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Novavax, Inc. (NVAX) H.C. Wainwright 26th Annual Global Investment Conference (Transcript)
Source: https://seekingalpha.com/article/4720037-novavax-inc-nvax-h-c-wainwright-26th-annual-global-investment-conference-transcript
Novavax, Inc. (NASDAQ:NVAX) H.C. Wainwright 26th Annual Global Investment Conference September 9, 2024 3:30 PM ET
Company Participants
Jim Kelly - CFO
Bob Walker - Head of R&D
Conference Call Participants
Vernon Bernardino - H.C. Wainwright
Vernon Bernardino
Okay. Good afternoon, everybody. Welcome to the 26th Annual H.C. Wainwright Global Investment Conference. Our next company presenting are -- that we're having a chat today is Novavax, company that by now, hopefully, all of you know really well. They have Nuvaxovid, which is one of three COVID vaccines that is in authorization or license for commercialization. One thing that I do want to highlight though is Nuvaxovid is the only protein-based vaccine that's in commercialization. The others are mRNA-based. With that, I think to begin, you mentioned in your fourth quarter annual results call that you have four drivers of the stock that you're focused on in the long term and then you also have near term drivers. Could you walk us through those four drivers and then what should we expect near term?
Jim Kelly
Absolutely. And I should first really thank you for having us again this year, Vernon here. I really appreciate you here having us here. And we've had just great meetings with investors who, given the time of year, the respiratory season and just of course, getting our COVID vaccine approved just at the end of August, so much interest. And so it's been great to be out with you. I'm joined by Bob Walker, Head of R&D. Jim Kelly, CFO. And you're exactly right. Four pillars to drive value, shareholder value for our company and especially in light of a transformative transaction, which was the Sanofi transaction we announced back in May, which is pillar number one, billions and billions of potential cash flow from that transaction. And most importantly, what they can do to take our technology and bring important vaccines to patients. So pillar number one, the Sanofi agreement. Pillar number two, our late stage pipeline. We have our own proprietary flu and a combination flu COVID vaccine that are going to read out mid next year. So that's the second pillar. Number three, is doing incremental business development deals with our Matrix platform. Again, so much value that can be created to either improve existing vaccines or create new. And then finally development of our own organic portfolio and much more on that later this year. We got a validated platform plan to do much more and we plan to do so with a lean operating platform as we continue to drive down costs, as we transition from being a commercial stage global company to one that is focused on R&D and developing value that way.
Question-and-Answer Session
Q - Vernon Bernardino
Yes. And you've been -- this is an initiative that was taken on by John Jacobs, who came on Board the beginning of last year.
Jim Kelly
That's right.
Vernon Bernardino
And so they're showing execution, which I think hasn't been totally appreciated. So let's focus briefly on the Sanofi deal. Can you tell us a little bit about the terms and opportunities it represents for you?
Jim Kelly
Well, certainly. And just in a moment before I hit that, I’d tell you what there couldn't have been more change in the last 20 odd months since John joined. I mean, I think you know it. He came in in January of 2023. And almost instantly, on that sort of end of February, early March call, mapped out strategic initiatives to transform the company. And we kind of sit here today well down that path and with humility, you're never all the way there but we're really pleased with the progress of the last you know 20 months. And one of the hallmarks, I think, of this change has been this transaction, which I'm happy to walk through in a lot more detail now. The Sanofi agreement that we announced back in May has multiple dimensions and that's why it takes a little more time to kind of be understood, inclusive of initial upfronts and milestones of the transaction itself. So $500 million upfront, a $70 million equity investment. And then you look at how milestones royalties are available to the company for both the COVID vaccine and Sanofi's ability to develop combination vaccines alongside our COVID. $700 million in milestones across both and then significant royalties across both those programs available to us. Then the fourth piece or another piece of significant value creation is Sanofi has value to our or access to our Matrix. So they can take our Matrix and apply it to their existing vaccines, all except their flu or develop new vaccines. And we've got the ability to receive up to $210 million in milestones per vaccine and receive royalties on vaccines where they put it together with our Matrix. So those royalties can go 20 years. So significant value creation across this transaction. But importantly, it was done with a market leader in respiratory vaccines. We couldn't have really chosen or scripted a better partner. And so we're thrilled with not just the terms but also who we're working with.
Vernon Bernardino
For those who don't know, I mean, Sanofi is obviously big in the vaccine space. You've probably seen commercials already by now that they market the seasonal flu vaccine Flublok and Fluzone. And so this is a company that you would want to partner with as far as the vaccine space is concerned. Because in their past, they've also acquired vaccine technology, Chiron. That's dating myself here. But you know I've known the company since 2004, so there's quite a bit of Wall Street here, my second career.
Jim Kelly
Well -- and of particular importance to us is that when you look at their portfolios of where they play in respiratory vaccines, they've got the highly innovative, highly differentiated programs that really match up well to how we develop vaccines. And so in particular, we look at the 65 plus group and just that tends to be the premium markets and the types of markets where we play. So that part worked as well.
Vernon Bernardino
Yes. And the 65 plus group is the one who usually generate the weakest immune responses to vaccines. So big pharma partners present there is going to be very advantageous and synergistic. One thing that I think is really not appreciated adequately is Matrix-M. Matrix-M is an adjuvant. Matrix-M is also a technology, as Jim said. Can you very briefly, I mean, a lot of people do know what an adjuvant is tell the audience what an adjuvant is and the various uses that perhaps Matrix-M could be expanded and adapted to?
Bob Walker
Sure. So Matrix-M is a saponin based adjuvant. Some people are familiar with the GSK product, ASO-1, also saponin based, which is an extract of a Chilean tree, of bark of a tree that grows in Chile. So it's an extract that is then combined with cholesterol and phospholipids and forms a substance that when administered along with, in our case, a nanoprotein antigen, boosts the immune response. And the type of boosting of the immune response that Matrix-M delivers is both on the humoral side. So the magnitude and the breadth of the antibody responses but also the T-cell responses, which we think gives Matrix an edge, and is one of the distinguishing factors that we see both with our COVID vaccine as well as our flu vaccine. Now we have looked at Matrix with other competing flu vaccine products that are currently not adjuvanted and produced in egg systems, and we see the same types of responses. So we think that we can potentially partner with other flu vaccine manufacturers if they're looking for an adjuvant or looking to, for example, induce a T-cell response, this might be a good adjuvant to think about. We've also looked at the ability for Matrix to boost non-viral antigens and specifically pneumococcal antigens. So pneumococcal vaccines are based on polysaccharides. Polysaccharides historically have been difficult to be immunogenic in the populations that need them the most, tend to be the extremes, the babies and the elderly. And when we combined a market leading pneumococcal vaccine with our Matrix in laboratory animals, we see the same kind of adjuvanticity.
So we think that Matrix-M has potential to boost other existing marketed vaccines. It has the ability potentially to to revisit certain antigens that have -- or certain infectious diseases where that have not been considered to be necessarily amenable to vaccines but potentially by revisiting the approach and combining with Matrix, you'll see a different -- different properties. And then I think there's the world beyond infectious diseases, which we're currently assessing. And I think that later towards the end of the year when we unveil what our new pipeline will look like and where we'll be going, I think that there will probably be some opportunities to look outside strictly infectious disease vaccines.
Vernon Bernardino
Now, what many investors may not know is those old protein vaccines that you used to take or still take that are protein based, often had an adjuvant in them called alum, which is a different or formulation of aluminum. So the idea is not new but Matrix-M is. And the basic idea is it boosts the immune response. But with Matrix-M, you perhaps have at least a 2x or many fold boost in that response. I think that's perhaps, let's see, by year end when you have the portfolio reveal how those opportunities are actually going to be best communicated and hopefully further appreciated.
Jim Kelly
Yes, I mean, you just reminded me. One of the other aspects is that the, what's called antigen-sparing property of adjuvant. So you can actually -- and that translates into better cost of goods, right? That's the point I was driving at. So if you can find the right adjuvant, you can actually lower your protein production costs, which is really where a lot of the money gets spent in manufacturing of vaccines. And so even -- you know anyway, there's other opportunities there to help folks -- other partners, for example, reduce cost of goods by looking at Matrix.
Vernon Bernardino
And the protein sparing also sort of has a little bit of quality of life aspect to it. Because can you imagine to get more immunogenicity you can also just inject more protein to get a higher response. But because of formulations that can actually be painful. And you know over time people may not get their vaccines or you know hesitate to finish a course, because it's just an injection is painful. So you imagine if you had a volume like I've had for a rabies when I got bit by a dog, you have this course of vaccines and those are huge volume injections. And so dose sparing is another aspect of the adjuvant technology you have that's underappreciated. Real quick on to CIC, which is the combination COVID seasonal influenza vaccine, positive Phase 2 results. Could you tell us a little bit about those plans and you know whether you're on track for the Phase 3 immunogenicity trials?
Jim Kelly
I'll take that one too. So yes, we're initiating a Phase 3 immunogenicity study, looking at both CIC and our standalone flu in the same Phase 3a study. And we're on track to start that in October of this year. And we're expecting our first data readout to be by mid 2025, and that's going to be a really important data readout for us, right? Because you know that's where going to see, it's gonna be very binary, we think. You know we either see non-inferiority to the market leader or we don't. And we're fully expecting that based on the Phase 2 data we are gonna see non-inferiority or not superiority, that's right. And that's going to, I think, open up the door to partnering discussions where we actually have an asset at that point that's been proven.
Jim Kelly
Really important because we're planning on investing up through these data readouts mid next year partnering and then we're seeking to have the partner advance the filing, run the Phase 3b, post marketing commitments and commercialize. And through that partnership have available upfronts, milestones and royalties as a part of continuing to monetize and create value from our pipeline.
Vernon Bernardino
Perfect. Now, as you remember that Jim mentioned earlier, one of the pillars that CEO, John Jacobs, had the company implement was getting costs under control, but yet it's a drug a, you know, a vaccine development company. So there's going to need to be spend. The results so far have been great. I think my model does expect you to at least be operationally breakeven sometime next year. I forget which quarter it is. But can you talk a little bit about those initiatives, efforts and the results you have so far?
Jim Kelly
Well, certainly. As folks heard when we started today, hey, we're a pandemic company and so we scaled up for this global reach to be able to deliver billion of doses. Well, we transitioned the company in the past few years to a post pandemic model, really cleaned up our balance sheet, cleaned up our OpEx and now are increasingly emphasizing our R&D roots. So what does that mean mathematically? Well, in 2022, we had $1.7 billion in R&D and SG&A. By 2026, we expect to have less than 350%, a 80% reduction. How the heck do you do that? Well, a lot of it is, hey, we worked our way through those operation warp speed studies. It was great, the government helped us, it was such a great help in investing in our COVID platform. Then as we move through this year and the next, this year is our last commercial year. So those roll offs, the big COVID studies roll off, the commercial front end investment rolls off next year or this year's R&D and SG&A, we expect $750 million, next year below $500 million, the year after below $350 million. So what we're able to do, the other side of this agreement with Sanofi in completing our commercialization efforts, is really resize and reshape the company to get to a more lean, agile operating model where we can operate within the parameters of the cash flows coming to us through the Sanofi agreement. We're planning to partner in new cash flows off of flu and CIC. And then you just heard from Bob, the opportunities to partner are Matrix. And we think there are vast opportunities there, both for improving existing vaccines on the market or helping develop new ones.
Vernon Bernardino
Yes, I think this is an important aspect of the investment thesis, because one of the things the company -- in this implementation is to perhaps an evolution to a commercial stage company, at some point, you want the company to be profitable, right? You can't just be spending on R&D all the time, and it's a biotech company, so you're going to plow profits into the pipeline. So there's always going to be some spend. But on the return of that investment, I think, company starts to become really attractive. And I think the homework starts now if it already hasn't been done that if the story starts to become operational breakeven that for those investors who focused on the cash flow aspect of the story, it is probably a good time to do so, because I think and my model only actually has the company capturing 10% of the COVID market, I think it's slightly higher because I think the combination vaccine -- slightly higher for the combination vaccine, because the combination vaccine, I think, will be superior to the competition that the company doesn't really necessarily need to cut that more price that high, capture that much more market share to get to what I believe is currently, right now, an attractive valuation and a price target horizon for those who don't necessarily want to hold the stock long term, which I do recommend. Real quick since we only have about a minute left in time, could you talk a little bit your cash position and perhaps how you might deploy those limited resources into clinical stage activities?
Jim Kelly
Yes, certainly. And important to emphasize, hey, it's our intent to be a profitable company. Like there should be no question about it. I'm not guiding just yet. On hey, you're saying, hey, what quarter? Hey, not guiding just yet. Hey, we're going to -- that's our goal. Our goal and our intent is to be a profitable company where we've been able to do those types of licensing arrangements that bring cash flows into the company that fully support our development efforts. And those efforts we can't wait to unveil as a part of our R&D Day later this year. Important activities that are ongoing include flu CIC that we'll read out by midyear. We've also said that we've initiated IND enabling work around both our RSV and H5N1 programs. You know those are also seeking to become partner ready. And then as we unveil these new pipeline prioritization projects that's where the funding's going to go. So much more on that front as we move forward in the coming months. Can't wait to share more.
Vernon Bernardino
So let's take a little liberty of just one more minute. Can you tell us a little bit about the steps you took and the status of the current launch for Nuvaxovid?
Jim Kelly
By the way, thank you for getting there. Just how quickly we move on to the next one. Hey, the authorization, the EUA that we received from the United States on August 30th, we couldn't be more pleased. They were -- have been such great partners with us. We did so in the summer. We're four or five weeks ahead of where we were last year. We're right here at the beginning of the season in the US, shipped to retail pharmacy late last week, expecting the ability of shots and arms this week, pre-filled syringe, really good contracting work, a lot of credit to our team, retail contracting this year to get us in pharmacies and availability across the country. So we're there. We're there now.
Vernon Bernardino
Terrific. On a personal note, I got my COVID vaccine one week before theirs was available last year. This time, it's going be on time not only because it's earlier but obviously the commercialization -- the authorization is also earlier. So I want to thank Jim Kelly, Dr. Robert Walker for joining us today for presentation on the Novavax. Hopefully, you got a taste and a bit of insight into what attractive investment opportunity this company is. And that if you haven't taken a look before or have perhaps looked in the past but decided to not take a position at that time, I think now is a time. The company is evolving in a positive direction and hopefully you got that insight from them. Thank you.
Jim Kelly
And thanks again, Vernon. Really enjoyed being here. And thank you all.
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