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Novavax (NASDAQ: NVAX) 3Q20 Earnings Transcript


Ladies and gentlemen, thank you for standing by, and welcome to the Novavax Third Quarter 2020 Financial Operating Results and Operating Highlights. At this time, all participants are in a listen-only mode. After the speaker’s presentation, there will be a question-and-answer session. So ask a question during the session, you will need your part star one on your telephone. Please be advised that today’s conference is being recorded. If you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker today, Senior Vice President Investor Relations and Corporate Affairs, Silvia Taylor. Thank you. Please go ahead ma’am.

Silvia Taylor

Good afternoon and thank you to everyone who has joined today’s call to discuss our third quarter 2020 operational highlights and financial results. A press release announcing our results is currently available on our website at novavax.com and an audio archive of this conference call will be available on our website later today.

Joining me today are Stan Erck, President and CEO; and John Trizzino, current Executive Vice-President, Chief Financial Officer and Chief Business Officer, and newly appointed to become Chief Commercial Officer and Chief Business Officer. Dr. Greg Glenn, President of R&D; and Dr. Filip Dubovsky, our recently promoted Executive Vice President and Chief Medical Officer will be available for the Q&A section of today’s call.

Before we begin with prepared remarks, I need to remind you that we will be making forward-looking statements during this teleconference that could include financial, clinical or commercial projections. Statements relating to future financial or business performance, condition or strategy and other financial and business related matters, including expectations regarding revenue, operating expenses, cash usage in clinical development and anticipated milestones are forward-looking statements within the meaning of the Private Securities Litigation Reform Act. Novavax cautions that these forward-looking statements are subject to numerous assumptions, risks and uncertainties, which change over time.

I would now like to hand the call over to Stan. Stan?

Stan Erck

Thanks, Sylvia. Actually before I begin what I’d like to do is congratulations to our colleagues at Pfizer. They had a great result. They did a great job. It’s a remarkable effort on their part. And it’s great for global health. It’s great for the vaccine industry. And truly it’s great for all the efforts of our colleagues developing a spike protein to stop the coronavirus pandemic. It shows that a vaccine will work, and congratulations to Pfizer.

So with that in our third quarter and continuing through today, reflects the accelerated expansion of Novavax in every functional area. With the ongoing Phase 3 clinical trial in the U.K. we are now just months away from Phase 3 efficacy data for a COVID-19 vaccine.

On last quarter’s call, we detailed our clinical program and highlighted the substantial manufacturing and development agreements we completed. We have made further progress in all these efforts for our COVID-19 vaccine and we will be discussing those today.

I’ll start with an update on all of our COVID-19 vaccine activity in the quarter and recent weeks, and then following that I’ll quickly provide an update on NanoFlu. John will then review the financials for the quarter. We will then take your questions.

As I’m sure you all know by now after initiating early-stage development efforts in January of this year, we identified Novavax CoV2373 as our lead vaccine candidate in April. And for simplicity I will refer to our candidate as 2373 today.

Following preclinical testing that demonstrated high immunogenicity, we quickly began clinical testing in a U.S.-Australia Phase 1/2 trial. In mid-August we initiated a Phase 2b trial in South Africa followed a week later by the initiation of the Phase 2 portion of the Phase 1/2 clinical trial in the U.S. and Australia. Last week we presented preliminary favorable reactogenicity data from the Phase 2 portion of the trial at the CDC’s Advisory Committee on Immunization Practices or ACIP.

At the end of September, we initiated a pivotal Phase 3 efficacy trial in the U.K. two weeks ago we announced the expansion of this U.K. trial and that we are planning to begin enrolling into our U.S. pivotal Phase 3 clinical trial by the end of this month. So as all of you can see, there’s been a great deal of progress on the COVID-19 vaccine front, since we embarked on this journey earlier this year.

Now I’ll dig into some specifics from our clinical program. Let’s begin with our Phase 1 trial. Data from this trial was published in early September in the New England Journal of Medicine. This publication detailed the distinctively strong immunogenicity and benign safety profile of our vaccine.

With respect to the Phase 2 trials, as I mentioned earlier, we initiated a Phase 2b efficacy trial for 2373 in South Africa in mid-August in collaboration with Professor Shabir Madhi at Wits University. Shabir is a well-known leader in running important global clinical trials over the years and we are honored to have his support. This trial is being supported in part by a $15 million grant from the Bill & Melinda Gates Foundation.

We recently expanded trial enrollment from 2904 to 4404 participants as of today and we are more than 50% enrolled. There are two separate cohorts in the trial and the first cohort will evaluate efficacy, safety and immunogenicity in approximately 4164 healthy adults while the second will evaluate safety and immunogenicity of approximately 240 medically stable HIV-positive adults. Conducting this trial in South Africa allows us to evaluate 2373 across a diverse representative study population that includes an immunocompromised group.

The results of this trial will provide an invaluable indication of efficacy in part due to the severity of the pandemic in South Africa. Also in August, we began enrolling patients in the Phase 2 portion of our Phase 1/2 trial in the U.S. and Australia. The main goal here has been to expand on the initial safety and immunogenicity results, but also to look for robust immune responses in older adults, a particularly vulnerable population in this disease. Of the 1,288 volunteers, approximately half are between the ages of 60 and 84.


On October 30, we presented a subset of data from this trial at the CDC’s ACIP meeting. New data presented included blinded reactogenicity of the vaccine in adults older than 64 years of age. The benign reactogenicity profile in all age groups was consistent with the Phase 1 data. Preliminary reactogenicity and immunogenicity data was reviewed by the FDA. And based on their review, we have been given permission to begin Phase 3 development in the U.S.

In late September, we initiated the Phase 3 study of 2373, which is being conducted in the U.K. As of today, the trial is more than 60% enrolled at approximately 9,000 individuals between the ages of 18 and 84 with and without relevant comorbidities. 25% of the enrollees are above the age of 65, which means that we are meeting our original goal.

We recently decided to expand the trial to 15,000 participants, which we expect to have enrolled by the end of this month. We believe this increased enrollment is likely to expedite the overall assessment of safety and efficacy. Additionally up to 400 participants will also receive licensees of influenza vaccine as part of a co-administration subset. The U.K. trial protocol has a single primary endpoint, which is the first occurrence of PCR-confirmed symptomatic COVID-19. These data could serve as the basis for global licensure. The U.K. Phase 3 protocol is posted on our website at novavax.com/resources.

And finally on the clinical front ,we recently announced our plans to begin a pivotal Phase 3 trial in the U.S. as well as in Mexico by the end of November. We are actively working with the FDA to initiate this trial supported by Operation Warp Speed. This trial is expected to enroll up to 30,000 participants with proportional representation among diverse populations most vulnerable to COVID-19 distributed across race and ethnicity age and those living with comorbidities. Like the U.K. trial, the U.S. Phase 3 trial has a single primary endpoint, which will be the first occurrence of PCR-confirmed symptomatic COVID-19.

While discussing U.S. development of our vaccine, I also want to mention that 2373 was recently granted Fast Track designation from the FDA, which we announced this morning in a press release.

We discussed the significant support Novavax received in terms of funding on our last call. As a reminder, Novavax has received commitments for over $2 billion in funding for our COVID-19 vaccine development and manufacturing from Operation Warp Speed, CEPI, the Department of Defense and the Bill & Melinda Gates Foundation. As I am sure you all realize, this funding is crucial to our ability to move forward, and for which the company remains grateful.

I’d like to spend a couple of minutes discussing the status of our global manufacturing of 2373, and the supply agreements we have completed. Manufacturing continues to scale up. We anticipate manufacturing 2373 in seven different countries in 2021, an ambitious but necessary goal given the pandemic we are facing.

Over the course of the third quarter, we established and built on several manufacturing collaborations and purchase agreements for 2373. In August, we entered into a development and supply agreement for the antigen component of 2373 with SK Bioscience in Korea. We also signed a letter of intent with the Republic of Korea’s Ministry of Health and Welfare in conjunction with SK Bioscience, to help make the vaccine available to South Korea. This agreement boosts the potential global supply of the vaccine and is an important component of our collaboration with CEPI.

In the same time frame, we entered into an arrangement with the U.K. government for the purchase of 60 million doses of 2373 and its support of our Phase 3 clinical trial in the U.K. Novavax has expanded its existing collaboration with FUJIFILM Diosynth Biotechnologies to manufacture the antigen component of 2373 in the U.K. in addition to its manufacturing activities at its sites in North Carolina and Texas. This additional FUJIFILM site is expected to produce approximately 180 million doses annually when it is fully online.

In August, we reached an agreement in principle with the Canadian government to supply up to 76 million doses of 2373 and expect to begin fulfilling this supply agreement as early as the second quarter of 2021.

In September, we amended our existing agreement with Serum Institute of India to increase our global manufacturing capacity to more than two billion doses annually when all planned capacity has been brought online, which we expect to happen by mid-2021. And just last week, we announced an arrangement with the Australian government to supply 40 million doses of 2373 starting as early as the first half of 2021.

Over all, we have strategically enhanced our manufacturing capacity over the course of 2020. We now have antigen production capacity in the following geographies. In India through the Serum Institute; in Korea through SK Bioscience; in Spain through Biofabri; in the Czech Republic through Novavax CZ; in Japan through Takeda; in the U.K. through FUJIFILM; and in the U.S. through two facilities operated by FUJIFILM.

In addition on the adjuvant side, Novavax’s proprietary Matrix-M adjuvant is now being manufactured at our Swedish subsidiary Novavax AB; AGC Biologics in the U.S. and Denmark; and at the PolyPeptide Group in the U.S. and Sweden, which will manufacture two key intermediaries used in Matrix-M.

With our continued progress, we have taken steps to grow our physical footprint as well. We recently announced the expansion of our Maryland campus to support global vaccine development. We are leasing approximately 170,000 square feet in Gaithersburg Maryland for manufacturing R&D and general operational purposes, which is expected to be ready for use in early 2021. We also purchased a 10-acre parcel of land also in Gaithersburg Maryland for future development to accommodate our expected growth.

I would now like to turn – I would now like to provide a brief update on our other cornerstone program NanoFlu. Earlier this year in March, we announced the successful completion of NanoFlu’s pivotal Phase 3 clinical trial and our intention to seek regulatory approval from the U.S. FDA under the accelerated approval pathway.

As we announced last March – sorry, last month, we formed a leadership team that will advance NanoFlu to regulatory licensure. The team will also explore the potential of our respiratory vaccine portfolio and develop a regulatory and commercial plan for NanoFlu as a standalone vaccine or as a combination respiratory vaccine with either COVID or RSV or both. The effort is being led by Rip Wilson as well as several other Novavax veterans who have been involved in leading the NanoFlu program.

I also want to highlight that our Phase 2 NanoFlu data was recently published in Clinical Infectious Disease. This publication is posted on our website at novavax.com/publication.

So before I hand it over to John, I want to quickly highlight recent updates regarding our board and leadership team. We are pleased to add Gregg Alton to our board of directors. Gregg brings extensive industry experience and leadership to Novavax, including more than 20 years at Gilead Sciences where he served in an array of roles including Chief Patient Officer, leadership of commercial operations in Europe, Asia , Latin America and Africa as well as government affairs, public affairs, global medical affairs and General Counsel and Chief Compliance Officer.

Additionally we are excited to announce Greg Covino, who is joining next week as Chief Financial Officer. Greg was most recently Group CFO at GSK’s TESARO Oncology Division having served as TESARO’s SVP and Chief Accounting Officer prior to the acquisition.

With this appointment, John Trizzino who previously held both the CFO and Chief Business Officer roles will continue to serve as Chief Business Officer and also assume the newly created role of Chief Commercial Officer. I’d like to thank John for taking on the CFO role and getting us to the strong financial position we hold today.

I’d also like to highlight two recent promotions. First, Filip Dubovsky, MD has been promoted to Executive Vice President, Chief Medical Officer. And Biegie Lee has been promoted to Senior Vice President Chief Information Officer. Both have played important parts in our recent success and I thank them for their efforts.

And with that I’ll have John provide the financial results.

John Trizzino

Thank you, Stan. Today we announced the financial results for the third quarter and first nine months of 2020. Given our focus on 2373 development and a significant amount of grant funding to support its development, it makes comparison to last year to not be materially relevant. So therefore, I’ll focus most of my comments on the third quarter 2020 results only.

For the third quarter we reported a net loss of $197.3 million or $3.21 per share. Revenue in the quarter was $157 million and was primarily the result of services performed under our participation in Operation Warp Speed, the CEPI agreement and a Department of Defense contract. We recognize revenue as we complete services under our funding agreements and also report expenses as incurred.

R&D expenses were $294.1 million in the third quarter of 2020. These expenses were primarily related to development activities of 2,373 and included, approximately $122 million of non-cash expense in the period that related to embedded leases under U.S. accounting principles. It is important to highlight this accounting treatment given its impact to total operating expenses for the quarter. Excluding this charge from total operating expenses brings our R&D expenses in line with revenue.

G&A expenses were $56.9 million in the third quarter of 2020. Expenses from the quarter were primarily from increased employee stock-based compensation expense and increased professional fees related to the integration of Novavax CZ and supporting our 2373 program. As of September 30 2020, Novavax had $571.6 million in cash, cash equivalents, marketable securities and restricted cash.

Net cash provided by operations for the first nine months of 2020 was $86 million, compared to net cash used in operation activities of $112.9 million, for the same period in 2019. During this quarter, we raised $53.3 million in net proceeds through our ATM offerings, for a total of approximately $445.6 million, since the beginning of the year.

In addition in the second quarter of 2020, we entered into an agreement to sell Series A convertible preferred stock, convertible into 4.4 million shares of common stock, to an investment fund affiliated with RA Capital in a private placement. We received gross proceeds of $200 million.

That concludes my financial review. And I’ll now turn it back to Stan.

Stan Erck

Thanks John. 2020, continues to be a productive year for Novavax. In the third quarter we took big steps toward achieving our goals in both, our COVID-19 vaccine program and NanoFlu. We expect Quarter four to be no different.

As we head into 2021, we will continue to rise to the challenge presented to us and look to strengthen our record of executing and delivering. We look forward to keeping you updated on milestones and developments across all of our programs.

As always, I would like to express my gratitude to the entire Novavax team as well as our collaboration partners, who make all of this possible. Your tireless efforts in this critical period have been invaluable. All of us here at Novavax are honored to be part of the solution to one of the most significant public health events of our lives.

And with that, I’ll turn it back over to the Operator, for Q&A. Operator?

Question-and-Answer Session


Stan Erck

All right. Well, thank you. It appears, we don’t have questions or the question system isn’t working right now. But if we have no questions, I’m happy to be able to present our Quarter two. We had a great quarter. And we’ll continue to keep you updated. Thank you very much.


Ladies and gentlemen, this concludes today’s conference call. Thank you for participating. You may now disconnect.

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