Novavax, Inc. (NVAX) Jefferies 2024 Global Healthcare Conference (Transcript)

Novavax, Inc. (NASDAQ:NVAX) Jefferies 2024 Global Healthcare Conference June 6, 2024 12:30 PM ET Company Participants John Jacobs – President and CEOFilip Dubovsky – Chief Development OfficerJim Kelly – CFO Conference Call Participants Roger Song – Jefferies Roger Song All right. Good afternoon, everyone. Thank you for staying with us for the last day of 2024 Jefferies’ Global Healthcare Conference My name is Roger Song, one of the senior analyst cover Semi Cap Biotech in the U.S. It’s my pleasure to have the fireside chat with next company Novavax. We have the whole crew here, CEO, John Jacobs, the Chief Development Officer. Filip and the CFO, Jim, all of those gentlemen with us, and welcome. John Jacobs Thank you, Roger. Its pleasure. Roger Song Awesome. So, we believe we have a lot to cover including most recent VRBPAC meeting with all. Maybe John, if you cannot give us some kind of opening remark in terms of what happened in the past couple months, a lot happening already. Give us some highlights and then we can go into the Q&A. John Jacobs Thank you, Roger. We’re really excited about the future of Novavax and a lot has happened in the last couple of months. And that was predicated by what happened really the last three years as the company entered a global pandemic, established its first commercialized product and then I came in January of last year to help the company take a new path forward. And working with management and our board of directors, we put a strategy in place. Last February that we announced on my first earnings call with the company four weeks into the job. But that was really get our vaccine out the door, show that we could update the strain, and we could produce our vaccine in a timely manner and have it out there in a given season, improve that technology platform out further. Secondly was the company had roughly $2.5 billion in current liabilities, when I joined in January. We needed to work to really renegotiate those and pay that down and strengthen the balance sheet. Significantly, we wound up cutting between $1.5 billion and $2 billion in current liabilities out and reduced our OpEx by over a $1 billion in the last 15 months to really strengthen the financial health of the organization with many successful negotiations including the settlement around the Gavi matter, which was a big deal for the company. And note, the success we had in those two pillars enabled us to execute on pillar three of our strategy, which was to extract value beyond COVID alone, the Nuvaxovid, our COVID vaccine alone. The reason I came to the company is the technology platform that Novavax has. A proven technology platform with our nanoparticle technology for vaccines and our Matrix-M adjuvant which has now been proven out in our COVID vaccine and the R21 malaria vaccine that was just launched by Serum into Africa most recently. And we hope will save hundreds of thousands of lives a year from a devastating disease. Go forward, then that enabled the Sanofi partnership to occur, which has multi-billion dollar value potential over the coming years. Obviously, the upfront payment of $500 million, the investment in equity that they made roughly 5% of our company, and then another $700 million in near and midterm milestones for executing and operationalizing the initial stages of that deal. In addition, we’re so excited to have a global leader like Sanofi and vaccines with a world-leading flu franchise, a vaccine expert in development and generating RWE and commercializing products on a global scale. They also were very impressed with our technology and have access now to our Matrix-M platform. For each new vaccine they may choose to develop with Matrix-M. We have up to 200 million in milestones available to us and decades of mid-single-digit royalties to come. So the deal has many layers of potential value. But we remained an independent company. This wasn’t a sale of Novavax. It’s a partnership deal. We have our own pipeline. We are putting two Phase 3 programs in place this fall and should turn those data cards over by this time next year. One for our own combination flu COVID vaccine and another for our flu vaccine, which we’ve already produced positive data for from our Phase 2 study and Filip will pine on that later. We also intend to expand our early-stage pipeline while reducing our cost footprint even further as we turn and focus more on R&D and less on commercialization on an existing asset. So lots to do in the future, lots to do from today forward and we’re going to stay focused on continuing to drive growth, Roger. Question-and-Answer Session Q – Roger Song Excellent, John. I’m so happy for you because since you joined Novavax, you came up with those pillars, strategic pillar you have been executing. That’s one of the key things you mentioned, focusing on Novavax, how is that execution? I think you have demonstrated a lot of the positive progress there. So we’re going to zoom in one-by-one. But it’s so off the press. Let’s talk about the VRBPAC meeting yesterday and then lot of investor here [indiscernible]? John Jacobs Sure. Filip, would you want to handle that one on the VRBPAC? Filip Dubovsky Sure. So, the VRBPAC was been a complete surprise with us. We’ve been working like I said with agency for months. And we’ve already had the several recommendations from the WHO, the EMA, Europe. That being said, it was anonymous vote for JN.1 vaccine. And that is a vaccine we produced in advance of the season, we manufactured risk. So it can be available at the very beginning of the vaccination season. This year we’re going be in prefilled syringe, so we hope to have a very successful season going forward. But a lot of the rhetoric you heard from the advisors really was quite supportive to our vaccine and approaching based option, really to help drive vaccine rates in the U.S. Roger Song Got it. Yes. Let’s just stay on this upcoming season in the U.S. and in Europe. That’s a major market for you. How now we selective, so U.S., EU, WHO? And how ready you are to supply the vaccine for the updated version? And tell us about the regulatory kind of past or progress there, EUA versus BLA, and then how ready you are to be able to supply in the early September timeframe? John Jacobs Roger, I’ll unpack that a bit, so start with supply perhaps first. Roger Song Sure. John Jacobs We anticipate having ample supply for the U.S. marketplace. So with the selection of JN.1 as Filip said, that’s the strain that we’ve manufactured and having that produced that of Serum Institute of India were on track with a prefilled syringe and anticipate ample supply in market by August prior to the start of the season and ready for distribution. We’ve had excellent conversations with retail. Very excited about where that can take us this season, and believe we’re much better positioned for a stronger performance in the U.S. this year than ever before. When it comes to regulatory, I’ll ask Filip and Jim to comment as well, but the FDA accepted our BLA filing. And in partnership with FDA, we worked on a strategy for a dual approach. One was the BLA file and in addition was an EUA which would give us a faster pathway to get our vaccine out the door in the JN.1 and prefilled syringe format at the start of the season. That’s very important, is the first three to four weeks of the season is 40% to 50% of the market opportunity. So even a few weeks drift there could make a huge difference. So we made the decision in partnership with FDA to go for that EUA pathway and file the BLA in parallel, which was now accepted and we expect a PDUFA date in April. We have a PDUFA date in April next year, which should allow us to then be on a normal cycle of just submitting the strain change each year along with the mRNA competition. So that’s the goal. It’s a good milestone for the company and we’re more than ready for the fall season. Guys, I don’t know if you wanted to comment. Filip Dubovsky Just really incredible partnership with the FDA, it was their desire to see us being on the market at the start of the season, really on a level playing field with the – on the vaccine side. Roger Song Got it. So just to confirm the BLA PDUFA date is April next year, but the EUA isn’t really ready to go for the season? Filip Dubovsky The intention of that is to be on target at the beginning of the season and be in a prefilled syringe in JN.1. Roger Song Got it. And then the EUA will be JN.1 prefilled syringe and anything — any other features will be in the in the EUA compared to last season? Filip Dubovsky No. That’s pretty much it. Roger Song Got it. Okay. Good. And then, so investor has been asking I think the answer, you have been guiding, but let’s just confirm that compared to BLA/EUA, any difference in terms of your commercialization for the season with the EUA versus the BLA either if you consider that? John Jacobs No, it’s not a major factor in our opinion, Roger. It allows you to do some more marketing if you have it under the BLA under a brand name and using a more expanded brand label. But people know the vaccine by the company name. So if you’re standing online at a CVS, you hear someone say I’d like the Moderna product or the Pfizer product or the Novavax product, right? They don’t tend to go by the brand name of these vaccines. So there’s some differences in how you market, but we don’t think those are the major levers. The major levers that were exemplified last season were retail access. And in the U.S. you really didn’t have a large percentage at all of healthcare providers administering any COVID vaccine. I mean that caught us and everyone else by surprise. You’d expect with flu a 70/30 split retail HCP — COVID, it was over 90% retail. And so, that’s the focus right now for us and we’ve had great conversations with the retail. We’re really pleased with the traction on the contracts there and expect to be ready for the season. Prefilled syringes are really important. We had a five-dose file last season. So the real levers you want to pull our awareness in the consumer and HCP marketplace, prefilled syringe for convenience and being on time at the beginning of the season, so you catch that wave at the same time as the competition. Those factors are all in place. We’re on track to do that this season. Roger Song Got it. And then, you just had a 1Q earn in a couple weeks ago, with some updated guidance in terms of along with the Sanofi partnership with some guidance on the revenue APA versus non-APA. I think a U.S. and EU market will be mostly non-APA market. So with this JN.1 confirmation, any updated thoughts around the guidance for the for the non-APA sales for 2024? John Jacobs Filip, do you want to take the guidance? Filip Dubovsky Hey, sure. There are no updates to our guidance, because our guidance contemplated exactly what just occurred. And I think that’s a sign of just how well we’ve worked in partnership with these different regulatory bodies across we want to be prepared. Roger Song Got it. Okay, great. Let’s talk a little bit about the Sanofi partnership, which is very meaningful. I’m very much curious of Novavax next stage. So, first question maybe start with what triggered that partnership kind of a deal sign off? What is the key consideration? Sanofi pick you and then you also agree with the partnership? John Jacobs We cannot pine in detail, Roger, on any conversations we might have had behind the scenes with Sanofi or other potential parties. But what I can say is what triggered that was our strategy all along since I joined the company. The three pillars, proving out the tech, getting the vaccine out the door, generating revenue, paying down billions of dollars in liabilities and reducing OpEx by over a billion. That helped to stabilize the company and put us in a position of leverage for partnering and business development discussions which was pillar three of that strategy. So all along we intended to put the company in a better position to be able to negotiate a valuable deal and a win-win for everyone shareholders in both organizations. However, that worked out. So that’s what led to a deal of this nature. I can’t comment specifics around Sanofi, but what I can say is, we’re thrilled with Sanofi as a partner. They are a global leader in vaccine development and commercialization, the leader in flu around the world, they’re right in that seasonal respiratory space and are a powerhouse on distribution commercialization development generating RWE, generating value from vaccines and have a lot of credibility footprint and infrastructure to pull this kind of a thing through. We’re very excited about the deal. And as people understand more about it and unpack it, it’s a little bit complex at first. The headline in the newspaper is $1.2 billion deal sign. Well, that’s adding up the upfront payment and the near and mid-term milestones for executing the mechanics of the first phase of the deal. That’s not inclusive of what we feel is the larger portion of potential value from this deal, which are ongoing royalties, royalties and milestones that come from additional vaccines they can develop using our technology. And to simplify it or oversimplify it, the deal had four layers of value for Novavax. The first was $500 million upfront and that 5% investment, which I’m sure Sanofi is pleased with at this point now in our equity, right? That was about 570. And you got another $700 million in near and mid-term milestones, doing a tech transfer, handing over the commercial license, doing the things to operationalize the first phase of the deal. That’s another $700 million in one-time milestones. From there we anticipate royalties beginning next year to start to generate that footprint from sales of our COVID vaccine that Sanofi will take the lead on starting in January. In addition to that, they intend to take our COVID vaccine, add one or more of their flu vaccines to that, creating one or more combination products, COVID flu. We’ll get some milestones on that and then ongoing royalties. They have the rights to take our COVID vaccine and add any other vaccine they’d like to it and make additional combination vaccines, a triple, a dribble, another double. We would get royalties on those that are ongoing. We also as part of the deal in the third layer gave them unfettered access with the exception of their own flu vaccine. They can add our Matrix-M to anything else they want to in their pipeline and develop new vaccines using our adjuvant technology. For each new vaccine they may develop using that, we get up to 200 million in one time milestones and mid single-digit royalties for decades to come. So those are all the different layers The last layer of value for us, Jim, is our ability to reduce cost and infrastructure more aggressively, more in line with an R&D focused company than a company that’s commercializing a seasonal product at a global scale. Any comments to add to that? Filip Dubovsky Sure. Two media comments. One is the cash flow from our COVID and related franchise, we think the cash flow we’re going to receive from this agreement exceeds what we would have been able to do ourselves. So this is a great deal for not just cash flow and for our shareholders, but just incredible for patients, right, for potential people who can benefit from our vaccine in this technology. Then when you look at what we’re moving towards, this is a development stage company lean efficient, focused on fully leveraging this technology platform and creating more value either through more transactions like this or perhaps even preparing ourselves someday to commercialize. But with that said, couldn’t be happier. We still got some work to do to operationalize it, but a great start. John Jacobs And Roger I want everyone to be clear that, we have our own late-stage pipeline with our own combination vaccine and flu, we intend to expand our early stage pipeline. We’re in the middle of a thorough analysis on the best markets to play in and why. But do so at that low cost point of earlier stage we now have a proven platform to bring forward and we’ll make very choiceful and thoughtful bats within a new lean operating cost structure on that pipeline and intend to aggressively pursue additional business development deals. We can out license our Matrix-M to anybody we want to. There’s no restriction on any of that. We’re an independent organization. Matrix-M has the potential to help other vaccine manufacturers potentially lower their COGS by reducing antigen content in their vaccines improve immunogenicity. Develop new vaccines in their portfolio. They might not have otherwise been able to approach. So we intend to keep exploring those opportunities, cutting new deals, and intend to explore potential partnerships should we have positive clinical data which we’re expecting next year with a high probability of success for our proven platform assets. Additional partnerships and deals are something we’ll be seeking. Roger Song Yes, excellent. So one drill down question for the Sanofi partnership this milestone are the different layer. One of layer is they’re going to do the combination. So that’s 350 million milestone is tied to that combination program. Just want to clarify on that. Is that’s a flu specific or that’s a non-flu kind of combo as well inside this within the 350? Jim Kelly So, when it comes to the combination, they have the ability to take our COVID vaccine and add it to any of their current flu. Roger Song Any of the current flu or? John Jacobs Roger is your question to clarify. I believe you’re asking is the 350 of the remaining 700 million in near and midterm milestones is linked to the specific development of their COVID flu combination vaccine. Roger Song Yes, that’s right. John Jacobs And then any other combinations they would choose to make taking our COVID vaccine if you were adding it, I’ll make it up. I’m not speaking for them. Say they add RSV to it as an example. That would not be separately eligible for a milestone, but would be for ongoing royalties. Should they succeed with that product? The additional milestone opportunities for vaccine development beyond their specific COVID flu combination come from new assets they would develop using our Matrix-M technology platform. So if they did five new vaccines over the next six, seven years using Matrix-M, Oncology vaccine or Ology, whatever they want to work on doesn’t have to be respiratory. For each one of those we’re eligible for up to 200 million in one time milestones and then ongoing mid-single digit royalties for decades. Roger Song Got it. And then, so in terms of their flu COVID combo, any kind of a development plan they have been communicated with you? Because we haven’t seen anything from the public disclosure say, they will take your flu or your COVID with their flu into the combination? John Jacobs They absolutely have plans, Roger. We’re not going to comment on those. Jim, I don’t know if you wanted to add any other color on that. Jim Kelly I think the transaction and agreement speaks for itself. They have big plans. Roger Song Yes. Okay, good. Okay. And then, John, I definitely want to talk about your own program, which is in a late stage Phase 3 ready for the flu COVID combo. So how should we think about the accelerated approval pathway given the president and the other competitor and how confident you are this will be positive Phase 3 and then moving to the market by itself? John Jacobs Filip, you want to comment on that? Filip Dubovsky Sure. So we’re going into these two Phase 3 studies with a lot of confidence. And that’s because the Phase 2 studies we did that had favorable data and achieve the emergency endpoints we were looking at really succeeded and there are a mimic of what we’re doing in the Phase 3 program. They were designed specifically and envisioned to inform a sort of approval pathway. So that’s what we’re pursuing. And we’ve had an interaction on the COVID portion which was quite supportive of our approach. In the past we’ve discussed that its very approval pathway for influenza and we’re following that pathway as well. So we’re going in with confidence. We expect the data to be out by this time next year and concurrently we’re earning a lot consistency study for the CIC [ph] program as well as a lot a lot for the flu program. So we’ll be in a position have data to file for both toward the second half of next year. Roger Song Also second half next year for the combo and the flu alone? Filip Dubovsky That’s right. I mean, we’ve shown the data at previous earnings calls, the flu data, sent on flu data is exceptional being superior to the license comparators and their CIC, it looks like it’ll easily achieve non-APA criteria for licenser. Roger Song Got it. Okay, great. And then, since you now have the Sanofi with a giant of the flu vaccine entire space and how you think about the commercialization strategy for your own CIC. Is that when you generate a Phase 3 data and then you want to sign a partner and well, Sanofi probably will be one of them. They will be have take a look at your data. John Jacobs Well, look, we’ll certainly have optionality and that’s what we’re seeking here is to have optionality. We could out license. So let’s say we have positive data as we would expect with a high probability of success. And by the way, there’s risk in any clinical trial, right? You never know even with a prior proven product. But we assume we’ll have success. And assuming success and strong data, we can out license, sell those assets, co-develop, co-promote, partner, we have optionality. And with a proven platform if you have two registrational Phase 3 assets each of which that could compete in multi-billion dollar global marketplace. And who knows if the competition makes it out before us or not? We believe they’ll do what they say they can do, but you never know. There’s a scenario where we may be the first and only combo out there. There’s another where we might not, right? Who knows what the cards have to play out over the next several quarters as we see this unfold. But what we like from the Sanofi deal and from our current position as a company is optionality, multiple shots on goal to drive value. Three or four layers as we described earlier today a value to the Sanofi deal from milestones to potential royalties from multiple new vaccines they intend to and could develop over time and even for decades to come, a late-stage pipeline that’s maturing and about a year out from day to read out with a proven tech platform, high PTRS, competing in markets that have multi-billion dollar opportunity, a proven adjuvant platform that we intend to put an early-stage pipeline in place within a new lean cost structure with that proven tech base to expand future shots on goal. And assertion that we want to go out aggressively, do more business development and partnering using that tech platform to help others enhance their own portfolios. So with all those shots on goal, no company succeeds at everything they try to do. This is a risky business, right? We’re going to work really hard. We’re happy with our success so far. We take absolutely nothing for granted. Even the Sanofi deal, that’s behind us now. We’re focused 100% guys right on execution, humility, check the ego at the door knows to the grindstone, so we don’t let down all the people that are counting on us to execute. But even if we succeed on a portion of those opportunities, I think people are starting to grasp, but there’s a lot of opportunity here to grow value over time at Novavax. Roger Song That’s great. We definitely look forward to that. Maybe last a minute in terms of the balance sheet, which is supposed to used to be an overhand for Novavax and you significantly improved. You remove the remove the going concern there. So how should we think about the operating operational cost structure from here? Assuming you will have this — and you have the CIC. You have the early-stage pipeline. How should we think about the long-term operational structure? Jim Kelly Well, certainly. Well, we are thrilled that we were able to remove that going concern and Coincident to the Sanofi agreement, give you a sense where we are pro-pharma for that announcement. It’s about 1.1 billion. We had in total we had $500 million in cash at the end of Q1 and almost $600 million in upfronts and an equity investment through this agreement. That combined with near-term milestones and then also the potential royalties, which we’re really excited about. Offers great opportunity to fund the company and advance this platform. But one thing that we are continuing to keep in our DNA is operating a lean agile efficient organization. We don’t want to take for granted that we have a strengthened balance sheet in future looking potential cash flows. We’re going to ensure that we get this company sized for the opportunity And the more efficient we are, more of these studies, Filip and others can run and create more value. And so that’s our mindset. So we shared with you our R&D and SG&A guidance this year of 750. As you know, that’s a billion lower than we were even two years ago. And what we said, is next year, we’re going to take it below $500 million and we expect a portion of that to be reimbursed. So we’re going to keep pushing here, get a little smaller, but create more value by delivering the pipeline. John Jacobs And Roger, obviously, there are core capabilities we need to maintain at least for the time being to affect technology transfer, commercialization transfer to Sanofi for some of these things. As those milestones hit, it gives us additional opportunity to shrink down that OpEx and that SG&A expense base. But despite that we’re aggressively preparing right now for immediate moves that we can start to make to bring well below prior stated targets on that cost. So just because we’re in a much better cash position, it doesn’t mean it’s time to start spending more. It means it’s time to spend even less and that’s one of the key value levers here from the Sanofi deal. Roger Song Thank you. Thank you gentlemen and thank you everyone.

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