Q3 2024 Novavax Inc Earnings Call
[inaudible]
Speaker Change: Good morning and welcome to NOVAVAX Third Quarter 2024 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.
Speaker Change: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star followed by the 1 on your touchtone phone. To withdraw your question, please press star followed by the 2.
Speaker Change: Please note, this event is being recorded. I would now like to turn the conference over to Louis Dunay, Vice President, Investor Relations. Please, go ahead.
Louis Dunay: Good morning and thank you all for joining us today to discuss our third quarter 2024 operational highlights and financial results.
Louis Dunay: A press release announcing our results is currently available on our website at Novavax.com and an audio archive of this conference call will be available on our website later today.
Please turn to slide 2.
Louis Dunay: Before we begin with prepared remarks, I need to remind you that this presentation includes forward-looking statements, including but not limited to statements related to Novavax's corporate strategy and operating plans,
its value drivers and near-term priorities.
Louis Dunay: Its partnerships and expectations with respect to potential royalties, milestones, and cost reimbursements. Its expectations regarding manufacturing capacity, timing, production, and delivery for its COVID-19 vaccine.
The development of Novavax's clinical and preclinical product candidates.
Louis Dunay: Full Year 2024 Financial Guidance and NOVAVAX's Future Financial or Business Performance.
Louis Dunay: Each forward-looking statement contained in this presentation is subject to certain risks and uncertainties that could cause actual results to differ materially from those projected in such statements.
Louis Dunay: Additional information regarding these factors appears under the heading, Cautionary Note Regarding Forward-Looking Statements in the Presentation 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 Securities and Exchange Commission available at sec.gov and our website at novavax.com.
Louis Dunay: 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 3.
Louis Dunay: This presentation also includes references to a non-GAAP financial measure, which is forward-looking information for combined R&D,
Louis Dunay: and SG&A Expenses, as adjusted for expense reimbursement from Santa Fe under the Santa Fe Agreement.
Louis Dunay: 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 and highlight our four key value drivers.
Louis Dunay: Additionally, John Trizzino, our President and Chief Operating Officer, will provide an update on our current commercial season, and Dr. Bob Walker, Chief Medical Officer, will discuss our clinical development and R&D strategy.
Louis Dunay: Finally, Jim Kelly, Chief Financial Officer and Treasurer, will provide an overview of our financial results.
Speaker Change: I would now like to hand over the call to John Jacobs.
John Jacobs: Thank you, Lewis, and thank you everyone for joining us. Please turn to slide 5.
John Jacobs: I'm pleased to be with you here today along with members of our executive team to discuss Novavax's progress during the third quarter as well as how we have advanced the new corporate growth strategy that we outlined during our second quarter call in August.
Thank you. Thank you.
John Jacobs: This strategy is focused on driving future value from additional business development activities and organic research and development using our proven technology, all while reshaping the company into a leaner and more agile organization.
John Jacobs: This strategy has already resulted in the Sanofi partnership we announced this year, which has enabled us to transition away from Novavax's prior business model of devoting all our resources and time to commercializing one product, our COVID-19 vaccine.
John Jacobs: and to move instead toward additional value-generating activities, which we will talk about more today.
John Jacobs: First I want to take a moment to recap the four key drivers of value for this strategy and then share with you both the progress we have already made and our next steps on each.
John Jacobs: The four value drivers are, value driver one, the Sanofi partnership, value driver two, our late stage pipeline, Kik and Flu, value driver three, leveraging our proven technology platform to drive additional partnerships and deals.
and Value Driver 4, our emerging early-stage pipeline.
John Jacobs: We intend to deliver on these value drivers using a more lean corporate infrastructure built on the core capabilities needed to execute this new approach and disciplined expense management on which we have already made significant progress and will elaborate on later in the call.
John Jacobs: So first, let's talk about Value Driver One, the Sanofi partnership.
John Jacobs: Sanofi will take the lead co-commercialization role for our COVID-19 vaccines starting in 2025, enabling us to monetize our existing COVID-19 vaccine program through double-digit royalties from Sanofi sales into the future.
John Jacobs: We also have the potential for multiple additional revenue streams generated from other vaccines developed by Sanofi, either in combination with our existing COVID-19 product, or using our MatrixM adjuvant, as they look to leverage the power of our proven technology.
John Jacobs: As a reminder, in the second quarter, we received an initial cash payment of $500 million up front and an approximately $70 million equity investment in Novavax.
John Jacobs: We are also eligible to receive up to $700 million in additional milestone payments related to our COVID-19 vaccine and Sanofi's own combination COVID flu vaccine.
John Jacobs: Along with future milestone payments and royalties we anticipate from these programs, we also have the potential for additional royalties and or milestones from other vaccines developed either in combination with our existing COVID-19 product or using our MatrixM technology.
John Jacobs: As you can see, Sanofi's strong global presence and proven track record in developing and commercializing vaccines, combined with Novavax's R&D expertise, has created the potential for this partnership to drive significant value for years to come.
John Jacobs: and the people who would have broadened access to our vaccine technology and the protection it can provide.
Speaker Change: Our second value driver is Novavax's late-stage pipeline. Our late-stage pipeline is comprised of our COVID-19 influenza combination and standalone influenza vaccine candidates.
Speaker Change: We believe that combination vaccines, such as our kick candidate, represent a significant market opportunity, and we're excited about the prospect of advancing these assets.
Speaker Change: In addition, our stand-alone influenza vaccine program is based on a platform that has demonstrated enhanced immunogenicity in late-stage trials.
Speaker Change: And we believe that if successful, this could be the first and only recombinant-based, protein-adjuvanted flu vaccine in the market, and one which can serve as the foundation to advance an innovative and differentiated pandemic influenza program as well.
Speaker Change: As we previously communicated, our intention is to partner these assets.
Dr. Bob Walker will provide updates on this program shortly.
And now moving on to Value Driver 3.
Speaker Change: which is to leverage our proven technology platform to drive additional partnerships and deals.
Speaker Change: Our proven tech platform consists of both our MatrixM adjuvant and our nanoparticle protein-based technology, which we believe provide us the potential for multiple business development opportunities with a diverse set of potential partners across a range of vaccines.
Speaker Change: We believe MatrixM holds incredible promise, not just to develop our own vaccines, as we've already seen with our marketed COVID-19 product, but importantly, to also potentially improve other companies' existing vaccines and or enable them to develop new vaccines using our adjuvant.
Speaker Change: Last quarter, we shared data from existing vaccines combined with MatrixM to demonstrate how our adjuvant can be leveraged to potentially improve them.
Speaker Change: The data we showed of inactivated influenza and bacterial polysaccharide vaccines adjuvanted with our MatrixM are just two examples of the significant value we believe our adjuvant could provide to the existing vaccine portfolios of other companies, and we continue to explore other ways to leverage its potential.
And finally, Value Driver 4, our emerging early-stage pipeline.
Speaker Change: Our fourth value driver focuses on generating additional value from our tech platform through the development of a new diversified pipeline.
Speaker Change: Employing a disciplined approach, we intend to develop an early stage pipeline based on our proven technology platform, starting from our core of infectious disease and potentially going beyond that core into other areas where we see the most unmet medical need and the greatest potential for our technology.
Speaker Change: Importantly, we intend to expand our pipeline strategically using a rigorous set of guiding principles aimed to focus our time and investments on the highest value programs.
Speaker Change: This will include considerations such as scientific rationale and reasons to believe our technology can be differentiated and when in a specific therapeutic area.
market opportunity and the level of unmet medical need.
Emerging Competitive Pipelines.
Speaker Change: attractiveness of the asset to other companies and ability to partner and several other factors to help us make high quality choices with our investments in R&D.
Speaker Change: Importantly, we intend to execute this strategy in a capital-efficient manner, one that maintains our flexibility and preserves the potential for maximum value creation.
Speaker Change: Dr. Bob Walker will expand further on both how we intend to apply these guiding principles and our next steps during his portion of today's call.
Speaker Change: So, in summary, our corporate growth strategy channels all of our resources into driving value from our proven technology platform via partnering and R&D.
Speaker Change: and to doing so in a much more lean and efficient organization.
Speaker Change: For the remainder of this year, and in line with our key value drivers, we're focused on executing our four priorities, which you will see on slide 6.
Priority one, the successful execution of our partnership with Sanofi.
Speaker Change: Priority two, driving incremental value from our technology platform with the advancement of our kick and flu programs, the ongoing development of an emerging early-stage pipeline, and pursuing new business development opportunities.
Speaker Change: Priority 3, further reduction of our R&D and SG&A costs in line with our guidance, along with implementing additional reductions to scale as we enter 2025 and beyond.
Speaker Change: And priority four, delivery of our updated COVID-19 vaccine for the 24-25 vaccination season.
Speaker Change: Before I hand the call over to additional members of our team, I want to take a moment to welcome Dr. Raksandra Dragia, our new head of R&D, who started just yesterday.
Speaker Change: Roxandra brings more than 20 years of extensive clinical, corporate, and global public health expertise to Novavax, and we believe she will be instrumental as we evaluate our future pipeline and opportunities for our tech platform.
Speaker Change: You will hear more from Ruxandra in the coming weeks as she settles into her new role.
Speaker Change: Now to discuss our third quarter in more detail, I'd like to turn the call to John Trizzino for our operating updates. John?
Thank you, John. Please turn to slide 7.
Speaker Change: We are pleased with the progress in our COVID vaccine program through the first part of the 24-25 season.
Speaker Change: And with this progress, we are already seeing that season-to-date, Novavax's vaccine administrations in the U.S. already outperform those done in the entire 23-24 season, with our current weekly market share averaging about 3%.
Speaker Change: Let me take a moment to highlight our progress last quarter, all of which we believe will position Sanofi for success when they take over lead commercialization of Nuvaxazid in the 25-26 season.
Please turn to slide 8.
Speaker Change: Thank you for watching. I'm James Kelly. I'll talk to you soon.
Speaker Change: Our primary commercial efforts remain dedicated to the largest market opportunity, the U.S.
Speaker Change: We initiated our 24-25 COVID-19 commercial season in mid-September shortly after achieving our goal to get our vaccine authorized at the end of August in line with the timing of the competitors in order to facilitate a timely season start.
Speaker Change: Compared to last season, this was a significant improvement in timing for Novavax.
Speaker Change: At the same time, the current COVID-19 vaccine season initiated three weeks earlier in the U.S. as compared to last season, and we believe that if current trends continue, the total market size could be approximately 40 to 50 million shots in arms this season.
Speaker Change: Specific progress for this season also included our product presentation offering our vaccine in a pre-filled syringe compared to last year's five-dose vial presentation.
Speaker Change: broader access and improved contracting, doubling the number of locations with Novavax available in over 30,000 locations including CVS Pharmacy, Rite Aid, Walgreens, Meijer and and hundreds of other grocers and thousands of independent pharmacies.
Speaker Change: Higher visibility of Novavax on vaccine schedulers in most major retailers.
Speaker Change: and a targeted commercial approach, executing marketing and selling activities targeted to select opportunity markets rather than last year's broader national approach.
Please turn to slide 9.
Speaker Change: In situations with more favorable market access contracts, Novavax is demonstrating the ability to compete with the mRNA vaccines.
Speaker Change: In one regional supplier of vaccinations, Novavax has achieved approximately 70% market share as reported by that retailer.
Speaker Change: It is important to note that this audience aligns to ACIP's recent recommendation for this age cohort to revaccinate this season after their initial updated seasonal dose.
Speaker Change: At the same time, we experienced some challenges that have prevented us from achieving our initial market share goals, namely minimum purchase commitment contracts for mRNA vaccines,
Limited initial retail stocking of our vaccine.
Speaker Change: a limited commercial infrastructure of just 30% of our previous size, and three-month product expiry dating for our pre-filled syringe, which we intend to work with the FDA to improve for future seasons.
Thanks for watching!
Speaker Change: We are managing through these challenges and we do not believe our current market share is representative of the overall demand and potential of our COVID-19 vaccine. In fact, of the greater than 30,000 retail outlets stocking our vaccine, we have seen an increase in the level of restocking quantities, demonstrating growing demand.
Speaker Change: As we advance through the remainder of the season, we believe these efforts will continue to strengthen the opportunity and establish a solid foundation for Santa Fe in preparation for next season.
Speaker Change: We continue to work closely with our partner to enable a seamless transition of lead commercial activities.
Speaker Change: We believe that Sanofi's significant scale and strong presence, coupled with the increase in consumer demand we have seen for Novavax's COVID-19 vaccine, will result in successful upcoming seasons for the product.
Please turn to slide 10.
Speaker Change: Outside of the U.S., we were pleased to receive marketing authorization for our updated vaccine from the European Commission last month.
Speaker Change: We remain focused on conducting a lean, limited, and targeted commercial season in Europe and Asia while we continue to work with Sanofi to position them to take over lead commercial operations for the 25-26 season.
Speaker Change: In other regions, as we've noted in the past, we are continuing to prioritize the completion of our APAs with the intent to transition key markets to Sanofi.
Speaker Change: In summary, we believe there remains a continued demand for COVID-19 vaccines and believe that Sanofi, with its large commercial reach and greater resources, will drive additional market share in 2025 and beyond.
Speaker Change: With that, I'd like to hand the call to Bob to discuss our research and development updates.
[inaudible]
Thank you, John. Please turn to slide 11 and 12.
Speaker Change: Today, I will elaborate on important updates in our research and development program that support each of the four key value drivers John Jacobs outlined earlier.
Speaker Change: I'll start with our updated 2024-2025 COVID-19 vaccine, followed by our late-stage program in kickin' influenza.
Speaker Change: Then I'll discuss expanding potential opportunities for Matrix M and conclude with an update on our internal preclinical pipeline and our R&D strategy going forward.
Please turn to slide 13.
Speaker Change: With regard to our 2024-2025 COVID-19 vaccine targeting the JM1 strain,
Speaker Change: We continue to monitor the performance of our vaccine against newly circulating variants in non-clinical models.
Speaker Change: And these data continue to demonstrate broad cross-neutralizing antibody responses to each new strain, including both KP311 and XEC. Please turn to slide 14.
Speaker Change: This slide shows neutralizing antibody responses pre and post receipt of our JN1 vaccine in rhesus macaques.
Speaker Change: You can see that the antibody titers are robust against all of the variants tested, including the KP311 and XCC variants that are now widely circulating.
Speaker Change: So these data for the newer variants indicate that our vaccine should provide acceptable coverage against the variants that are currently circulating.
Please turn to slide 15.
Thank you for tuning in. We'll see you next time.
Speaker Change: I'll now move on to our late-stage pipeline, comprised of our COVID-19 Influenza Combination or KIC vaccine program and our Seasonal Influenza vaccine program, which is the second value driver that John discussed.
Speaker Change: We issued a press release yesterday stating that the clinical hold on our IND for our kick and standalone influenza vaccine candidates has been removed by the US FDA.
Speaker Change: The safety event recently reported by a participant in our Phase 2 study was reviewed in detail by the FDA, along with our responses to their comments.
Speaker Change: and they determined that we had satisfactorily addressed all clinical hold issues.
Speaker Change: The information provided to the FDA supported our assessment that the serious adverse event was not related to our vaccine.
Speaker Change: We intend to begin enrolling our Phase III immunogenicity trial as soon as possible.
Please turn to slide 16.
Speaker Change: Data from our now-completed Phase 2 KIC study support non-inferior immunogenicity of both our KIC and influenza vaccines.
Speaker Change: During the Phase 3 pre-IND process, the FDA and Novavax aligned on a single Phase 3 trial for both candidates with an updated trial design as shown in the graphic on the right.
Speaker Change: Participants will be randomized to one of four vaccine arms, and immunologic comparisons to establish non-inferiority for KIC will be made to the Novavax COVID-19 vaccine and to an age-recommended commercial influenza vaccine.
Speaker Change: Immunologic comparisons to establish non-inferiority for Novavax seasonal influenza vaccine will also be made to the same commercial flu vaccine.
Speaker Change: Their trial will enroll adults age 65 years and older and is currently planned to be conducted in Australia and New Zealand during their current spring and upcoming summer.
Please turn to slide 17.
Speaker Change: Now, I'd like to turn to our proven technology platform, our third value driver, and to the attributes of Matrix M that we believe could be of significant interest to partners with established or developing vaccine franchises.
Speaker Change: On prior earnings calls, we presented data supporting each of the Matrix M attributes listed on this slide.
Speaker Change: We believe these attributes provide the potential for Matrix M to improve the activity of existing vaccines, as in the case of inactivated egg-based influenza vaccines.
and we previously shared those data.
while maintaining excellent tolerability.
Speaker Change: And we believe Matrix M has the potential to be antigen-sparing and reduce cost of production, such as for pneumococcal polysaccharide vaccines, and we've previously shared those data as well.
Speaker Change: We also believe that Matrix M may enable new vaccines to be developed for certain poorly immunogenic pathogens that have not been regarded as good vaccine candidates to date.
Speaker Change: During the third quarter, Novavax entered into a material transfer agreement with a leading pharmaceutical company to evaluate Matrix M in a bacterial vaccine program.
Speaker Change: We intend to continue to seek out similar opportunities to further leverage MatrixM's proven adjuvant activity and impressive safety profile.
Speaker Change: which includes its role as a component of two authorized vaccines, our COVID-19 vaccine for ages 12 and over and R21 for malaria prevention, recommended for infants as young as 5 months of age.
Please turn to slide 18.
Speaker Change: Finally, I would like to provide updates on our emerging early-stage pipeline, our fourth value driver.
Speaker Change: John talked about the ongoing strategic assessment of our technology platform, which is a major focus for our R&D organization. And we are excited to continue this assessment under the leadership of our new head of R&D, Dr. Ruxandra Draghia.
Speaker Change: Our strategy to drive value through innovation and R&D that leverages our validated technology platform is based on expansion beyond our existing core expertise in COVID-19 influenza and kick vaccines.
Speaker Change: Our R&D strategy will be executed within the framework and key guiding principles John noted earlier.
Speaker Change: First, we intend to move forward with RSV combinations and pandemic flu, which are disease areas that leverage our existing experience and internal expertise in infectious disease.
Speaker Change: Both are based on our Protein Nanoparticle and MatrixM technology platform, and we hope to advance both through IND-enabling activities in the near term.
Speaker Change: We will focus on exploring RSV-containing combinations that would give this vaccine candidate the highest probability of success, given the number of RSV stand-alone vaccines now available.
Speaker Change: Characterization of our RSD candidate is ongoing in preparation for an IND enabling toxicology study that is planned to start next year.
Speaker Change: For the pandemic flu candidate, toxicology studies are now underway, and we are actively discussing funding opportunities with the relevant government agencies to support early and late-stage clinical development and the manufacturing of this promising candidate.
Speaker Change: Outside of RSV combinations and pandemic influenza, our next step is to identify other infectious diseases that are or could become vaccine-preventable, meet other predefined criteria, and for which our technology could possess differentiating attributes for potential advancement to IND.
Speaker Change: We will prioritize areas where we believe we can make a meaningful impact while leveraging our existing expertise.
Speaker Change: Areas that are currently under consideration for more rigorous scientific and business case analyses range from reactivated infections that are known to be vaccine-preventable, such as varicella zoster,
Speaker Change: where our technology has produced a candidate VVV vaccine that we believe may be better tolerated and comparably effective to the currently approved vaccine and with a large market size.
Speaker Change: to areas of great need such as antibiotic associated infections such as C. difficile where the scientific challenges are significant and where we believe our technology could have a meaningful impact.
Speaker Change: We intend to evaluate these and other opportunities in infectious disease.
Speaker Change: And we intend to prioritize our efforts over the next few months to make decisions on which preclinical programs we want to advance.
Finally, the third step in our portfolio development process.
Speaker Change: We potentially may expand more broadly beyond infectious diseases into therapeutic areas where we believe there are real opportunities for our technology to augment and improve on current approaches.
Speaker Change: If so, we would plan to leverage specialized scientific knowledge and robust translational models.
Speaker Change: to evaluate a range of chronic diseases where our technology could lead to the development of preclinical constructs to advance to proof of mechanism and proof of concept studies and beyond.
Speaker Change: Here, we are evaluating therapeutic areas, for example, oncology, immune-mediated diseases, and diseases of protein aggregation.
Speaker Change: We plan to apply a low-cost approach with rapid in vitro assessments and non-clinical models to identify a small number of specific diseases for further focused assessment.
Speaker Change: Key considerations include balancing available resources and necessary spend by leveraging existing screening technologies and collaborations.
Speaker Change: We will engage in a similar comprehensive and rigorous scientific and business assessment that would be needed to support further advancement.
We continue to evaluate opportunities under this framework.
Speaker Change: And we will provide regular updates as we execute this strategy.
Speaker Change: Now, to discuss our financials for the quarter, I want to hand the call over to Jim.
Thank you, Bob. Please turn to slide 19.
Speaker Change: Today, we announced our financial results for the third quarter of 2024.
Speaker Change: Details of our results can be found in our press release and in our 10-Q filing.
Please turn to slide 20.
Speaker Change: We remain focused on improving the financial strength and performance of Novavax to drive shareholder value. I'll start by covering key themes for the third quarter and a look towards the remainder of 2024 and beyond.
Speaker Change: For the third quarter of 2024, Novavax recorded total revenue of $85 million, including $38 million primarily from the U.S. market sales, and reflecting initial stocking orders that were in line with our expectations.
Speaker Change: Although we are seeing an improvement in market share compared to the 2023 vaccination season.
Speaker Change: Our current market share of approximately 3% is trending below our full season expectations, and as a result, we are updating our full year 2024 total revenue guidance.
Speaker Change: As we continue to transform Novavax into a more lean and agile organization, we reduced our Q3 2024 R&D and SG&A expenses by 26% compared to prior year.
Speaker Change: For full year 2024, we are reiterating the guidance range for R&D and SG&A expenses of between $700 and $750 million.
Speaker Change: At midpoint, this reflects a decrease of approximately 40% and $500 million as compared to full year 2023.
Speaker Change: Novavax is prepared to initiate an additional cost reduction program to reduce combined R&D and SGA expenses in 2025 and 2026 to better align our go-forward cost structure with our value creation strategy.
Speaker Change: We maintained a strong cash position and ended the third quarter of 2024 with over a billion in cash and accounts receivables.
Speaker Change: And finally, we remain focused on prioritizing the completion of our APAs to enable a smooth transition to commercial leadership to Sanofi.
Speaker Change: Please turn to slide 21 for a more detailed view of our third quarter 2024 financial results.
Thank you very much. Thank you.
Speaker Change: For the third quarter of 2024, we recorded total revenue of $85 million compared to $187 million for the same period in 2023.
Speaker Change: Of note, product sales for the third quarter of 2024 were $38 million compared to $2 million in the same period for 2023 as a result of higher U.S. market sales in the current quarter.
Speaker Change: Our cost of sales for the third quarter of 2024 were $61 million as compared to $99 million for the same period in 2023.
Speaker Change: For the third quarter of 2024, Novavax's combined R&D and SG&A expenses of $158 million reflects a 26% reduction from the same period in 2023.
Speaker Change: Approximately $30 million of this current quarter amount is related to commercial and medical affairs related spend that we do not expect to incur after this year. Based on this, we believe we're on track to further reduce our cost structure in 2025 and beyond.
Please turn to slide 22.
Speaker Change: We are committed to creating a more lean and agile organization to align with the company's market opportunities.
Speaker Change: To advance that goal, we expect to reduce our R&D plus SG&A to approximately $350 million in 2026, an approximately $1.4 billion, an 80% decrease when compared to full year 2022.
Speaker Change: For 2025 and net of expected reimbursement, we expect our non-GAAP combined R&D and SG&A to be approximately $450 million.
Speaker Change: To achieve this, NOVAX is prepared to initiate an additional cost reduction program to better align our go-forward cost structure with our value creation strategy.
Speaker Change: As we transition lead commercial activities to Sanofi, this will enable the reduction of commercial and supply chain costs.
Speaker Change: We are also actively exploring the sale of our Czech Republic manufacturing facility, which could provide both cash proceeds and a reduction to our ongoing operating cost.
please turn to slide 23.
Speaker Change: Now turning to our updated financial guidance for the full year 2024.
Speaker Change: We are revising our guidance for total revenue to between $650 million and $700 million from our prior guidance of $700 million to $800 million.
Speaker Change: At midpoint of $675 million, this is a $75 million decrease to our total revenue guidance.
Speaker Change: Based on a revised full year 2024 product sales guidance, we now expect product sales of between $175 million and $225 million.
At midpoint of $200 million, this revised guidance includes
Speaker Change: $100 million from APAs delivered in the first half of 2024, and $100 million commercial market product sales from the U.S. market and ex-U.S. markets in the second half of 2024.
Speaker Change: The decrease of $125 million at midpoint compared to prior guidance is driven primarily by our COVID-19 trends in the U.S. market.
Speaker Change: We are also revising and increasing our full year 2024 licensing, royalties, and other revenue guidance and now expect to achieve $475 million.
Speaker Change: The $50 million increase compared to the prior guidance is driven by a combination of revenue recognition for the upfront payment and cost reimbursement under the Sanofi Agreement.
A few comments on our expectations for 2025 and beyond.
Speaker Change: For the remaining APA agreements, our intent is to amicably negotiate or deliver doses, or when appropriate, exit agreements with the goal of these activities to be cash flow neutral or favorable on a go-forward basis.
Speaker Change: To be conservative, we have removed APA sales from our forward-looking revenue expectations until further clarity is available for each.
Speaker Change: Our current operating plan, including the multi-year expense targets, highlight a path to our goal of maintaining at least one to two years of cash on hand prior to receipt of cash flows from the Sanofi Agreement in the form of milestones and royalties.
Please turn to slide 24.
Speaker Change: For the 350 million in the Vaxevit COVID-19 milestones, we expect to complete database lock of a related pediatric clinical trial in the fourth quarter of 2024, which would enable earning the first 50 million milestone.
Speaker Change: Revenue recognition for this milestone will be allocated over the transition services period through 2026.
Speaker Change: All other milestones under the agreement will be recognized in full in the period when earned.
Speaker Change: The 175 million BLA milestone is anticipated to align with our BLA PDUFA action date and approval which is presently targeted for April 2025.
Speaker Change: The two $25 million authorization transfer milestones are expected to follow as we enable Sanofi to commercialize Navexavid in the U.S. and Europe for the 2025-26 vaccination season.
Speaker Change: The $75 million technology transfer milestone is expected to follow the completion of our transition services obligations that we currently estimate to occur in late 2026.
Speaker Change: For the Sanofi Flu COVID-19 program, there are two milestones totaling $350 million related to the development and first U.S. commercial sale.
Speaker Change: Sanofi recently noted on their Q3 earnings call that they expect to start their Phase 1-2 study this year, and if that data are positive, they would move towards Phase 3 in 2025.
Speaker Change: In addition, Novavax is eligible to receive tiered royalties on net sales from COVID-19 standalone and COVID-19 combination products. This enables Novavax's meaningful participation in future economics from the current and future products under this agreement.
Speaker Change: NOVAX will support Sanofi as it prepares to advance all programs associated with this agreement. And NOVAX will be eligible for cost reimbursement across a host of spend categories.
Speaker Change: We expect this reimbursement to occur during 2025 and 2026 as we supply product, conduct R&D, and technical transfer activities.
Speaker Change: For products supplied to Sanofi, we will book both cost of goods sold and reimbursement revenue.
Speaker Change: We look forward to sharing additional updates as we seek to improve Novavax's 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.
John Jacobs: Thank you all for joining us today and thank you to all our employees for their continued efforts in advancing our business. I am proud of our accomplishments to date and excited about our opportunity to drive value in the future with our new strategy. I'd now like to turn the call over to our operator for Q&A.
Thank you for tuning in. We'll see you next time.
Speaker Change: We will now begin the question and answer session. To ask a question, you may press star then 1 on your touchtone phone.
Speaker Change: If you are using a speakerphone, please pick up your handset before pressing the keys.
Speaker Change: To withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster.
Speaker Change: The first question comes from Roger Song with Jefferies, LLC. Please go ahead.
Speaker Change: kick in the flu program. So a couple of questions from us, maybe first on the clinical hole removal, understanding you want to start a phase three as soon as possible. Can you give us some clarity around the timing of the star?
Speaker Change: you know, what will be the gating factor for you to start the phase three.
And then given this severe SAE occurrence,
Thank you.
Speaker Change: Thank you, Roger. We'll let Bob Walker address your questions, starting with timing. Bob.
Bob Walker: Great, thanks. Well, first of all, let me just say we got the news on Friday, so we, after market close, or close to market close.
So we've had, you know, the weekend and yesterday.
Bob Walker: to assess and I would say that we're working on study logistics right now.
Bob Walker: Our intent, of course, as you've heard, is to start the trial as soon as possible.
Bob Walker: We're not prepared to give you a specific starting date at this moment, but expected in the coming weeks, we will be able to provide more clarity on specifically when we plan to start the trial.
Bob Walker: Let me just remind you that the safety event that was reported to FDA led to the clinical hold was determined by us not to be related to study vaccine. And based on the FDA's reaction, it appears that they concur with our assessment. It certainly substantiates our assessment.
They're really the standard safety
oversight and monitoring.
Bob Walker: that essentially was already in the trial, or with a slight...
tweaks.
Bob Walker: in response to the back-and-forth while we were assessing this event.
Bob Walker: So, what I'm trying to say is we don't expect significant impact.
Bob Walker: from any of those kind of operational changes to the protocol other than the standard types of impacts.
Bob Walker: that everyone encounters when they make administrative changes to a protocol.
John Jacobs: and Roger, this is John. Thank you for your congratulations on that hold being lifted. We're very excited about and we were to just build upon Bob's answer. We were ready to go on track to go Bob right in Q4 with our study. So having this lifted is excellent. There's just a little bit of work we need to do but in the near term we think we'll be able to start that study. We're just avoiding giving a specific date yet as we're still digesting.
John Jacobs: the feedback from FDA, which is clear and expected, and we just have to get that reset and going. But we think in the near term we'll be able to restart that study. We're very excited about it. Thank you.
John Jacobs: Great, thanks for the clarity. Yeah, I understand you just got the news and then thank you for confirming you're still going to start a trial in 4Q. So maybe shift to... No, Roger, let me just clarify. We're not giving a time frame right now on it. We're just digesting the feedback and have to reset the logistics to get it started. So it may be sooner rather than later, but we don't want to give a specific date yet until we finish our planning. That's what we were saying. So not giving a specific time frame yet, but in the near term, we should be able to provide clarity and we think we'll be able to start it in the near term.
Speaker Change: Thank you. And then shifting towards the commercial, so you've got 38 million commercial sales mostly coming from U.S. Can you give us some additional color around the stocking versus the real shot arm?
Speaker Change: The script capturing, you have around 160,000 scripts in the retail channel. So how should we think about the percentage captured by the retail versus non-retail? And the last part of the question is, what's your working assumption on the net price per dose?
Go ahead, John. You want to take that one?
John Jacobs: Yeah, so just a little bit of clarification on some of the stats there. I think what we're seeing so far with the IQVIA data, which everybody is monitoring,
John Jacobs: is a season that started a bit earlier than last year and so we're seeing reflected in some of the trend lines.
John Jacobs: shots in arms into the marketplace through retail pharmacies and I think that's consistent with what you would see as a normal pattern of vaccination. The trend lines that we're seeing are also indicating that there's a slight increase
John Jacobs: And overall, demand and shots in arms this year over last. We'll have to see how the rest of the season progresses to determine whether or not that's going to hold true for the balance of the full season, the full 24-25 season, just to be clear about how some other numbers.
have been reported by other companies.
John Jacobs: This will take us through the first quarter. So far, we're holding at about approximately 3% market share. We're significantly greater even season to date than we did in all of last season, some three to four times the total number of what we did.
and I think that that's significant.
Got it. Thank you.
Speaker Change: And the next question comes from Mayank Mantani from B. Reilly Securities. Please go ahead.
Speaker Change: Good morning, team. Thanks for taking our questions and welcome aboard, Roxandra. So maybe just following up on the prior question, you know, just thinking forward-looking,
Speaker Change: in terms of having the vaccine now as part of Sanofi's product portfolio and distribution channel next year.
Speaker Change: Are you able to comment on, you know, what, you know, trends around net price? I know market share might be too early to comment on, but just split by channel and some of the pricing dynamics could look like, and then I have a follow-up.
Thank you. Thank you.
Go ahead, John T.
John T.: This is really important so far about what is happening this year versus what is happening you know next year with Sanofi, right? Of course this partnership is strategically very beneficial.
to us.
John T.: We're not seeing the benefit yet of that relationship and we're beginning through all the transition activities.
John T.: There's a high level of cooperation and collaboration across all markets.
John T.: and so therefore what we expect to see happening as they fully embrace the relationship.
John T.: across the globe, but also remember how deeply penetrated they are in the vaccine space, including influenza. Having a COVID vaccine available alongside of their flu vaccines should have a dramatic impact and overall demand. So we see significant progress being made as we go into the 25-26 season.
Speaker Change: How are you thinking steady state in this 2026-2027 time frame, knowing you may not have a commercial infrastructure there and may not look to perhaps even do a large scale phase 3 program beyond obviously this phase 3 program that you're executing?
Speaker Change: So I think to make sure I understand your question correctly is a commercial infrastructure to support any other future development activities if that's if that's the question I think what we're primarily looking at
is partnering some of these late-stage assets, right, and not...
having the significant cost infrastructure to support a commercial organization.
Speaker Change: you know, going forward. And we would see the benefit of partnering out these assets, you know, going forward, which is exactly what we did with Sanofi and what we potentially do with our own, you know, kick program going forward.
Speaker Change: In my IQ, if you look back at some of the prepared remarks I provided earlier, one of the things you're going to see, I noted, is this quarter we had approximately $30 million in spend related to commercial and field-based medical affairs activities, so it annualized to about $120 million that we don't expect or anticipate spending in future years. That is part of the reason why we've got significant confidence in our ability to continue to decrease our run rate on R&D and SG&A in line with the guidance we've been providing.
Speaker Change: And lastly, on your next IND filing coming from Bob and Roxandra, I know you talked about a number of pipeline initiatives, just maybe if you narrowed down on what could be the next IND filing for one of your projects.
Speaker Change: prioritize programs. And in the same context, if you are able to talk to also Sanofi's prioritization of any next candidate beyond the new accident would also be helpful. Thanks again for taking our questions.
Speaker Change: Bob, do you want to take the question on thoughts around our next IND and how we're approaching that process?
Thank you.
Speaker Change: As I mentioned in the R&D strategy going forward, we do have two candidates right now that are moving toward I&D and in or soon to begin I&D enabling activities. And so that's the RSV combination program as well as the pandemic influenza.
Schultz.
Schultz: Too soon, I think, to give you anything more specific in terms of timing, but those are the two that I think I would regard as being next in line.
Schultz: and then you know the other the other areas that we talked about will be able to you know give you more clarity in the months ahead but
Hi!
Speaker Change: Yeah, okay, I think that answers your question. Let me know. Thank you, Bob. And Mike, you asked a second question about Sanofi. Obviously, in their most recent earnings call, they noted they're preparing to initiate a Phase I-II kick study this year. And with a positive readout, if they get that positive readout, they would move towards a Phase III sometime in 2025.
You can go check their commentary to clarify that.
for your notes.
Speaker Change: And then we can't comment on any other things that Sanofi may be working on right now. But I think just referring everyone back to that contract and the agreement that we have where there are multiple opportunities to partner with Sanofi on our MatrixM adjuvant. And they can also make at their choosing multiple combinations with our COVID vaccine should they choose to do so. Each new asset they would develop with MatrixM has towards $200 million in potential one-time milestone payments and ongoing royalties for years to come. So certainly a lot of opportunity in that contract over time to.
Speaker Change: to develop multiple assets should they choose to take that pathway. You'll have to look to them for further commentary on their plans.
Speaker Change: Noted. Thanks for that helpful color and congrats on the progress.
Thank you, Mike.
Speaker Change: And the next question comes from Alex Stranahan with Bank of America. Go ahead.
Speaker Change: Hi guys, Matthew on for Alec here. Thanks for taking our questions and congrats on the quarter. Just two quick ones from us. Curious if you can provide some color on the net price for NuvaXvid this year and how much of that channel was outside of retail and whether you expect that to be similar going forward in the future years.
Speaker Change: Sorry, if you could just restate the question real quick. Sorry.
Speaker Change: Yeah, just looking for some color on the net price for NubaxFed this year and how much of that was outside of retail and whether you expect those dynamics to continue in the upcoming years.
Hey, I'm happy to address the net price question.
Speaker Change: While we have not given a specific net price, some of the feedback that I've shared more generally about this marketplace has been the following. You know, all three COVID vaccines on a gross basis are approximately the same around 140 per dose. It is reasonable to assume that the net price after deductions would be in the 50 to 75% of gross, that would put you at 70 to 100. And then, in addition to that, depending on the dynamics of returns at any given time, hey, that number can fluctuate. But I think that does give you, hopefully, a sort of generalized view. And then with respect to the retail versus non-retail, I'll let John comment on market dynamics.
here and what we're seeing this year as well.
Speaker Change: Yeah, and let me just follow up just a point of clarification on a previous question, right? So while we're we're looking at IQVIA data, and there are multiple sources of shots in arms data
Speaker Change: and also there's the what's revenue generating out to the distributor versus what actual shots and arms are.
Speaker Change: The clarification, I said 800,000 doses before, the actual number is closer to 500,000 doses with the one-week lag simply coming off of the IQVIA data. So a lot of data points here, I think where the updated guidance is considering all of the trends, what we're seeing in the market so far, but just to be crystal clear and specific about what the IQVIA data is reporting so far.
Thank you for joining us.
Operator, next question.
you on the phase 3 tick trial.
Speaker Change: Your prior guidance was for an expected readout in the mid-25 time frame. Is that still your expectation, or should we be carrying a more conservative timeline assumption perhaps in the second half? And just kind of...
Having gone through this clinical hold experience, I wonder...
Speaker Change: to what extent your Phase 3 IND might be exposed to any additional longer-term follow-up from the Phase 2 trial? Have you sort of reviewed any potential at-risk patients to sort of rule out the potential for,
similar, you know, SAE type of events.
Speaker Change: And then finally, just when it relates to the stand-alone flu portion of the Phase 3 study, I just want to confirm whether that would be intended for... the design is intended to support registration.
Speaker Change: of this blue standalone, and if so, whether you have superior immunogenicity in mind there within the trial design or if it's more around a non-inferior signal. Thanks for taking the questions.
Speaker Change: Thank you for your questions, Erika. I think you had three questions into the question there, but very good points. So number one on timing, we did address that a little earlier. Let me just reframe that so everyone's clear that we were on track.
Speaker Change: In Q4, as we stated before, to initiate our trial, then the clinical hold occurred. We're happy that that was lifted in a short order.
Speaker Change: and now we're gearing up to reinitiate that trial. So we just got the feedback from FDA on Friday, close of business or so, worked on it over the weekend and yesterday, so we're not going to commit to a precise timing to restart that trial or to start that trial now, I should say.
Speaker Change: But give us, in the near term, another couple of weeks or so, we'll be able to provide more clarity on trial start timing. But we don't see a significant delay. We think we can get it started relatively in the near term. But again, we'll clarify once we finish working through FDA feedback.
Speaker Change: So, thanks for that question. Bob, did you want to take the other two questions that Eric had? Thank you.
Sure. So... Okay.
Bob Walker: The follow-up on the trial is the standard length of safety monitoring for adjuvanted vaccines.
And I think I'll just leave it there.
Bob Walker: And in terms of the design for the Phase 3 and the flu stand-alone product,
The intent of the study is to demonstrate non-inferior immunogenicity.
Bob Walker: So that's true for the Kik product, and that's equally true.
Bob Walker: for our flu standalone. The study will be able to obviously generate more than non-inferiority data, so the statistical analysis has the ability to demonstrate superiority, but the study is designed and powered for non-inferiority.
So look at that square.
Speaker Change: Absolutely. And I think Eric was also asking, Eric, if we heard your question correctly, is that designed for registration, that trial, Bob? Could it provide a registrational opportunity?
Bob Walker: Yeah, yeah, absolutely. This study is designed as a phase 3a immunogenicity trial to support licensure of the products with the understanding that a follow-on clinical efficacy trial would need to be demonstrated post-approval.
Bob Walker: And again that whether or not it can be will be determined by the FDA in their overall oversight based on the data and other factors, Bob, correct? That's right, that's right.
Excellent. Well, thank you very much for taking the questions.
Thank you.
Speaker Change: The next question comes from Brandon Smith from TD Cowan. Please go ahead.
Speaker Change: Hi, this is Jackie on for Brendan. Maybe just one on your expectations for your analyst event next year. Will you confirm any new pipeline programs and are you planning to be in the clinic with any other wholly owned assets besides the flu in the next 18 months?
Speaker Change: Jim Kelly, you want to take the analyst's day? Yes, certainly, and thanks for the question. And, you know, as we evolve into the post-commercial
Great, thank you.
Thank you for joining us.
Speaker Change: Once again, if you have a question, press star followed by the 1. And the next question comes from Vernon Bernandino from HC Wainwright. Go ahead.
There's some evidence that the flu vaccine this year was...
Speaker Change: not as good as in prior years. Just wondering how the kick vaccine formulation for the flu vaccine component is handling that. And the second question I have is, just wondering if you could provide us insight into how the gross margins may change going forward. Thank you.
Bob, you want to take Vernon's first question?
Bob Walker: Thanks John. So the strains that we're using in the that we are planning to use in the phase 3a trial are the US or Northern Hemisphere strains for the last season for or the season that we're currently in.
Bob Walker: Again, just to remind you, the trial is not designed as a clinical efficacy trial, but is a comparative immunogenicity study, right? So, the readout is going to be whether or not the immune response is induced by the flu component in our vaccine.
Bob Walker: are not inferior to the immunogenicity of the comparator flu vaccine.
Bob Walker: And in good efficacy years or less good efficacy years, the immunogenicity is a kind of a stand-alone readout that's going to be driving the analysis of this study.
It's very helpful. Thank you. Yeah, okay.
Speaker Change: Vernon, happy to answer the question about gross margins in 2025 and forward.
Speaker Change: You know, this year is our last commercial year. Certainly in U.S. markets, Europe's, we had noted that while there's some trailing APAs, we're excluding them from our future guidance at this time. So I'll focus my comments on, you know, what will be our cost of goods sold for 2025, 2026, and beyond. It is going to reflect...
Providing supply to Sanofi.
Speaker Change: for 2025 and 2026. That's on a cost plus basis. And so you can see that, you know, the traditional commercial company relevance of gross margin is not gonna be the same from 25 forward. That's gonna be a more cost plus.
Speaker Change: This concludes the question and answer session. I would now like to turn the conference back to John Jacobs for any closing remarks.
One moment, please, while we reconnect.
Eric Joseph, James Kelly, John Jacobs, John Jacobs, John Jacobs
Yeah, we got it. Bye.