Novavax, Inc.
Q2 2019 Earnings Call Transcript

Published: 10 Aug 2019

[Operator:]

Good day, ladies and gentlemen and welcome to Novavax Second Quarter 2019 Financial Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would like to introduce your host for today’s conference, Ms. Erika Trahan, Senior Manager of Investor Relations and Public Relations. Ms. Trahan, you may begin.

[Erika Trahan:]

Thank you, operator. Good afternoon. I would like to thank everyone for joining today’s call to discuss second quarter 2019 operational highlights and financial results. A press release of our earnings 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 on today’s call are Stan Erck, President and CEO of Novavax; and John Trizzino, Chief Business Officer and Chief Financial Officer. Dr. Gregory Glenn, our President of Research and Development; and Amy Fix, Senior Vice President of Regulatory Affairs will also be available for the Q&A portion of the call.Before we begin our 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, conditions 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 will now turn it over to Stan to begin today’s call.

[Stan Erck:]

Thanks, Erika. Thanks to all for joining the call. I think we have had a very productive quarter. And on this call, I will focus on three areas. First, we have just closed on a deal that will have a significant positive impact on our future cash flows and balance sheet. Next, as we expected, we recently reached agreement with the FDA on the design of our Phase III clinical trial for NanoFlu. The data from this trial will support the use of the accelerated approval pathway for licensure. And finally, I will provide a progress reported on our partnering and regulatory efforts for RSV.So, let’s start with the Catalent Paragon deal, the closing last week of our recent deal with Catalent Biologics and their Paragon Gene Therapy unit. This was a win-win strategy in which Novavax raised capital. We significantly reduced our burn rate. And at the same time, the agreement allowed us to maintain access to our GMP manufacturing infrastructure and personnel, and Paragon acquired manufacturing expertise capacity for its growing business. So briefly, some of the key points of the agreement include

[John Trizzino:]

Thank you, Stan. Today, we announced financial results for the second quarter of 2019. A summary of our financial statements, including 6-month results can also be found in today’s press release.Before we start, I would like to remind everyone that effective May 10, 2019, we completed a reverse stock split of our issued and outstanding common stock at a ratio of 1

[Stan Erck:]

Thanks, John. We look forward to providing updates on NanoFlu as we anticipate Phase III data in the first quarter of 2020. We look forward to updating you on our progress both in this quarter and throughout the year.And operator, I can turn it over to you for Q&A, please.

[Operator:]

Thank you. [Operator Instructions] And our first question comes from Eric Joseph with JPMorgan. Your line is open.

[Unidentified Analyst:]

Hey, good afternoon. This is Turner on for Eric. I just have a couple of questions on the Phase III NanoFlu study, I am kind of curious if you have any specifics on sizing of the trial and powering and then a couple of follow-ups to that?

[Stan Erck:]

Greg, I will let you handle that one.

[Gregory Glenn:]

So we are – it’s a non-inferiority trial and that the criteria for success include the rolling out of a lower bound of a two-sided 95% confidence interval on the Day 28 HAI unit mean titer. So you take the HAI titer of our vaccine in quadrivalent flu and then we take the mean titer of the comparator and that lower bound confidence interval will have to be greater than 0.067. And we have to have criteria for what’s called zero conversions worth approximately a fourfold rise in titer at the end of Day 28 and that would be the difference. So subtract the zero conversion rate of quadrivalent NIV minus the zero conversion rate of the license comparator and again that has to be greater than minus 10. So those are the specific criteria for success on the primary endpoint. So, I know that’s a big mouthful, but that’s a platform. So, I don’t know if you have any questions on that. So it’s non-inferiority, two criteria, it is the ratio of HAI titers and second is a difference between zero conversion rates. We can provide you that detail. It’s a fairly standard mathematical criteria, that’s applied to non-inferiority.

[Unidentified Analyst:]

Okay. Yes, that would be very helpful. Thank you. And then I was kind of curious from the strains that are emerging for the 2019 to 2020 season. How far along are you in the process of developing NanoFlu against those strains, is there any difficulty in adapting the vaccines of the new strains?

[Gregory Glenn:]

Well, that’s a good question and it plays to our strength. What’s happening with respect to circulating strains is there are – as you know, we are including four strains in vaccine, which is quadrivalent vaccines try to have two B strains and two A strains. The particular problem in older adults has especially been associated with evolution of the A strain called H3N2 and there has been a lot of, what we call, antigenic drift, so mutations in that strain. And I think we presented those diagrams for the previous season and we again have a similar, very active evolution of the virus.And so the challenge for the CDC and the WHO, who make recommendations for content of vaccines, the selective strain, that might predict what’s coming in the coming year. So what we – and you may recall this, what we found in 2 years running where we conducted our – both our Phase I trial of the second year our Phase II trial is we included the recommended strain in our vaccine. And that changed, that there was evolution. But because we are a recombinant vaccine, that is, we reflect a wild-type strain, and we have an adjuvant, we induce very broad end responses, so to some degree, our vaccine is immune to the antigenic drift. And so we have very broad levels of antibodies, functional antibodies to these evolving strains.And that really is why I think we have such a good technology for the times because the framing of all this is the rapid evolution of H3N2. H3N2 is the major cause of morbidity and mortality in older adults. And last year and the year before, it seems that the vaccine efficacy in that population against this strain was very, very low to negligible. The CDC looked at vaccine effectiveness, and their estimation is that the vaccine, of course, in the H3N2 coverage, effectiveness of that vaccine was not – it could not be confidently stated there was any vaccine efficacy, so approximately 9%. So a good question. We – the strength of our technology is that we can induce immune response that’s very broad with respect to these evolving strains, and we believe that will be a major innovation for flu vaccines in the future.

[Unidentified Analyst:]

Great, thank you. Appreciate your responses.

[Operator:]

Our next question comes from Kevin DeGeeter with Oppenheimer. Go ahead please.

[Kevin DeGeeter:]

Hey, thanks for taking my question Stan, I think you called out in your prepared comments work from the Bill & Melinda Gates Foundation to identify a global partner or a partner for developing economies. Can you just provide us an update as to if you don’t get a clear path to market from the EMEA, other strategies that might be available to make the product commercially available sooner perhaps for some of the developing markets where the market may be and the need may be greatest.

[Stan Erck:]

Yes, Kevin. I think that the Gates Foundation, when they saw the data, became very excited that this is exactly what they want it for. Their mission is infant mortality. And what are – the data that we provided shows it to work very well, particularly in their territory. So we’re working – they have – they are confident that we will do what’s necessary to get the vaccine approved in high-income countries, and they want to make it as easy as possible for us to get it approved in the rest of – global, the rest of the world. It’s a large market. It’s a large world for low and middle-income countries. So we’re working with them. They’ve engaged PATH, which is a large NGO that – with whom we worked, we started working with before our Phase I trial many years ago. And so we’re all working together to identify a very competitive process to have other companies who would be capable of developing and producing very large-scale quantities of material. And that process has officially started. So we’ll keep you posted as it progresses. It should go fairly reasonably quickly, I think.

[Kevin DeGeeter:]

And with regard to NanoFlu, have you identified the comparator?

[Stan Erck:]

You mean, on the flu?

[Kevin DeGeeter:]

Yes.

[Stan Erck:]

Yes, the comparators, the quadrivalent vaccine at Sanofi is Fluzone.

[Kevin DeGeeter:]

Got it. And when do you hope to begin enrollment or kind of first patient in for the NanoFlu Phase III study?

[Stan Erck:]

Well, I think very late in this quarter. So the trial will be – we’ve been making product. It’s in the process of being released and shipped to centers. And so later this quarter, we expect to be day 0, and then day 28 will be the blood draw date, and then it takes a few months to get all the data analyzed and announced.

[Kevin DeGeeter:]

Okay, great thanks for taking my questions.

[Stan Erck:]

Sure.

[Operator:]

Our next question comes from Michael Higgins with Ladenburg Thalmann. Your line is open go ahead.

[Michael Higgins:]

Thanks operator and thanks guys for taking my question. Just a quick follow-up on the Fluzone enhancers, is it Fluzone HD as the comparator?

[Stan Erck:]

No, we used Fluzone HD as a comparator in Phase I and Phase II because our strategy has always been to introduce our product in the premium-priced older adult market and compare ourselves to the best-selling flu vaccine, which has been Fluzone High-Dose, and we did that successfully twice in a row. But in this particular trial, we want to go against a quadrivalent vaccine. And Sanofi’s Fluzone is the biggest-selling quadrivalent vaccine. Fluzone High-Dose is only a trivalent vaccine.

[Michael Higgins:]

Great. Okay that’s very helpful.

[Stan Erck:]

So we have the data – the data gets – we had the comparator data against Fluzone High-Dose in our pocket already.

[Michael Higgins:]

Right, right. Okay, good. And Greg thanks for the recap. That was very helpful. I just want to understand the timing for the BLA. It sounds like you are saving some comments, but just trying to get a sense if we can hear when that BLA may be filed, best guess maybe back half of the year. It sounds like you’ve got some manufacturing to square away before filing. Is that a fair assumption at this point?

[Stan Erck:]

Yes, I’ll answer that. This is Stan. So I don’t think we’ll be filed. We won’t be filing the BLA by the end of this coming year because of the CMC, because of the manufacturing issues. And so we have not announced a target date, but we will as soon as we get – as soon as we get closer and we see our data, and we’ll keep everybody informed when we have a date for all the manufacturing activities to be done and a BLA to be filed.

[Michael Higgins:]

Okay. And then also, we’ve talked in the past about some data releases coming from the Phase II, maybe 56-day and additional data. Anything now that we’re getting closer to the fall that we can look for coming up in the next few months?

[Stan Erck:]

Well, typically, what we do is, as we did with the Phase I. We published that in a letter to the New England Journal, which was, I think, indicative of the importance of the data. We’re in the process of preparing publications for the Phase II data, and they take time. We’ll get them out as soon as possible, but that would be the desired priority first.

[Michael Higgins:]

Appreciate it. Thanks for the feedback guys.

[Operator:]

Our next question comes from [indiscernible] with B. Riley FBR. Your line is open.

[Unidentified Analyst:]

Good afternoon. This is Wayne on for George. So I have two questions. The first one is about NanoFlu. Could you please comment on what are the FDA’s last concerns for the end of Phase II questions? And the second is about ResVax. Have you received any feedback from EMEA yet?

[Stan Erck:]

Amy, do you want to do it?

[Amy Fix:]

Sure. Hi, this is Amy. And so we did receive input on all the questions we asked, and there were no concerns of FDA. They actually were providing us a lot of guidance to make sure we’re on track with our BLA so no concerns whatsoever. Again, complete agreement with the study design, so it was really quite a good communication.

[Unidentified Analyst:]

Okay, thank you.

[Operator:]

[Operator Instructions] Our next question comes from Vernon Bernardino with H.C. Wainwright.

[Vernon Bernardino:]

Hi, everyone. Thanks for taking my question and congrats on the agreement with the FDA. Certainly, I guess, you could have expected it. But it was an uncertainty and so congratulations. The question I have, so could you remind us again when the strains were released for this coming flu season? And you had mentioned that you had manufactured the batches and that they were at the point where they would be cleared, I believe, or some other words, I can’t remember now what you had described as the term. And so can you remind us again, at least with the current technologies, and this is going to be adjuvanted – NanoFlu is adjuvanted, how long it takes to manufacture a batch? And lastly, could you also remind us, what is the current manufacturing capacity in the number of doses?

[Stan Erck:]

Yes. Those are a lot of questions. So first of all, the CDC and WHO get together twice a year to look at them and recommend Southern and Northern flu strains. And this year, they did so. They actually – I think they recommended the 3 flu strains, 2 Bs and 1 of the As, on a particular on the usual schedule, which was at the end of February, 1st of March. And it took an extra, what, maybe 30 days to get to determine what they wanted to predict on the H3N2. So, there’s an extra time period in there.One of the advantages of our technology is, is that we don’t have to spend the time to, a, adapt our strains that are chosen because we have this recombinant cell-based production system. So that gives us somewhat of an advantage. And that’s what we made. And we made the 4 strains on time. It’s a process. I don’t think I can divulge what the actual time from seed to product release is, that’s, I think, proprietary information, but it’s faster than with an A-based vaccine. And our capacity is at a stage right now where we have the capacity to make whatever vaccine we need to finish clinical trials, plus launch product when that time comes. And we’ll design our capacity based upon our then-current yields per liter and where we choose to manufacture the product in a contract manufacturing facility.

[Vernon Bernardino:]

Okay, thanks. Ask a number of questions I will get back in the queue and just follow-up later. Thank you.

[Operator:]

Thank you. Our next question comes from Matthew Lillis with Cantor. Your line is open.

[Matthew Lillis:]

Hi guys. Thanks for taking questions. I was curious if you could talk about the difference in comparing between a trivalent and a quadrivalent and that’s going to be in this study. Could you just talk about the differences for you guys and kind of what we could expect from a scientific point of view with regards to how that’s expected to play out? Thanks.

[Stan Erck:]

Yes. So, we go ahead, Greg.

[Gregory Glenn:]

Well, I was just going to say that we know this with the Fluzone High-Dose and the Fluzone are have different doses, but they’re egg-based, egg-derived vaccines. The Fluzone quadrivalent vaccine is appropriate for us because we want to compare ourselves to a quadrivalent vaccine. So, the High Dose is not licensed for quadrivalent at this point. And so, we selected the Fluzone regular dose. And that has that we have matched with the strains that were selected for that in our vaccine. So, I think scientifically, these are the comparator is an egg-derived vaccine, and that means that they’ve isolated the virus. They grew it up in eggs and adapted to eggs. They then purified the important proteins. And so, it’s an egg-derived vaccine. Ours is recombinant where we have the sequences from the wild-type circulating strains that we then make the key protein hemagglutanin from those. And so, they are they have perfect fidelity with those strains that are circulating. And they’re selected they’re selected because these are strains that are prominent, especially with respect to the selection difficulties are associated with selecting the A strains, in particular, the H3N2. And so again, I think we had some discussion with that earlier, that the strength of our technology by having a recombinant nanoparticle that’s adjuvant and we get a very broad response. So, we’re much less in fact, we think we can overcome the antigenic drift that might occur between what was selected last based on last year’s surveillance data and what may come in the coming year.And I think that was the reason that the New England Journal published our Phase I data because we showed that precisely that precise situation, where we had a strain selection from the year before, that was not a good match or circulating, and yet, the immune response to our vaccine, based on the functional assay, showed that we were able to neutralize or address the antigenic drift, both the forward drift, we call it, where it was an unpredicted strain that arose. And then looking back, we also had very broad antibody response against those strains. So, we have a fundamentally different technology from what’s licensed. We have a recombinant. It’s a nanoparticle and its adjuvant. And those things are allowing us to, I think, address the major unmet need in older adult influenced immunization this antigenic drift and the egg adaptation and these things are bringing the older adult flu vaccine actually down to very, very low levels. So, I think the CDC and the public health authorities are very interested in having a technology like Novavax’ to address these clinical problems.

[Matthew Lillis:]

Thank you.

[Operator:]

Thank you. Our next question comes from Michael Higgins with Ladenburg Thalmann. Your line is open.

[Michael Higgins:]

Thanks [indiscernible]. Just a follow-up, 1 or 2, if I could. Could you give us some sense of the cost of the Phase II and then upcoming for the Phase III? We’ve not talked on this much. Then, on a related note, your cash runway following the recent sale? Thank you.

[Stan Erck:]

Yes. So, I think as we have in the past, Michael, we do not give forward-looking projections on cash balances. We raise money to get us comfortably through data, and that’s where we are right now, and future funding needs are dependent upon success of trials and partnering discussions. And I think we have mentioned in the past that the Phase III trial was going to be a very affordable trial. I don’t think Greg mentioned the number of people in the trial, it’s 2,600, and it’s simply a day 1 dose and a day 28 blood draw and then analyze the trial. So it’s a very cost-effective trial for us and so yes.

[Michael Higgins:]

Great. Okay. And then just a follow-up then on the 2,600 patients, how many sites, is this [indiscernible] design elements that you can provide for us would be helpful?

[Gregory Glenn:]

It’s approximately 20 sites, I believe?

[Stan Erck:]

Is it?

[Gregory Glenn:]

Yes, I believe so. Around 20 sites.

[Michael Higgins:]

And these are North American sites?

[Gregory Glenn:]

Yes. It’s all North American. This is a relatively simple trial. The reason we have a number of sites, we will recruit in a very efficient manner. So, it’s an immunization, a bleed, a return visit at day 28. So, we want to do that very efficiently and enroll at a very tiny time window.

[Michael Ladenburg:]

And then lastly, same sites as the Phase II for the most part, how much overlap is there?

[Gregory Glenn:]

They overlap, but they are not completely overlapped.

[Michael Ladenburg:]

Alright. Thanks guys.

[Operator:]

Thank you. At this time, I’m showing no further questions. I would like to turn the call back over to Mr. Stan Erck for closing remarks.

[Stan Erck:]

Okay. Again, thanks everybody for paying attention and good questions and we’ll be communicating with you as news progresses. Thanks.

[Operator:]

Ladies and gentlemen, thank you for your participation in today’s conference. This concludes the program. You may now disconnect. Everyone, have a wonderful day.