalent finding that recapitulated. The preclinical data we discussed through June for a pack.
And finally, all formulations had similar record unit city profiles.
Findings from both to be a one NBA five parts of the 311 study provide reassurance that our manufacturing is consistent and the various strains perform comparably.
These data have been submitted to the FDA to support regulatory approval for our updated ex Phoebe Covid vaccine.
In addition to abating our vaccine for the fall season, we continue to work on expanding our label to include the pediatric population. Please go to slide 13.
75% or three as our global pediatric H D escalation study being conducted in children six months of age to 11 years of age.
Is complete in the six to 11 year old cohort and the two to five year olds, but is ongoing and the youngest children.
The data on this slide is preliminary topline data for the six to 11 year old cohort.
On the right hand side, we displayed validated neutralizing responses after two doses.
As a group the children Chiba titer of 5380, which represents a geometric fold rise of over 21 fold.
To put this value in context. This is fivefold higher than seen in our adult phase III study conducted in U S, Mexico, which was associated with higher levels of protection.
The protocol defined primary effectiveness endpoint with a demonstrated immune responses in children with non inferior to the Munich sponsors in young adults in the U S. Mexico Phase III study.
It shows the immune responses was non inferior for both the geometric mean titer as well as seroconversion rate.
Overall, we saw reassuring safety profile through 28 days post dose two.
The unsolicited adverse events and medically attended adverse events were balanced between vaccine in placebo and represented common childhood illnesses. There were no related let's say he's not really severe events no adverse events, especially interest no myocarditis and no pericarditis.
We're also evaluating clinical efficacy however over the sort of observation window, we don't observe two cases and they were both in the placebo group.
Please move to slide 14 to look at our reactor Jesse events.
Here, we have displayed record unit to the events after dose one on the top of the slide and dose two on the bottom of the slide the local symptoms on the left hand side in blue and systemic symptoms are in green on the right for each term most children reported no symptoms and.
And when they did have symptoms, the vast majority or reported as mild or moderate.
There was no significant increase of symptoms between dose one dose too.
We think our vaccine may play a special role in the pediatric population the vaccine appears to be very well tolerated, while inducing robust neutralizing responses.
Profile. In addition to our classic recombinant protein technology, maybe a reassuring when parents and providers choose vaccines for children.
We expect to submit these preliminary results to the EUA in the fourth quarter and while the length of regulatory review is not known we believe that approval of our EIA amendment could occur in early 2024.
Okay, let's move to the next slide Slide 15, and review our plans for the clinical pipeline in support of our third corporate pillar.
Last quarter I shared some top line data from our clinical programs and we're still awaiting final humoral and cellular immune readouts to finalized formulation decisions, but as John mentioned, we've made some stage gated investments to keep development on track.
For a COVID-19 influence a combination vaccine candidate we showed immune responses from the combination of our comparable to licensed influenza vaccines as well as our authorized COVID-19 vaccine.
This is a priority pipeline asset for us because there's consumer and medical provider preference for a combination of vaccines.
We will be investing and developing and co formulate vaccine and preparation of the phase II study planned for next year the.
The purpose of the phase <unk> study will be to establish a robust safety database for the co formulated product and confirm the previous immunogenicity.
We believe this stage gated and best friend will provide all the data needed for regulatory interactions prior to our phase II decision and increase the assets overall value.
We continue to evaluate ways to accelerate this program and secure sufficient funding for a large and complex pivotal phase III study for example through strategic partnerships.
For Standalone influenza vaccine candidate we showed you our vaccine induced wild type Hai responses that were overall better than two market leading license vaccines.
While the combination covered influenza vaccine will be our primary focus the clinical development plan does maintain an option to take the stand alone Blu products through advanced development.
We also recognize that our influenza vaccine platform may be attractive from a pandemic preparedness perspective, because of currently available avian influenza vaccines are poorly immunogenic.
Preclinical evaluation is ongoing for three different highly pathogenic H five N 1234 obese trains.
Now the optimal target product profile would allow for single dose pandemic vaccine, which has been elusive with other vaccine technologies.
And finally for our hydro Covid vaccine candidate, we shared our immune responses were improved with higher antigen doses without increasing recognition and we plan on starting a high dose COVID-19 vaccine study in older adults and the fourth quarter.
Now these three vaccine candidates exemplified the inherent flexibility in potency of our adjuvant it recombinant protein nanoparticle technology.
We can do is very broad immune responses and long lived cellular responses.
<unk> seen that we use can use high androgen doses without compromising tolerability.
This is critical as we think about high antitrust applications for difficult to immunize populations, such as older adults and allows us to modulate the androgen dosage levels and combination of vaccines to overcome <unk> interference.
These features are important and potentially differentiate our products.
The vision is to leverage these attributes and establish a leadership position in the seasonal respiratory viral vaccine space, we think that space will be dominated by combination vaccines and targeted number of pathogens that are specifically troublesome for older adults, including influenza Covid RSV and HBV.
Okay, Let me hand, it off to Jeff to discuss our financial results.
Thank you Philip.
This morning, we announced our financial results for the second quarter of 2023 details of our results can be found in our press release issued today and our 10-Q filing. In addition, we also announced this morning, the execution of agreements with SK bioscience that enhance our strategic business partnership.
And included 85 million equity investment in Novavax at a 59% premium to the 90 day volume weighted average price.
I'll begin by providing an overview of our second quarter 2023 results then I'll provide more details regarding our quarterly results liability management and progress on our global restructuring and cost reduction plan.
Finally, I'll share an update on our financial guidance for the full year 2023.
Please turn to slide 17.
For the second quarter of 2023, we recorded $424 million in total revenue, reflecting a $239 million and 128% increase as compared to the second quarter of 2022.
Combined R&D and SG&A expenses for the second quarter of 2023 for $313 million.
This reflects an $85 million or 21% decrease compared to the second quarter of 2022, and $46 million or 13% decrease compared to the first quarter of 2023.
This improvement represents the continued progress of our ongoing cost reduction plan and demonstrates our commitment towards an improved financial profile to drive long term value.
Additionally, in the first half of 2023, we reduced our outstanding liabilities by $864 million, including a $323 million reduction in the second quarter of 2023.
With the SK Bioscience announcement today and settlement of related manufacturing agreements the reduction to current liabilities now exceeds 1 billion for the year.
And finally, we ended the second quarter with $518 million in cash and accounts receivable balance of $395 million for a combined total of over $900 million as we head into the fall vaccination season.
Please turn to slide 18.
Beginning with revenue our second quarter 2023 performance benefited from improvements to both product sales has been vaccinated and grant revenue as we recorded total revenue of $424 million compared to $186 million in the second quarter of 2022.
Of note.
This materially reflects the final sales of our Wuhan vaccine for the season.
Our cost of sales for the second quarter of 2023 were 56 million compared to $271 million in the second quarter of 2022.
This includes $2 million related to excess obsolete or expired inventory and losses on firm purchase commitments as compared to $255 million in the same period in 2022.
Research and development expenses for the second quarter of 2023 were $219 million compared to $290 million for the second quarter of 2022. The decrease was primarily due to a reduction in clinical and manufacturing spend.
Selling general and administrative expenses for the second quarter of 2023 or $94 million compared to $108 million in the second quarter of 2022.
The decrease was primarily due to a reduction in spend by corporate support functions as outlined in the global restructuring and cost reduction plan announced in May.
Second quarter of 2023 total operating expenses included $15 million in one time restructuring costs related to workforce reduction fixed asset write offs and the consolidation of certain facilities of.
Of which 12 million was recorded in SG&A.
These charges reflect substantially all of the restructuring cost we expect to record under our restructuring plan.
For the second quarter of 2023, we recorded net income of $58 million compared to a net loss of $510 million in the second quarter of 2022.
Please turn to slide 19.
Today, we announced new agreements with SK bioscience that reflect the evolution of our relationship from a contract manufacturer arrangement to a strategic business partnerships, including an equity investment by SK Bioscience and Novavax.
First the upgraded agreements extend SK biosciences commercial rights in South Korea, Thailand, and Vietnam and provides for a 4 million milestone to Novavax and return for the extension of these rights. In addition to existing economic terms, which include royalties on future product sales in those markets.
Yes.
Second SK Bioscience is making an $85 million equity investment in <unk> common stock at $13, a share, reflecting a 59% premium to the volume weighted average price over the 90 days prior to August eight 2023.
Third the agreement settle $195 million, an outstanding note <unk> contract manufacturing liabilities for $154 million.
In total under these agreements Novavax will issue $6 5 million common shares and pay net cash of $65 million to SK bioscience to settle $195 million in current liability as of June 32023.
Please turn to slide 20.
We've made significant progress to reduce our outstanding current liabilities, including the reduction of $323 million during the second quarter and $864 million in total for the first half of 2023.
And as we just discussed the SK Bioscience agreement announced today further reduces our current liabilities by $195 million for a total reduction of over $1 billion year to date in 2023.
Please turn to slide 21.
In May we announced our global restructuring and cost reduction plan today, we remain on track to significantly reduce novavax as expenses are retaining capabilities needed to drive results and build future value.
For the full year 2023, we reiterate our target to reduce our annual combined R&D and SG&A expenses to between $1 3 billion and $1 4 billion, reflecting a 20% to 25% reduction as compared to 2022.
For the full year 2024, we also reiterate our target of R&D and SG&A expenses of below 1 billion, reflecting a 40% to 50% decrease when compared to 2022.
Importantly, we've been able to further reduce our anticipated cost structure to allow us to now include onetime restructuring costs.
And strategic stage gate investments to advance our kick flu program towards late stage development in 2023, and 2024, while maintaining our R&D and SG&A expense guidance.
In summary, we are on target with our plans to reduce our R&D and SG&A scale and cost structure by 40% to 50% in 2024, we have aggressively reduced our current liabilities by over $1 billion in 2023 and approach the fall vaccination season with over $900 million in cash and receivables.
All supporting our intent of building a solid financial foundation for long term value creation.
Please turn to slide 22.
Before discussing our full year 2023 financial guidance I am pleased to share that since April we've secured up to approximately 600 million and cash to improve our cash runway.
The up to $450 million in cash payments negotiated this year under our Canada EPA represent an important source of non dilutive funding for the company.
In addition, we've raised $153 million of equity capital through an $85 million investment by SK, Bioscience, and $68 million and equity raised through our ATM program at an average combined price representing a significant premium to our 90 day volume weighted average price.
<unk>.
I'd like to spend a moment on the accounting associated with the up to $450 million and non dilutive cash payments in 2023 related to forfeited doses.
These amounts will be initially recorded as deferred revenue along with existing related upfront payments for these forfeited doses.
These combined amounts will later be recognized ratably as product sales between 2023 and 2025 as the remaining performance obligations are met under the amended Canada API.
We do not expect this to be a material contributor to 2023 product sales.
Regarding payment timing, we received the initial 100 million cash payment related to the April 2023, EPA Amendment in the second quarter of 2023.
The up to $350 million in cash payments associated with the June 2023, EPA amendment or to be paid in two equal installments of $175 million.
The first 175 million payment was received in July 2023, and a second 175 million payment is contingent and payable upon delivery of vaccine in the second half of 2023.
Of note for full year 2023 revenue guidance.
<unk> million of the up to $350 million cash payments associated with the June API Amendment was included in the prior full year 2023 product sales and total revenue guidance.
For this reason we are removing this $100 million cash payment from our full year 2023 revenue guidance.
With that said, let's turn to our full year 2023 financial guidance.
We expect to achieve full year 2023 total revenue of between one three and $1 5 billion, including product sales of between $960 million and $1 billion 140 million in grant revenue of between 340 and 300 <unk>.
$60 million.
Our full year 2023 product sales guidance includes U S market product sales of between 260 and $440 million and approximately $700 million in product sales based on 2023 committed dose delivery schedules each subject to updated.
Manufacturing and regulatory approvals as well as successful pull through in the U S market.
In the first half of 2023, we recorded $505 million in total revenue, which is in line with the expected phasing of total revenue guidance provided in may as.
As a result, we expect total revenue of approximately $800 million to 1 billion in the second half of 2023.
In addition, we expect that our updated X P. B COVID-19 vaccine product sales will materially occur in the fourth quarter.
This is based on the recent U S. FDA announcement for plans to approve updated COVID-19 vaccines in late September plus the expected time and for other regulatory approvals and deliveries of our updated <unk> COVID-19 vaccine outside the U S.
For expenses as I mentioned earlier, we are reiterating our targets to reduce our combined R&D and SG&A expenses for the full year 2023 and 2024.
Of note, our combined R&D and SG&A expenses for the second quarter of 2023 were $313 million.
The midpoint of our full year 2023, R&D and SG&A guidance range implies an approximately 340 million quarterly run rate for the second half of 2023.
In the coming quarters, we expect to see a seasonal increase in our sales and marketing investments as our commercial team executes during the fall 2023 vaccination season.
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.
We look forward to sharing additional updates as we seek to improve <unk> financial performance cost structure and strength to deliver shareholder value with that I'd like to turn the call back over to John for some closing remarks.
Thank you Jim Please turn to slide 23.
I'd like to close today's call by reiterating the important progress we've made on all three priorities for 2023.
The updates we shared today reflect meaningful progress against our priorities.
Which are intended to place novavax on a path to success, both this year and beyond.
During the past quarter and through midyear, we have under priority one continue to prepare for the fall season and have now manufactured our SBB vaccines at commercial scale with ample supply initiated our regulatory filing with FDA and have our commercial team fully deployed with the majority of U S commercial contracts completed or in <unk>.
Progress to ensure broad access to our vaccine this fall.
Priority two so we've significantly reduced our current liabilities by over $1 billion and in parallel have built the cash and receivables balance of over $900 million as we head into the fall vaccination season.
We are also on track with our cost reduction initiatives and in addition, we're able to absorb our one time related restructuring charges within those stated target.
Under priority three we will be advancing our pipeline of future assets with a priority focus on our new combination vaccine program and secondarily, our Standalone flu program as Philip outlined earlier in the call.
Guarding business development, we signed a new agreement with SK Bioscience that includes an $85 million investment in Novavax at a premium and removes at $195 million current liability from our balance sheet.
In addition, new approvals were achieved for the R 21, malaria vaccine and we anticipate upcoming sales of matrix M to support that launch.
Well as potential royalties from future sales.
And we were proud to announce that we signed an agreement with the Bill and Melinda Gates Medical Research Institute to advance several vaccine development programs using our matrix M technology and look forward to furthering that partnership.
When I first joined you all in February for the fourth quarter earnings call.
I pledge to you our commitment to be transparent about our opportunities as well as our challenges and to provide a balanced perspective on our progress.
With this commitment in mind I hope you can see from today's announcements that we have made significant progress on our key priorities. So far this year and have overcome several of the barriers to success, we have highlighted since my arrival.
And importantly that these successes have helped to put the company in a better position now to achieve our objectives for the year as we approach the fall season.
That being said, we cannot yet claim a successful year.
As there is still much work to be done with significant execution risk ahead of us much of our success. This year will be dependent on how and when regulatory authorities react to our filings how the fall season unfolds, including demand for Covid vaccine in general.
And we will need to continue to execute successfully against all of our objectives.
I want you to know that I am confident in our management team and then our organization's desire and focus to advance our objectives.
It is with humility that I give you our full commitment to continue these efforts with a goal of delivering our vaccine the season to consumers around the world and doing our best to deliver a successful performance for our company and our shareholders and all key stakeholders in 2023 with that we will now take your questions.
We will now begin the question and answer session.
To ask a question press Star then one on your Touchtone phone.
Using a speakerphone please pick up your handset before pressing the keys.
Withdraw from the question queue. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
Our first question will come from Roger song with Jefferies. You May now go ahead.
Great.
Thanks for taking the question and congrats for all the all the progress.
Thank you Roger.
Thank you John So a couple of questions.
Maybe first the focus on the U S market. So for the <unk> filing you already started so just curious what's left to be submitted is that possible you will.
They will oh, well in D C SBB clinical data versus that.
Five data you already have all had any risk of supply and be able to meet all of their requirement by late September .
Maybe that's one part of that you asked the question and the other part is the what are the key driver for you to be able to gain meaningful market share in the U S. For this fall.
Specifically, maybe talk about the pricing strategy and in your 10-Q, we see.
Those presentation is five versus a one dose any impacts on that thank you.
Thank you Roger a fill up would you take Roger's first question. Please on the FDA submission.
Sure. So we are we are somebody that preclinical and clinical packages and we're going to complete that filed this month.
We previously discussed with the FDA the need for a what kind of clinical data, we need and that's why we conducted a study we did the ex U b five data is adequate and not only for the U S. But globally for approval for that you'd be one time and our plan is to have the product available in time for the FDA CDC a release at the end of September .
Thank you Philip and John <unk> would you like to take the U S.
Yeah sure John Thank you Hey, Roger Thanks key drivers are I've been somewhat outlined in the script, but to review a big piece of this is an access strategy being able to make sure that all markets have all market segments have availability to the vaccine we've talked about distribution pharmacy Nash.
National Regional health care provider offices public health. These are all our key participants in our strategy to make sure that we have the non mrna vaccine a protein based vaccine available and accessible across that entire spectrum pricing strategy.
We're in line with what's been publicly stated about $130 off of WAC.
All of that gets incorporated into a a.
A reimbursement strategy that makes us competitive.
Advantage situation here to be sure that all of that vaccine is being purchased through the normal channels and as we think about what those normal channels or it's the normal annual seasonal flu vaccine.
Means of getting to the health care provider and to the consumer.
It's critical to understand here that we had very limited access of our vaccine during the last season, two government contract purchasing and a late approval of our vaccine. We are now well positioned with inventory to be in warehouses, starting in September the distribution network in place and a strong desire for.
For the consumer market in the healthcare provider market to be trying the.
Protein based vaccine.
Great. Thank you.
Maybe next question is regarding the financials.
Very glad to see Johan.
<unk> financial position improved significant today and also Jim you mentioned on the call.
All of the operation.
Operational plan.
Paul you can go more vehicle going concern that's key for you asked and I believe and maybe just elaborate on that point ended a bit.
And under what condition, you will potentially to move they're going kind of say the next 12 months. Thank you.
Yes, Jim Kelly you can take that question, Hey, certainly and you're exactly right that this is an area of high interest for investors our financial health. We really think we've made significant progress as you heard US mentioned, we have 900 million essence 630 in both cash and receivables.
And we just announced a really important.
Improvement in our strategic partnership with SK that certainly eliminates further liabilities when it comes to the going concern you are correct that it is further disclosed in our 10-Q and we look forward to providing more updates, especially in light of our performance. This fall in the.
Updated vaccine commercial marketplace and I think that's about what we can say right now I think the.
We're optimistic with our operating plan, we continue to execute well and then if we do so.
That would be in line with our expectations that with the with the appropriate execution, we endeavor to remove that going concern some more on that in the future.
Excellent. Thank you for the comment on that.
Our next question will come from Eric Joseph with JP Morgan.
You May now go ahead.
Good morning could you clarify whether.
The updated SBB vaccine would be available as a single dose or multi dose format for the U S fall campaign.
And I'm also curious to know whether any of the.
Whether a single dose format is required by any of the national or regional Pbms and then I have a follow up.
Thank you Erik John do you want to take that one yes, yes. Thank you, yes, we will be providing five dose vial presentation, which is a reduction from our previous 10 dose.
We had been talking about unit dose vials, an assessment of what market conditions are looking like there has to be sure that we had sufficient supply and insufficient timing parameters.
Isn't was made to go with a five five dose vial there is no <unk>.
Specific prevention from having a multi dose vial and the reality is we still have refrigerator stability, while others are still being shipped frozen product.
He's of administration of the five dose vial and certainly making sure that there are no barriers to the use of the five dose vial and that's being communicated and coordinated with all of our customers distributors pharmacies health care providers et cetera.
Okay now like you had a follow up you had a follow up question. Yes. That's very helpful. Thanks, John maybe just picking up on your comments about.
Pricing.
And you made a note about whack, but your comments signals being competitively price I guess, what should we be thinking about in terms of <unk>.
Discounts are.
Net price is there a range that we should be modeling in the U S.
So we're not going to disclose the specific contract pricing terms, but as you can imagine as part of the overall access strategy and contracting strategy across all of these channels.
That we are making sure that the reimbursement calculations are being taken into consideration for what what they're purchasing for what their what the health care providers are being reimbursed for.
And knowing that that's an important calculation.
For that.
That strategy, so contracting across all.
All channels in particular, I've mentioned pharmacy, I've mentioned office space physicians, but office phase positions are in categories of integrated delivery networks are in physician buying groups.
And so therefore that contracting strategy significantly affects their decision making.
Final one if I could sneak in a last one here.
With respect to the remainder of deliveries under a PPA in the EU are you effectively done with distributing that Wuhan strained at this point or should there be some pull through is still in the second half of that format.
I guess.
If that's not the case I guess, what's the timing when you expect to sort of be ready with the SBB stream delivery and Nathalie. Thank you go ahead, John Yeah. So Eric.
All of our shipments in the fall will be the variant strain XP big.
The different regions have different rollout of the Apis. So a P. As in you are finishing up by before the end of this year and we're going to be shipping all of that product.
In Canada, Australia, and New Zealand.
Taiwan, Singapore all have additional.
Shipments to be coming but we're all in all cases, whether they are we still sort of an extension of apa's, there will be ongoing and already in place execution of commercialization strategies, either in the private market or the tender markets and the script I made reference to several key markets in the EU that are gonna be folk.
Our attention will be focused on those markets as we go into the 24 seasons. So we understand what those situations are we also understand especially in Europe about the Pfizer.
About the Pfizer settlement in Europe against their contract, however, that still leaves us more than sufficient market share available for us to acquire.
Acquire and again all of those conversations and negotiations are already in process for the future.
Great. Thanks for taking all the questions. Thank you Eric.
Our next question will come from Brendan Smyth with TD Cohen you May now go ahead.
Hi, guys. Thanks, so much for taking the questions and congrats on the quarter.
Thank you Brian .
Yes, yes. So a couple of quick one from a kind of building on I think the last couple of questions.
I guess really to your.
I pointed out the Apa's I wanted to also ask if you're still planning to or maybe currently negotiating with any any of these government to try to monetize any of the remaining AP or are you expecting at this point you really just go ahead and sell them felt the rest as is.
And then I guess, one last question on the remaining supplies at the one vaccine.
We should maybe expect any I don't know if potential write offs or disposal of existing doses or really what your plan is for any any outstanding suppliers. There as we kind of move into the fall with ex vivo. Sir Thanks, John do you want to take the first question.
Yeah, let me.
I think Eric May have asked the same question too and let me just come back to clarify so for the remainder of shipments to be made for the balance of this year will all be under the very extreme vaccine Xb will.
It will be what the strain included in the vaccine will will be no. Additional wuhan shipments will be made will can we for this period of time have complied with the <unk> recommendations of the variant strains to be included.
We will continue to do throughout all of the various regions that we are engaged the <unk>.
Or a little bit different country by country. So no apa's contained within the U S itself wholly commercial market, Canada. For example will continue under there under the amended EPA will continue for 24 and 25 under under a PPA and we continue to talk with them long term about what their COVID-19 vaccine needs are.
Europe ends.
With this year, but conversations on a country by country basis for what might either be their tender market or private.
And then similarly, with Australia, and New Zealand those apa's have been amended.
To continue for another two years in every case the relationships established during the pandemic continued to be strong on a country by country basis, they've been very cooperative and flexible with us and in all cases, we've retained the full contract value of the API. So we will either continue to ship updated variant vaccine.
Or manage that through future purchase commitments to be satisfying against those those obligations.
And then Jim Kelly the second question on any potential write offs from Wuhan, yes exactly.
And we don't anticipate any write offs associated with Wuhan in and I think you noted in our Cogs. This quarter I think that's about $2 million and expiry and obsolescence. So we.
We've cleared our balance sheet of those items and we're fully focused on delivering the updated vaccine. This fall I'll just reiterate what Jon just said about getting all the Wuhan vaccine to our customers. We are fortunate our customers requested to have Wuhan delivered by Q2 and we.
We delivered on that and that was a part of I think what people are happy to see in our top line this quarter and when you think about our guidance that we've given given just in terms of phasing of revenue. We had said hey about one third or $500 million, we expected before the fall season, well, we did just that and so the remaining 800 to a one.
Is this back half of the year and we look forward to executing with our updated vaccine.
Alright, great. Thanks, guys.
Our next question will come from my Yang <unk> with B Riley.
You May now go ahead.
Good morning team.
Solid execution against the plan.
John .
Yes. Thank you.
Quickly.
Following up on the prior question around the.
Current liabilities management.
The <unk> update.
Mostly.
The focus on 2024 and your banking.
He has anything additional on.
On that on that topic, we should hear beyond the color you provided in Canada, and the FDA bio anything else that could happen under current liabilities.
Bucket, we should be looking out in the near term and then added Jim do you want to comment.
He will certainly.
By the way. Thank you for asking this question about current liabilities because it is so important to our financial health as we move forward.
When you think about the $864 million that we've.
Eliminate year to date and current liabilities and then the incremental 195 associated with it.
And really important set of agreements with SK bio my goodness, what a difference.
These last months have made as we further strengthen our.
Our financial position as a company.
We still do have.
In our I'll call it other liabilities, the approximately $700 million associated with coffee.
You have heard us say before that we stand by our position that.
We in our dispute that we think the claims around warranted.
And while we can't as policy speak to legal matters, we did share a disclosure that the arbitration hearing has been scheduled for next July 2024, and so.
That's all we can share at this time.
But certainly going back to Wow, great progress on improving the financial strength of this company and looking forward to give more and more updates on that front in future calls.
Thank you, Jim and then maybe to Berlin.
Quickly on that move forward.
Ongoing we saw a major antibody output Unfortunately failed equaled the enviable.
Got it and then the mix.
These newly added from the <unk> at least for a particular things that guide could you just talk about.
What sort of warning.
And.
As you think about it.
Execution.
Candidate and obviously.
<unk> had to be up on the news.
How you might be looking to do.
Design that phase II study.
Yeah. So so first I want to remind you.
The data that we presented previously was a relatively small data set right, we compared 11 different formulations. So those have to be bedside mixes.
The whole idea is for this next study we're going to be testing a co formulated vaccine.
It should be the final co formulated product, where we're looking at to develop the safety database, who could actually go into a large phase III study.
We think we're going to have a superior product that's the target product profile and we aim to prove that with a clinical efficacy phase III study to follow now that being said the.
You know our stage gate approach is really to release resources to develop the co formulation and looking forward in the future hopefully to get that phase <unk> study are taken care of next year.
To increase.
Increase the value of the asset and really to have.
Assuredness that as we go into a phase III study, we will have a superior product.
Okay understood and maybe just one final one John if I may.
The main.
U S product sales guidance ranges.
Right.
In terms of timing wise or market share.
Consultation on price and volume leverage.
How can we get it Jason is that based on your customer level.
Obviously, you haven't done already with GPO.
I need to do sort of breakdown.
Maybe able than downward.
How we may set it against that range, which is really broad.
John do you want to call, Yeah, Hey, Mike.
Look I think you're seeing a pretty significant range of estimates on total U S market demand probably for good reason and that Theres a lot of variability in what's going to be driving market sizing for the fall season, you had a lot of vaccine fatigue in the last fall fall season.
Not a good reason for that people were into the second or third booster. They were getting told to be vaccinated again in the fall campaign. It was falling off the headlines the U S government was declaring victory over the over the pandemic I think we're in a different situation. In this fall campaign, we have a new strain of the virus circulating in order to be protected from that new <unk>.
Rain or to reduce serious illness from that that's trained you need to have this updated vaccine in place in part what's going to drive that is information and communication to the consumer and health care providers about the need is.
Systems from the CDC and their communications campaign advising the public as to what to expect.
And then of course its participation at the pharmacy level right plays a significant role going forward and supporting a vaccination.
The office based practitioner.
Engagement with public health the BMC programs 317 funds.
Remember there's also the bridge access program, that's been talked a lot about with secretary <unk> to make sure. We've got coverage for underinsured know ensured underserved.
Populations.
So I think we're going to watch this play out over the next few weeks and months to decide where that where that is as far as our market share is concerned.
Remember, we had very little participation in the U S market last year, Unfortunately, and so.
But we have.
You know kind of moderate expectations about what we should be able to do but I think that there is a demonstrated need for a non mrna.
Vaccinate Covid vaccination.
They understand the value of our protein based vaccine. We are the only protein based vaccine in the U S market and we're going to be talking about choice.
And choice being important to this to this market. So we expect to see some market share gains.
And this fall campaign for sure.
Great. Thanks, Thanks, guys for taking my questions I appreciate it.
Okay.
Our next question will come from Alec Stranahan with Bank of America, You May now go ahead.
Hey, guys. Thanks for taking my question.
Just a couple from us.
First maybe just a finer point on the expectations around the BLA approval.
Approval.
Is your expectation that going into the fall vaccination cycle.
You'll have a BLA in hand, and if not.
Are any of the contract deliveries that you expect contingent on a BLA.
The recommendation or M. W. R recommendation, and then I've got a follow up thank you go.
Go ahead, John to you on that question, that's actually a really good question that we want to make sure everybody clearly understand so we are already in the process of submitting for the BLA, we expect that to be final submission within the coming we.
In months and then a BLA approval in the first quarter of of next year that process does not have.
A negative or positive effect for the fall campaign, right constant coordination and communication with FDA, we expect full operating flexibility under the emergency use authorization.
That conversation as I said has been taking place with with the regulators and with the FDA and so no restrictions across any of our distributors pharmacies health care providers, because we will have that an EUA authorization available.
Available to this product from the FDA.
Okay, Great and maybe one quick follow up maybe for fill up this in terms of the data that goes into the BLA, what the FDA would want it to be for full approval is this simply comparability versus the new accident on Immunogenicity or do you need to also demonstrate.
<unk> Sen from infection.
And if it's the latter would you.
Would you be updating the market once that.
Data available thank you.
Yeah. So so.
I mean, let me be kind of correspondence.
<unk> itself is based on the prototype vaccine $23 73.
Our original strain.
So that's that's as John said is we have a rolling submission and thats going in now.
<unk> approval for EUA for the X P b.
It also going in as I've said, we've completed the complete clinical role in the data I showed you today is the key clinical data for authorization of the SPV and Theres no other data in that file other than.
The data you saw it today.
And that's going to be completed this month.
With expectation of course to be building product that by the end of September for the CDC FDA now there's a subsequent supplemental BLA next year, which will wrap all this up into a into a single file going forward.
So at some point next year, we're going to be out of the EU a game and illustrate BLA game with all with this at all subsequent variants.
Great. Thank you.
Okay.
Again, if you have a question. Please press Star then one on.
Our next question will come from Vernon Bernardino with H C Wainwright.
You May now go ahead.
Okay.
Hi, everyone. Thanks for taking my question.
Congrats on the.
Yeah.
Restructuring and a.
Positive results.
The liabilities.
Wanted to confirm a few things.
Just wanted to confirm that the whack you quoted was 130 and whether that was all.
Four.
Single dose.
Boosted type.
Or is that for the.
Full of vaccination.
And then.
And.
As a follow up thank you.
So silver and.
130, WAC is $130 per dose regardless of presentation.
And so therefore, the calculation is based upon whack reimbursement follows in line with that calculation and then of course, the supporting contracts out to specific health care providers.
This is all part of how that process works.
And how does that work with.
No.
Some would consider that as kind of a premium.
Price.
So with that and receptivity with a combination COVID-19 and flu vaccine as far as the rest of activity to.
Such a vaccine being.
Somebody highly desired and then therefore also something thats deserving of a premium pricing.
Yeah, I don't know that I would call it premium pricing youre in the prevention or reduction of illness, or they see significant and severe disease. So the justification for that is based upon formal economic modeling that takes a look at the benefit received from the vaccine.
Against the economic burden associated with hospitalization.
Illnesses out of school out of work et cetera, et cetera, I think we have.
Calculation.
As reviewed we're confident that there is a a.
A robust cost benefit analysis that supports that were consistent with with the other manufacturers.
Yet comment on where we're going to be pricing strategy for a combo vaccine, but if you do have something based upon the data that we saw from the phase II.
That immunogenicity is robust and better than the leading vaccine in the market and then you also are combining that with the COVID-19 vaccine that has a robust efficacy profile against the severe disease burden.
That you would expect to see pricing consistent with the economic benefit.
Terrific I appreciate the additional insight Youre welcome.
Okay.
This will conclude our question and answer session I would like to turn the conference back over to John for any closing remarks.
Just wanted to say thank you for joining us today, everyone. We appreciate it and we look forward to sharing further updates with you in the future have a great day everybody.
Conference has now concluded. Thank you for attending today's presentation you may now disconnect.