Novavax, Inc.

Good afternoon and welcome to the Novavax First Quarter 2022 Financial Results and Operational Highlights Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touchtone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Sylvia Taylor, Senior Vice President of Global Corporate Affairs and Investor Relations. Please go ahead.

Good afternoon, and thank you all for joining us today to discuss our first quarter 2022 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. Before we begin with prepared remarks, I need to remind you that we will be making forward-looking statements during this teleconference, which are based on our current expectations and beliefs. For example, statements related to 2022 financial guidance, future financial or business performance, conditions or strategy, including expectations regarding revenue, product demand, operating expenses, growth margins, cash usage, clinical development of our vaccine candidates, timing of future regulatory filings, authorizations and actions, and other anticipated milestones are forward-looking statements. Novavax cautions that these forward-looking statements are subject to numerous assumptions, risks, and uncertainties that may change over time, and actual results could differ materially from what is described in such statements. Please turn to slide three. During this call, we will be referring to a non-GAAP financial measure, which is not prepared in accordance with U.S. generally accepted accounting principles. The most directly comparable financial measure calculated in accordance with GAAP and a reconciliation of GAAP to the non-GAAP measure is contained in the presentation and is available on our website at ir.novavax.com. Please turn to slide four. Joining me today is Stan Erck, President and CEO, who will provide an overview of recent achievement and our upcoming strategic priorities. Additionally, John Truzino, Chief Commercial Officer and Chief Business Officer, will provide an update on the status of our global COVID-19 vaccine rollout and our current regulatory progress. Dr. Philip Dubovsky, Chief Medical Officer, will discuss our clinical and regulatory strategy across our pipeline. And Jim Kelly, Chief Financial Officer and Treasurer, will provide an overview of our financial results. Dr. Greg Glenn, President of Research and Development, will also be available for the Q&A section at the end of today's call. I'd now like to hand the call over to Stan. Please turn to slide five.

Thank you, Sylvia. Thanks, everyone, for joining us today to discuss Novavax's first quarter results. We had a landmark start to 2022, reporting today a major milestone for Novavax. Our first ever profitable quarter as a commercial stage company scoring $203 million in net income and $704 million in total revenue. These accomplishments are the result of continued execution on our strategic objectives to deliver our COVID vaccine globally and advance our pipeline of new strains and combination vaccines. We're proud of our strong progress throughout the first quarter. Since the start of the year, we've increased our global impact and strengthened our capabilities as a commercial-stage vaccine leader. I'd like to begin today's call by highlighting the key accomplishments since the start of the year that demonstrate the substantial progress we've made. We've continued the successful launch of the VAX event globally, with vaccinations underway in key markets around the world. We've secured additional authorizations and full approvals for primary vaccination in adults, further solidifying our global research and global reach. In the U.S., we reached a major milestone in our pathway to EUA with a VRBPAC meeting now set for June 7th following the successful completion of an inspection of our manufacturing site at Serum Institute of India. Our expectation with the VRBPAC meeting is authorization for primary vaccination in adults. We have already submitted our adolescent data and we will be submitting additional data for boosting to the FDA. For additional indications, the timing of review will be a decision the FDA will have to make in the coming weeks. We continue to execute an ambitious strategy to pursue an expanded label for our COVID-19 vaccine, including indications for pediatrics and boosting. We recognize variants continue to emerge, and we remain ready to pivot and bring the relevant vaccines to market. We are advancing an Omicron mod of ailment and by-valence option and expected to be in the clinic later this month. We also advanced our COVID-19 influenza combination vaccine through a Phase 1-2 trial with the goal to advance this candidate into a Phase 2 trial before the end of the year. With strong execution of our commercial launch plan and clear line of sight into our opportunities, we are well positioned to achieve our guidance of full year 2022 total revenue between $4 and $5 billion. With that, John Terzina will now discuss the commercial lots of UVaxavit. Thank you, Stan.

Please turn to slide 6. Today, I'd like to provide an update on our COVID-19 vaccine rollout. Then, I'll touch on our ongoing efforts to ensure optimal supply and distribution of our vaccine, as well as our regulatory progress. Following the successful initial delivery of our vaccine to Indonesia in the fourth quarter, we've continued the global rollout of Nuvaxavit, our COVID-19 vaccine, and Covovax, the trade name for our COVID-19 vaccine, manufactured and marketed by Serum Institute to additional key markets. Through the first quarter, over 42 million doses have been delivered globally, including to the European Union, Canada, South Korea, Australia, New Zealand, and Indonesia. And as Stan mentioned, vaccinations with Nuvaxivit and CovaVax are underway in all of these markets. We continue to receive positive feedback from our customers in market as doses of our vaccine are delivered. While we are pleased with the initial utilization of our vaccine, we expect to see additional pull-through within these markets in the coming months as demand continues with recent surges of COVID around the world. As we look ahead to the second quarter, we expect our shipments to key markets to increase. This includes the European Union, where we are fulfilling on a previously disclosed 42 million dose order, and as a result, we expect increased product revenue for Q2. We are collaborating with all of our partners on allocation and delivery schedules and stand ready to ship our vaccine to where it is needed most, ensuring that we reach our shared goal of global equitable access. With emergency use listing granted by the WHO, our vaccine is now available in upwards of 170 countries worldwide, and we have sufficient manufacturing capacity to meet all demand. We believe that our protein-based vaccines' storage attributes, efficacy, and safety make it ideal for most settings, including those where standard cold chain is preferred. In addition, we continue to see low vaccination rates across low-income countries. And although we are prepared to deliver the quantities of 2373 doses to Gavi under the terms of our supply agreement, to date, We have not yet received an order from Gavi, and the timing and quantities of future orders to deliver 2373 to the COVAX facility are unclear. In the U.S., where we anticipate getting emergency use authorization in early June, we are engaged in ongoing dialogue with the government for how we will support demand if we are authorized. We continue to receive input from health care providers, health care organizations, and consumers across the country who are awaiting new vaccine choices, and if authorized, ours would be the first protein-based vaccine authorized in the U.S. With this recent progress, we remain encouraged by the long-term prospects for our vaccine domestically, and we remain on track to pursue full approval by filing for BLA in the second half of 2022, setting the stage for commercialization in 2023. This anticipated timing will be further informed by a pre-BLA meeting with the FDA where we would expect to gain additional insight into BLA requirements and timing. To ensure we are prepared to meet current and future global demand, we remain focused on optimizing our manufacturing activities. To that end, we have begun delivering against our commitment to add additional manufacturing sites into our network in addition to Serum Institute of India. At the end of April, we submitted manufacturing data from our partner, SK Bioscience, to the European Medicines Agency as a supplement to our conditional marketing authorization. And later this quarter, we expect to file a variation to add our Czech Republic site, Novavax CZ, as well. With significant progress made in our commercial launch, we believe we are well positioned to continue this execution through the remainder of 2022 and beyond. To accomplish our objectives, we've rapidly scaled our commercial team with a variety of initiatives underway to support our product launch. Some of these include the following. Implementing customer engagement programs to build product awareness. building out our European operations with the new office in Switzerland that opened this month, deploying our first ever unbranded campaign to improve educational awareness around COVID-19 vaccines, and building strategic partnerships with governments and policymakers around the world to promote market access. Now please turn to slide seven. On the regulatory front, we've made tremendous progress to expand the global reach of our vaccine. Since the start of the year, we have gained additional authorizations for both Nuvaxavit and Covovax. In total, our regulatory efforts to date reflect authorizations or approvals in 41 countries, as well as emergency use listing from the WHO, which represents the potential for our vaccine to reach over 170 countries. encompassing over 6 billion lives. Now please turn to slide 8. We have been leveraging data generated from our robust clinical development plan to expand our label around the world for boosting additional pediatric populations and the additional populations for primary vaccinations such as the immunocompromised. I will now turn it over to Philip for more on all of this. Philip.

Thanks, John. Let's flip to slide nine. I want to cover three topics today. First, I want to talk about our approach to variants. Based on our antigen and adjuvant technology, our approach may be different from other vaccines. In our phase three studies, our vaccines worked well against all variants that circulated. Furthermore, the vaccine induced high levels of variant-specific immune response. Although it isn't certain that an Omicron-based vaccine will be required, we're pursuing a strain change study to gather clinical data on the utility of both an Omicron variant as well as a bivalent approach. Next, I'll touch base on our pediatric data. We feel that our vaccine may have a special role in the pediatric population based on the parent's familiarity with recombinant protein vaccines and our favorable tolerability and emergency profile. I'll also share some data from our partners at the Serum Institute of India, on how the vaccine performs in children as young as two years of age. Finally, I'm gonna go over some data we presented previously on the combination work, and I'll leave the pathway forward for that. Okay, let's skip slide 10, which is a transition slide and goes to slide 11 to talk about variants. What's displayed here is the comparison of the clinical efficacy results from our two independent phase three studies. As you can see, the vaccine performed well with an overall efficacy of 90%, despite the majority of cases being caused by variants. For matched strains, efficacy was between 96% and 100%, and for variant strains, efficacy was 86% to 94% for alpha, and the US-Mexico study, 93% against a basket of all variants of interest and variants of concern. We observed complete protection against severe disease, irrespective of which variant circulated. The adolescent expansion of the US-Mexico study, only delta circulated, and the efficacy was 82%. I should note that the study was powered for the immunologic effectiveness endpoint, so there were only a very few cases. The conference intervals overlap the point estimate of the bigger, more precise adult cohort. Okay, let's move to slide 12, please, where I've detailed the variants that circulated and caused disease in the studies. In the UK, Alpha was circulating, and in the adolescent expansion, Delta was the identified variant. In the biggest study conducted in the US-Mexico, we identified seven different variants, Despite the majority of these cases being caused by this broad range of variants, our efficacy was preserved. Okay, let's go to slide 13, please, and talk about what we know about how the vaccine works against Omicron. The left-hand side, we've detailed immune responses against the MASH prototype strain, as well as a broad range of variants after the initial two-dose priming series. We said 100% of participants generated an antibody response that recognized all variants, including Omicron, BA.1, and BA.2. On the right-hand side, we've displayed the immune response to the variants after a single boost of six months. Here you can see a very large bump in antibody response to all variants, including the more contemporaneous Omicron BA1, BA2. In fact, the levels for BA1, BA2 after boost are higher than that seen after two doses of the prototype strain on the left-hand side of the slide. And I want to remind you that those levels were associated with 96% to 100% protection in the Phase III studies. Okay, let's move to slide 14, please. where the functional immune responses are displayed. These are 99% neutralization responses against Prototype, Delta, and Omicron, performed by the Matt Freiman Lab at the University of Maryland. And on the left-hand side, the response after two doses displayed, and the right-hand side after a six-month boost. After two doses, the neutralizing response is three-point-fold lower for Omicron compared to Prototype. This is a relatively small difference. In fact, for influenza, Anything less than a four-fold difference could be considered a matched response. After a third dose, on the right-hand side, the immune response has increased significantly, including for Omicron. This is important because pretty much everyone has been exposed to COVID or has been vaccinated, so these boosted responses have become even more relevant. So, based on our variant protection and immune data, we are far from certain that an Omicron-based vaccine is required or will provide material improvement in performance. However, this question can be answered with clinical data, so let's move to slide 50. We've previously announced we plan to conduct a strain change study to allow us to advance an Omicron-based vaccine. The study will be conducted in previously primed individuals and determine if an Omicron-based vaccine induces better immune responses compared to the original prototype vaccine. It will be the basis of a strain change variation. We'll also take the opportunity to evaluate a bivalent format to determine if there is a benefit of that approach. The study is scheduled to start this month, and top-line data will be available in the third quarter. Now, let's skip slide 16 and move to slide 17 to talk about our pediatric data. This slide describes our adolescent data, which was an expansion of the U.S.-Mexico Phase III study. We enrolled a total of 2,247 12- to 17-year-olds, and we randomized them two-to-one vaccine to placebo. The participants were subsequently crossed over, and we are now finishing up boosting these children. Let me review the top-line results. The licensure-enabling effectiveness endpoint was the demonstration of non-inferior immune responses in adolescents compared to young adults. In fact, the adolescent neutralizing responses were 1.5-fold higher than adults. We were also able to measure clinical efficacy, including against Delta, and the tolerability was favorable compared to adults in the main part of the study. These data are the data that is the basis for approval in India for our vaccine and is the basis of the file we have submitted to the regulators in the EU, the UK, Korea, Australia, and New Zealand. The increased magnitude of immune response seen in adolescents is also relevant for the variants. So let's look at that on slide 18. Here we've displayed our antibody responses to variants after two doses in 12- to 17-year-olds. Overall, they are two- to three-fold higher than seen in adults after two-dose series. We believe these data hold promise for broad efficacy in the pediatric population. Okay, let's go to slide 19 and talk about data in younger children collected by our partners at Serum. The study they conducted was an expansion of their Phase 2-3 adult study. It was a randomized, blind and placebo-controlled study, and in the pediatric portion, they had three age groups, 12-17, 7-11, and 2-6-0. We've been given permission to share top-line reactogenicity and antibody results with you today. The study was conducted with a full dose of vaccine in all age groups, five micrograms of antigen, and 50 micrograms of matrix. Turn to slide 20. In this slide, we've compared the local solicitor symptoms by age group. Adults are in dark blue, 12 to 17-year-olds in light blue, seven to 11s in purple, and two to six-year-olds in yellow. Dose one is displayed on the top, and dose two on the bottom. We expected more reactions were observed after dose two compared to dose one, However, overall, the vaccine was well-tolerated, at least as well, if not better, than in adults. The companion slide is slide 21, which is the next slide, which shows the solicited systemic reactions. Once again, dose two was more reactogenic than dose one. Overall, the tolerability profile is favorable compared to adults. The one symptom that decreases age is fever. In the youngest children, about a third reported a fever after the second dose. However, the fevers were short-lived with a median of approximately two days, and the grade Three fevers occurred in only 1% of the two six-year-olds. Overall, the vaccine was considered to be well-tolerated. Please turn to slide 22. Here we've displayed the IgG responses at baseline after one dose and after two doses. Adults are on the left, and the youngest children are on the right. The results are from a validated assay performed at the Novavax Clinical Immunology Labs. You can see there's a stepwise increase in immune responses as the age cohort decreases in age. So overall, we're seeing a favorable tolerability profile and a very significant increase in antibody responses in children. This sort of profile makes us believe our vaccine may have a special role in children's vaccinations. So what's next? We've agreed upon a pediatric investigational plan in the EU and UK, and our IPSP with the FDA has also been agreed to. Our protocol has been reviewed by the FDA, and we anticipate starting the study this summer. The planned study is an HD escalation study looking at 6- to 11-year-olds then two to five-year-olds, and finally six months to two. Okay, let's skip the transition slide and go straight to slide 24, please. A couple of weeks ago, we presented data from our quadrivalent influenza-COVID combination study. We conducted the study because in our UK Phase III study, we noted immunologic interference between influenza vaccine and the induction of anti-spike antibody with a COVID vaccine. Subsequently, data has emerged for other vaccine platforms, that when even flu vaccine is given with a third boosting dose of COVID, the immune response to COVID may be reduced by up to a third. By modulating the dosage levels of influenza hemagglutinin and COVID spike antigen, we've innovated our way past this issue. Let's move to slide 25 and briefly review the study's design. The study was a design of an experimental approach where we had 14 different dosage groups where we varied the hemagglutinin between 5 and 60 micrograms and we varied the spike between 2.5 and 22.5 micrograms. We held a matrix adjuvant level study at 50 micrograms. We compared to our standard COVID vaccine with 5 micrograms of spike and our standard quadrivalent influenza vaccine, which had 60 micrograms of each flu antigen. The influenza comparator has 75 micrograms of matrix M because that was the formulation we used in our successful phase 3 quadrivalent influenza study. Immunologic output, as well as the other baseline characteristics, were fed into a mathematical model, which predicted the optimal combination antigens. Okay, the findings are on slide 26. First of all, all the combinations were tolerable, and the reactancy profile was in line with the influenza vaccine comparator. From an immunogenicity perspective, we confirmed the immunologic interference between hemagglutinin and spike that we saw in our Phase III study. However, we were able to overcome the interference by increasing the spike antigen and decreasing Optimal dose for spike is between 20 and 30 micrograms, while the hemagglutinin can be reduced to 24 to 40 micrograms per strain. An overall antigen dose may be reduced by up to 50% in the product. It will be confirmed in a Phase II study that we have planned for later this year. We will select a couple of dosage levels using contemporaneous influenza strains and compare it to licensed influenza vaccine. We'll take the opportunity to evaluate 75 micrograms of matrix. Subsequent plan includes demonstration of clinical efficacy for both a standalone influenza vaccine as well as a combination vaccine. Okay, let me hand it over to Jim to talk about the financials.

All right, thank you, Philip. Please turn to slide 27. This afternoon, we announced our financial results for the first quarter of 2022. I'll begin by providing an overview of our first quarter 2022 total revenue performance, net income, and cash position. Then I'll discuss our quarterly results in additional detail, as well as provide an update on our full year 2022 revenue guidance. The first quarter of 2022 marked an important milestone for Novavax as our initial profitable quarter as a commercial stage company. We recorded $704 million in total revenue, reflecting 57% growth compared to prior year, and $203 million in net income. We ended the first quarter of 2022 with $1.6 billion in cash and had accounts receivable of over $400 million, which positions us well as we continue our global launch of Novavax Avid. Please turn to slide 28, where we'll provide a comprehensive overview of our first quarter financial results. For the first quarter of 2022, Novavax recorded total revenue of $704 million, compared to $447 million in the first quarter of 2021. Total revenue for the period included $586 million in product sales by Novavax, $19 million of royalties and other revenue, which includes both royalties and adjuvant sales to our licensed partners, and $99 million in grants from the U.S. government. $31 million of vaccinated doses sold globally marked the first commercial product sales for Novavax. We recorded lower grants revenue in the first quarter of 2022 compared to the prior year as we materially completed the activities under the CEPI agreement in 2021. We do not expect to record incremental revenue under that agreement in 2022. We will continue to receive funding for our 2373 clinical programs from the U.S. government. We entered 2022 with approximately $800 million of funding outstanding under our U.S. government agreements and expect to record at least $400 million of this amount during 2022 and the remainder in 2023. Our cost of sales for the first quarter of 2022 were $15 million of product sales in the period. We'll discuss this and the concept of reduced cost of sales in a bit more detail in the next slide. Research and development expenses for the first quarter of 2022 were $383 million compared to $593 million for the comparable period in 2021. The decrease was primarily the result of lower clinical development activities for 2373 and the capitalization of 2373 in manufacturing costs during the quarter. We expect our full-year R&D expenses to be lower than 2021, and as noted, a significant portion of our 2022 R&D costs will continue to be funded by the U.S. government. Initially, we recorded selling, general, and administrative expenses of $96 million in the first quarter of 2022 compared to $63 million in the first quarter of 2021. The increase quarter over quarter was a result of our commercial launch costs associated with Novavax. We expect SG&A costs to continue to rise as we move through 2022 as we further enhance our commercial capabilities to bring Novavax to markets around the world. Novavax continues to maintain its full tax valuation allowance as of the end of the first quarter of 2022. Majority of the 3 million tax expense recognized in the period was for income tax expenses related to foreign withholding taxes on royalties. For the first quarter of 2022, we recorded a net income of 203 million compared to a net loss of 223 million in the first quarter of 2021. Finally, for our cash position, We ended the first quarter of 2022 with 1.6 billion in cash. With sales of 2.2 million shares of Novavax common stock from our at-the-market offerings, we raised net proceeds of 179 million during the first quarter. Please turn to slide 29 where I'll discuss our cost of sales in more detail. During 2021 and prior to regulatory authorizations for Nevexavit, certain manufacturing costs were expensed to research and development that would otherwise have been capitalized to inventory. If not for the reduced cost of inventory for the period, full cost of sales for the first quarter would have been approximately $160 million, or 27% of product sales, based on our standard cost. We expect to utilize the majority of our reduced cost inventory during 2022. Our NAVAC survey gross margins on sales to high income countries are expected to be between 70% and 85% sales. Please turn to slide 30, where we'll provide an overview of our financial guidance for 2022. Today, we are reiterating our full year 2022 total revenue guidance of between four and five billion. As a reminder, total revenue reflects all sources, including by Novavax, grants revenue, royalties, and other revenue. John mentioned previously, we're prepared to deliver doses of our vaccine to Gavi under the terms of our supply agreement. However, we were recently notified by Gavi of their intent to seek to revise the number and timing of doses. date Novavax has not received an order from GAVI and the timing and quantities of future orders to the Novavax facility are unclear. Although we're not adjusting our full year 2022 revenue guidance, we note that our current guidance assumes successful delivery and conversion of the $700 million prepayment to product revenue. In the event we deliver less, our resulting revenue expectations for the year could be affected. We look forward to sharing our progress towards realizing this total revenue for future earnings calls. With that, I'd like to turn it over to Stan to discuss our upcoming strategic priorities.

Thanks, Jim and the team, for all the presentations. So let's go to slide 31, close it out. Again, I'm pleased to report our many achievements since the start of the year. collecting ongoing execution across all of our strategic priorities for 2020. For the remainder of the year, we will build on this momentum to achieve all of our objectives across commercial regulatory manufacturing and our pipeline. For commercial, we plan to continue the global delivery of our vaccine in collaboration with our partners to drive additional progress toward our full year 2022 revenue targets. For regulatory, we are focused on executing our robust clinical development plan to pursue additional authorizations that expand our vaccine's label and policy recommendations. For our pipeline, we will seek to advance development of our other vaccine candidates, ensuring our pipeline has the potential to address today's and tomorrow's most pressing global health needs. For our Omicron variant strain vaccine, we will conduct a clinical trial to ensure we're prepared to deliver our variant-specific vaccine as an either monovalent or bivalent vaccine as required in the coming months. And for a COVID-19 influenza combination vaccine, we will initiate our phase two trial. Thanks for your attention. I will now turn it over to the operator for Q&A.

We will now begin the question and answer session. To ask a question, you may press star then one on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. The first question comes from Roger Song from Jefferies. Please go ahead.

Great. Thank you for the update and the congrats for the 1QR revenues and the policy of EPS. A couple of questions from us. So the first one is for the USEUA, this VRBPAC meeting schedule. So as you mentioned, you're still kind of submitting outstanding items requested by the FDA. Just curious, what are those kind of additional data package you need to submit before they can have this VRBPAC and how confident you are you will have this VRBPAC meeting on June 7th? Thank you.

This is Philip. I'll take that. So they're not waiting for any new data from us. I mean, all the data has been submitted, and it's just part of the review process. They just are asking questions back and forth and preparing for the VRBPAC. As you know, it's a lift for them as well as for us to prepare for such an open public session. We're very confident. You've seen our clinical data. It's very strong, and that's the focus of the VRBPAC. Now that it's been scheduled, we have a high degree of confidence that we'll have a successful outcome.

Got it. Okay, that's great. Thank you for the assurance. And another question is for the to-date administration of the Novavax vaccine. We see the delivery is pretty strong, but since the real adoption is relatively lower compared to the delivery, so how do you expect the administration will match up for the delivery and sustain the delivery order as you guided.

Yeah, so this is John. So, yes, we're lagging just a bit, but I think what we're seeing is momentum pick up week by week where, you know, we move this product into the European Commission as well as others through a variety of distribution locations on a country-by-country basis, and then they have the responsibility to get that product out to the healthcare providers for vaccination. You know, we're two months in, and we're seeing some improvement in trajectory, although we have a bit of work to do from an education standpoint. Some of the unbranded campaigns that we're engaging in Europe, as well as pull-through mechanisms, I'm sure will allow us to catch up in that regard. Let's keep in mind we also have new orders coming from these countries, so they're accepting additional vaccines. in the second quarter in addition to what they received in Q1, and particularly in Europe with the 42 million doses going into Europe in Q2. So I think that there's a confidence in the vaccine. We're seeing improved uptake, and we'll expect to see that through Q2 and Q3.

And if I can chime in, I mean, we really are anticipating the label to be expanded in the near future, and that might provide additional opportunity.

Yeah, that's true, because so far, most of the countries only approved for the prime, not even for the booster or pediatrician, pediatrics. Okay, great. Maybe just one last one, if I may, is just clarifying for the upcoming Omicron-related data in 3Q, would that be just the monovalent, or you also will report data from the bivalent in 3Q? Thank you.

So we think we'll be delivering the monovalent for sure. The bivalent might lag by just a little bit, or maybe not. It mostly depends on the speed of enrollment at the site. I think we're ready to move forward with both the monovalent as well as the bivalent product.

Excellent.

Thank you. Thank you for taking all the questions.

That's it for us.

The next question comes from Georgie Yordanov from Cowan Company. Please go ahead.

Hey guys, thank you so much for taking our questions and congratulations on the progress in your first quarter of profitability. So maybe just to follow up with some of the questions that were asked, one question that we've been getting is on the APAs. How long can countries delay on setting up a delivery schedule? Is there like something in the contract that kind of like sets a timing until when countries should should kind of set up a schedule and actually accept the doses that are part of the contract. And do you guys have any update on those schedules, for example, with the UK? And then I'll give the follow-ups there.

Yeah, so the way those APAs are set up, Yorgi, is that we and they have some flexibility in scheduling how those doses are shipped into the country. And so we're speaking and coordinating with them on almost a daily basis and their demand patterns and how they want to bring product into their particular country is communicated amongst us, and then we set up those delivery schedules based upon that. And some of those APAs, as we've talked about before, will be shipping throughout the year and then also into 2023 as well.

Got it. And is there any update on the UK shipments?

We're still coordinating with the UK about what that delivery schedule is. We're still waiting on JCVI recommendations to come through on our product. And as we've talked about, these label expansions will help with all those efforts as well.

That's great. And then maybe we can also talk about your preparedness to participate in an eventual booster market this fall. So, do you believe you could potentially be able to participate in that market with an Omicron-containing vaccine, just given the timing of results for the upcoming studies?

Well, that's our goal. Our goal is to be ready for such a campaign. Now, clearly, we need to have a boosting indication, and then we need to have the Omicron strain change to be in place before we can do that. Some of our labels, for instance in Japan, actually carry both the homologous and heterologous boosting in their number of countries where the policy bodies have allowed us to be used in the boosting situation, either homologously or heterologously. We are bringing additional data to bear in that regard. That's what we want to do, and that's what we're working towards.

Great. And then finally, on the COVID flu combination opportunity, congratulations on the data. And to us, given just your technology, you could really be first to market with this product that could provide a major differentiation compared to your competitors. So maybe, could you talk about how aggressively do you plan to pursue this program, and do you see it as a priority for you in the near term?

I can take a crack at that, and John can... if I say something which is incomplete or incorrect. So, yeah, we're pushing as hard as we can. There are a number of innovations which we haven't talked about that we're bringing to this product. And the main issue is that flu is unpredictable. In the clinical efficacy study, we want to actually demonstrate that this product is better than a licensed comparator vaccine. For that, we need flu to circulate. So I think that's the one uncertainty is to the timing of when that pivotal clinical efficacy study will occur.

I think regarding commercial opportunity here, it's becoming clear that the key opinion leaders are looking at COVID to be looking like a flu, an annual seasonal vaccination. And so the combination of these two, and particularly on our technology platform, our recombinant protein platform, as well as adjuvanted technology seems to fit real well. I think most people will prefer one shot over multiple shots, and so therefore, and with the data that we have for both, so we've got solid efficacy data off of COVID, obviously, and we also have a successful phase three on our flu vaccine that makes this a strong combination and would expect high demand for this in most high-income country markets.

That's great. Thank you so much, and congratulations again.

The next question comes from George Duncan of Cantor Fitzgerald. Please go ahead.

Hi. Let's see. This is Charles. Thanks, folks, for taking the question, and Stan and team, congratulations on a great quarter of progress. Let's see. Had a quick question for John. John, you mentioned in your prepared remarks that you've gotten some favorable feedback from the market regarding the, you know, response to the vaccine. And I guess I'm just kind of wondering what kind of favorable feedback you've gotten in terms of adopters thus far.

So we continue to hear from our market research as well as anecdotally that there's a high demand for a choice in the marketplace. They like the technology platform. They like the safety profile. They like the efficacy profile. And so, you know, we're seeing a constant inquiry as to when product is available and where the availability to get the product. You know, so far it's a little bit early as far as follow on to the people that have been vaccinated. uh but but again here we're we're hearing that um they enjoy getting the vaccine they've seen uh low rates of reactogenicity and again so this isn't you know a quantifiable approach but market research and and some surveying that we're doing so we're optimistic about the data inputs that we're getting already uh where the where the vaccine has been administered

Do you think that, you know, I'll call it prescribers are aware of and have growing understanding of the kind of relative clinical as well as logistics profile and that that may or may not give an advantage in, say, a future booster campaign?

Well, so you have to keep in mind here that we're not in many markets able to promote directly. So what we are trying to do is get people familiar with the various vaccines that are out of the market, get familiar that we're in the market. But we're not in the normal commercial circumstances where we could be promoting more aggressively about all of the attributes and product profile that we believe are strengths of this product. And so we're doing this through the scientific presentations. We're doing it through You know, any opportunity that we can to make sure people are fully aware of what the characteristics of our vaccine. We're partly limited here, but I think we're gaining momentum as we're able to get more doses out into the marketplace.

Okay, that really makes the doses delivered even more impressive to me. Let me ask you a quick question regarding regulatory, and you're probably not going to be able to answer these questions rigorously, but I guess I'm wondering, as you prepare for the upcoming June event VRBPAC meeting, what kind of questions are you anticipating? Are there any key points of debate that you are looking forward to really being able to reconcile?

I guess that's to me, and I think the short answer is no. I mean, we've been very open with our data. We've published all of our results. It is very strong. It's compelling. And as the VRBPAC is really focused on clinical results, I think that's what we're going to trot out and share with advisors. We're feeling pretty confident about this one.

Okay, next question.

Just to put it into context, We've been approved, you know, in 40 other countries, and some of those regulatory agencies, for instance, Japan, MHRA, EU, Health Canada, TGA, I mean, those are rigorous regulatory agencies that have scrutinized our files.

Very good, Philip. Sorry to interrupt you. Last questions for Jim regarding the last kind of statement out of your presentation on GAVI. I guess I'm wondering if they were to renegotiate to zero, I guess, kind of worst case scenario, how could that change, at least qualitatively, how could that change the guidance? Just help me think through that math.

You know, Charles, I think it's fair to say you've put forth a highly negative, kind of negative scenario. What we're saying is that it's simply unclear right now.

Okay.

So before we go to perhaps something so negative, what we're simply highlighting is that we're committed to continue working with Gavi to ensure equitable access. And as this becomes clearer, we'll share more.

Yeah.

Let me just answer that a little bit. I think Jim is precisely right, right? we can take a disclosure issue that we have here, right, that I think it was important for us to be transparent about. But we haven't spent a whole lot of time talking about what upside potential is in multiple markets relative to either the variant strains or bivalent or upside in the U.S. market as we move forward and get introduced into the U.S. market post the VRBPAC meeting. And so I think that there's some pluses and minuses. that we're doing here, and we're simply trying to be transparent with this particular disclosure.

Yeah, and I'm not trying to set a negative tone. I'm just trying to make a very simple, overly simplistic mathematical calculation regarding GAVI, but I guess when you renegotiate, it could go the other direction as well. Okay, thanks for taking my question.

The next question comes from Eric Joseph of JP Morgan. Please go ahead.

hey good evening thanks for taking the questions um just uh a couple on uh the vaccinated commercial stan made a comment about the expectation of um sales increasing um over the course of second quarter was that relative to q1 i'm just trying to get a sense of where you see uh demand going relative to q1 and from what from P1, we can back into a dose of about $19 a dose. I guess, should we anticipate that price point in our assumptions going forward? Any fluctuation in mix, I guess, right, that might impact ASPs in subsequent quarters as it relates to the vaccine?

Yeah, Eric. Stan, so yes, we expect an increase in Q2 over Q1. We have a 42 million dose orders in Europe compared to, I think, 27 million in the first quarter. And so that in itself is an increase at the same pricing that we were doing in the first quarter. So we expect a fairly substantial increase in the second quarter revenue. Okay.

Okay, great. And just thinking through some of the scenarios that Mike to take place with the VRBPAC meeting. Is the focus here solely going to be on primary vaccination indication in adults? I'm wondering if there's kind of a potential outside case where the agency might be able to consider a broader application for pediatric use.

Yes, so they've announced that the, it'll be primarily in adults greater than 18 years of age. At the same time, they have our, adolescent data in hand, and that's the identical package which has been supplied to the other global regulatory agencies, so they have the data in hand. I think it's going to be up to them to decide specifically what questions they ask the advisory body. Okay, great. Same goes for boosting. They have our boosting data that we're pulling together to submit to the other regulators. We anticipate giving them additional data as well.

I think it's fair to say that What gets asked officially during the VRBPAC meeting versus what we submit soon thereafter? There's not going to be a big time gap between.

That's right. I mean, the package that we would submit to the FDA, for instance, for adolescents is pretty much identical other than the cover letter that we've submitted to, you know, EMA, MHRA, et cetera. So whether it be addressed there or the following day, I think we're ready for both situations.

Okay, great. And just circling back to the vaccinated sales, I guess for those who are tracking them alongside using third-party data sources, to the extent that those are accurate, I mean, can you just clarify where sort of the point of sale or sales recognition takes place? Is it at doses delivered to a central hub? Is there, you know... consideration for a secondary delivery or shots administered that get factored into when sales are recorded.

Yeah, that's a great question. We recognize revenue on delivery to our customers at their warehouses. That's where they take title.

Okay, great. Thanks for taking all the questions, guys. Congrats on the quarter.

The next question comes from Mayant. My name is Tani from B Reilly Securities. Please go ahead.

Good afternoon. Thanks for taking our questions and congrats, Tim, on recording your first profitable quarter. So maybe just a follow-up on the prior question, Jim. You know, this process of how revenue is recognized in EU versus shipments that are exported there, Can you just help us understand, is there like a timeline lag or an average percentage that needs to get to that facility before, you know, it could get to a subsequent country and recognized as revenue? And then a follow-up question I had on the revenue guidance, the full-year guidance was on how much of that $4 billion to $5 billion, you know, the guidance you issued today has the U.S. product sales Included in there, either as users, you know users, primary vaccine series and adults, adolescents or as boosters would be helpful to get some color on that.

Sure, sure, both good questions. So the we have not disclosed a particular cadence of shipments into our facility in the Netherlands, which is is from warehouse units prior to distribution. So we haven't. communicated a specific expected cycle time from arrival there to distribution out to our customers. Beyond that, we certainly want it to be as quick as possible to have the best shelf life available for our customers. Then with respect to your question about the U.S. government and the delivery and the doses, our Future delivery of doses post-authorization are expected to be recognized under grant revenue. You might recall that under our $1.8 billion Operation Warp Speed Agreement, a component of that is earmarked for doses to be delivered to the U.S. government. Now, we haven't disclosed exactly what percent or a specific amount of the greater than 400 million that I mentioned earlier will be recognized this year. But it does capture both the U.S. government's funding of our ongoing clinical work and delivery of doses. It includes both. A reminder is this quarter we recognized 100 million.

Understood. And could you just give us an update on that incremental 100 million with Europe, that optional APA, where you are with that, and what's your expectation for this year versus next year?

Yeah, so we're still working off the initial orders, and again, we're in constant communication with them, but there hasn't been a step into that expanded 100 million doses yet. But again, with the you know, pediatric label with the booster label and improved policy support, I would reasonably expect that we'll continue to see orders coming out of Europe in 22 and, of course, in 23.

Got it. And then just a couple of quick ones for Philip. This new data coming out of India and pediatrics, How does that inform your dosing strategy for, obviously, this 5 to 11-year-old that you're starting in third quarter but also going down the age group? Anything you learned from that? And then the final question is on, you know, your EUA package is so sort of comprehensive on both clinical modules and CMC. What are the incremental items that will be part of the BLA package that you look to submit in second half?

I'll take them sequentially. So the pediatric data we found very reassuring. The study design allows for dose adjustments in case the reactogenicity is too significant in the children. This may not be required. I mean, what I shared with you today looked very, very good to me. from a tolerability perspective, and the emergency was also obviously very good. So it allows us to be reassuring, both to the regulators, the IRBs, as well as the participants participating in the study. I think additionally, it may allow us to move a little bit faster through the HD escalation process that is really going to be up to the Safety Monitoring Committee as well as the regulatory agencies So overall, I think it's good news and just de-risks the entire endeavor. We're going to maintain the ability to do fractional dosing in case we do see some reactions which are severe, especially in the youngest kids. Remember, our goal is to take it down to children six months of age, which is another step down than the data I shared with you today. As far as what's required for the BLA from the clinical perspective, we need to come to agreement, and this is why we would have the pre-BLA meeting, exactly how much safety data the agency wants before we file it to BLA. And also, in the U.S. uniquely, a lot plot consistency study needs to be conducted prior to the BLA. And these are very short studies, but we need to make sure that the agency is in agreement with our approach for doing that.

Thanks for taking our questions.

The next question comes from Vernon. Bernardino from HC Rainright. Please go.

Hi, guys. Congratulations on the first profitable quarter. Hopefully, you're celebrating that achievement because it has been some time for some of us who've coached you for a long time. And my only question really is a follow-up from Charles' question regarding Gavi. Just wondering if you could share perhaps what Gavi is seeing out there and or perhaps what you are seeing out there that could make you at least have a matrix as far as decision making on the rest of your guidance and perhaps what, where Gavi might go.

Yeah, this is Stan.

Hi Stan.

George, how are you? Good. Yeah, it's a unclear marketplace right now in the low and middle income countries. There appears to be lots of inventory that's been shipped to the main vaccine introduction side of the warehouse in many of these low and middle income countries, and the difficulty appears to be getting it into the use in the country. And so I think that that's something that I don't have a lot of visibility into, but that's that's what's been. Relayed to us and so therefore they. That translates into uncertainty about it. You know the demand for our vaccine right now, and so it's it's I think characterized by uncertainty, so I don't know where it's going to go. For the low and middle income countries and we're waiting. on discussions with Gavi to see what we're going to do with our current contract. We've disclosed that there's uncertainty that's been fairly recent, and that's what it is.

As a follow-up, if I could, I know it's a separate disease, influenza, but part of hesitation sometimes is that you know, if you don't have a severe flu season, and that includes in developing in third world countries, you have less uptake of a vaccine that could potentially protect you, much less save your life. What are you seeing? I know you're working on a bivalent, but what you're seeing as far as marketing research, you're seeing whether some of this hesitancy is related to the fact that we've not had severe flu seasons for many years now, obviously before the pandemic.

Well, yeah, let me comment on that. I think what your assessment is right. Fear is a great driver of vaccine use, right? You're preventing a disease, not curing a disease. And so therefore, preparation is important. So I think the issue here, Vernon, is that What is the best preparation in any particular season for both influenza and COVID? And I think the vaccine is that right prevention. You can't predict in any given year, you know, what the circulating virus rate will be. And so I think that's why you've seen flu vaccine, especially in the U.S., be universally recommended now for many years. And there are some years that are bad and there are some years that aren't as severe. But vaccination is important. And I think that's going to be true for COVID as well. At the moment, you have COVID muting the circulation of influenza virus, and that might not be the case. And so when will flu come back? It will likely come back with some vengeance, and we need to be prepared for that. And we think a combination influenza COVID vaccine is the right strategy.

It's just just a pile on from an epi perspective. I mean really flu hasn't been around now for a couple of seasons and that means that the population is really susceptible. So when it does flip over and some minor drift variant comes into into the population, I think we could see quite a severe year. Remember that the CDC estimated that the vaccine efficacy this past year was. You know, based on our data, we believe that we have a better flu vaccine.

I think so. Thanks for taking my question and follow up and congrats again on the first profitable quarter.

This concludes our question and answer session. I would like to turn the conference back over to Stan Erck for closing remarks.

OK, thanks and thanks for everyone for joining in and listening. Just to close, we're proud of the significant milestones we've reached since the start of 2022, have been made possible through the dedicated efforts of our Novavax team and ongoing collaboration with many of our partners globally. The year ahead, we look forward to continuing to report on additional progress. We've talked about the things that are going on that will be new data coming out this year and across our business as we continue the successful commercial launch of our vaccine.

Thank you very much, and we'll close.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.