Novavax, Inc.

Good afternoon and welcome to the Novavax Third Quarter 2022 Financial Results and Operational Highlights. 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 the star then one on your telephone keypad. To withdraw your question, please press star then two. Please note that this event is being recorded. I would now like to turn the conference over to Sylvia Taylor, Executive Vice President and Chief Communication Officer. Please go ahead.

Good afternoon, and thank you all for joining us today to discuss our third 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 this presentation includes forward-looking statements, including information relating to the future of Novavax, its key strategic priorities, plans and prospects for 2022, and financial guidance, including total revenue, the ongoing development of our vaccine candidates, including anticipated timing of trials and results, the scope, timing, and outcome of future regulatory filings and actions, the efficacy, safety, and intended utilization of our vaccine candidates, including against COVID-19 variants, the global market opportunities for our vaccine candidates, our manufacturing capacity, and the future availability of our vaccine candidates, and key upcoming milestones. Each forward-looking statement contained in this presentation is subject to risks and uncertainties that could cause actual results to differ materially from those projected in such statements. Additional information regarding these factors appears under the heading Cautionary note regarding forward-looking statements in the slide deck we issued this afternoon and under the heading Risk Factors in our most recent Form 10-K and our third quarter Form 10-Q filed with the Securities and Exchange Commission and available at sec.gov and on our website at novavax.com, as well as subsequent filings with the SEC. The forward-looking statements in this presentation speak only as of the original date of this presentation and we undertake no obligation to update or revise any of these statements. During this call, in order to provide greater transparency regarding our operating performance, we refer to certain non-GAAP financial measures that involve adjustments to GAAP results. Any non-GAAP financial measures presented should not be considered to be an alternative to financial measures required by GAAP, should not be considered measures of liquidity, and are unlikely to be comparable to non-GAAP financial measures provided by other companies. Any non-GAAP financial measures referenced on this call are reconciled to the most directly comparable GAAP financial measure within the Investors section of our website at Novavax.com. Now please turn to slide four. Joining me today is Stan Erck, President and CEO, who will provide an update on our recent progress and our upcoming strategic priorities. Additionally, Dr. Philip Dubovsky, Chief Medical Officer, will discuss our clinical development across our pipeline, and John Trezino, Chief Commercial Officer and Chief Business Officer, will provide an update on our commercial progress and our outlook for 2023. Finally, Jim Kelly, our Chief Financial Officer and Treasurer, will provide an update 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.

Thanks, Sylvia. Good afternoon, and thanks for joining our third quarter earnings call. In addition to the financial report that Jim Kelly will give, Philip will provide our update on important clinical data that we are accumulating, which continue to highlight the advantages offered by our adjuvanted protein-based vaccine. And following that, John will discuss our commercialization efforts. But first, let me start with the financials. Jim will provide you more details, but the highlights include revenue for the quarter was $735 million. This met our target for the quarter and bring us to $1.6 billion in revenue for the first nine months of the year. During the last quarter, we continue to gather data that supports the differentiation of our vaccine. We believe these differences are important and are a predictable consequence of our vaccine technology. When our nanoparticle antigen is formulated with MatrixM, it generates a very broad and long-lived immune response, which we believe has advantages in the face of the continued emergence of new variants. We believe that these differences will allow us to deploy a vaccine that may not require serial updating and may not require bivalency. Novavax's vaccine has been granted regulatory authorizations globally. In the third quarter, we received emergency use authorization from the United States, representing the last major market in which we have obtained authorization for use. Throughout the year, we have been developing data with our many clinical trials across the globe that support the advantages of our vaccine. And together, we believe these advantages will be the basis for the continued long-term expansion of our product in markets throughout the world. We now have data supporting Novavaxivit's durable immune response that achieves levels associated with protection in our phase 3 trials. With the ever-mutating COVID virus, we want a vaccine that can stimulate an antibody response across any variant that arises. And while we can't predict the future, we can show that our vaccine has a breadth of response that covers all of the variants that we've measured to date, including alpha, beta, delta, and BA1 through 5. This is important for obvious reasons, but it should be pointed out that we don't have any data which suggests that it's a good decision to switch to a BA5 vaccine, given that our current vaccine stimulates levels of BA5 antibody that should be protective. Our data also shows that show that we have an 82% prevention of infection over an extended period, and plus our data continues to provide confidence in the use of our vaccine and its favorable safety and tolerability profile. Our mission must be to remind and educate the regulatory and policy bodies that as a protein-based adjuvanted vaccine, our vaccine is different from what's on the market. As long as we continue to demonstrate that our current vaccine stimulates a relevant immune response against circulating variants, we believe our current vaccine will be a good choice for ongoing vaccination campaigns. Importantly, it has the added advantage that when you continue to boost with the same vaccine, you continue to see maturation of these responses with the expectation that you'll see more effective and longer-lasting responses. When we see data that suggests the need to update our vaccine with a new strain, we will. We will do so with either a monovalent or bivalent vaccine based on data that we then have and relevant policy recommendations at the time. There may be some public health agencies that prefer either a strain change or bivalent vaccine, and our plan is to develop in parallel a variant containing monovalent and bivalent vaccine. Switching topics. We have mentioned in the past that we have been collaborating with the Serum Institute and Oxford University on a new malaria vaccine that includes our Matrix M adjuvant. I'm very pleased that Adrian Hill of Oxford University presented a very high-level summary of Phase III efficacy data at a late-breaking session of the Tropical Disease and Malaria Conference in Seattle last week. More detailed safety and efficacy data will be available when approved for publication later this year. Going forward, We believe that we are in a very good position. We have a global manufacturing capacity to support our planned sales of Novavaxvid. This capacity will also support our pipeline vaccine candidates for flu, for combination flu COVID, and for malaria. And we now have a global marketing and regulatory presence to support our goals for 2023 and beyond. I'll now turn the call, the presentation, over to our Chief Medical Officer, Philip Dubosky, who will be followed by John Terzino, our Chief Commercial Officer, and our Chief Financial Officer, Jim Kelly. We will end with a session of Q&A.

Thanks, Dan. Since the last call, we've developed a significant amount of new clinical data. Today, I'm going to review data from Study 307, which is our lot-to-lot consistency study that includes heterologous boosting on top of two and three doses of mRNA. Then I'll describe preliminary findings from study 311, our strain change study that evaluated boosted responses to a prototype vaccine, Omicron BA.1 vaccine, and bivalent vaccine when given on top of three doses of mRNA vaccine. But first, I want to review some findings we have recently disclosed. Please advise to slide seven. From our UK study, we recently published that our vaccine had 82% efficacy for preventing all infections over a six-month observation period. This was despite the majority of cases being caused by the Alpha variant. Protection from infection is important because if you don't get infected, you can't transmit the virus, you can't get sequelae for COVID, and you can't get long COVID, and you can't be the source of new variants. In our adult U.S.-Mexico Phase III study, we achieved a formal regulatory endpoint supporting boosting in the U.S. population, and we demonstrated a durable immune response as well as a broad immune response that includes cross-reactive antibody levels directed against Omicron variants that were consistent with levels associated with protection in our Phase III studies. And in our adolescent Phase III study, we met the regulatory endpoint for boosting in 12- to 17-year-olds and showed that immunologic responses to Omicron variants were comparable to those associated with protection. Okay, let's go to slide eight and talk about study 307, which is our lot-to-lot consistency study. For this study, I'll discuss data supporting the achievement of our lot-to-lot endpoint and the magnitude and breadth of the heterologous boosting response. This is still preliminary data, and additional immunologic assessment is ongoing. So let's move to slide nine, please. Study 307 enrolled 911 adults in the U.S. who had no history of recent COVID infection and who had received two or three doses of an approved COVID vaccine, with the last dose being at least six months prior to enrollment. As you can see on this slide, most of our subjects received two or three doses of either Moderna or Pfizer. A few received one or two doses of J&J, and a very small number had received two doses of Novavax. After enrollment, all subjects were boosted with one of three different lots of Novavax vaccine, and the serum was collected at a 28-point immunologic assessment. Let's move to slide 10. Demographics show that the three lot groups were well-balanced. The racial makeup was broadly representative of the general U.S. population, and the median interval prior to the Novavax boost was approximately nine months. Let's go to slide 11 and look at the primary endpoint. As you can see here, the primary endpoint of non-inferior immunogenicity was achieved, as measured by anti-S IgG titers at day 28. This was the regulatory endpoint confirming consistency of our manufacturing process. Please note the extremely tight confidence intervals here. But let's look at the immune responses following heterologous and homologous boosting on slide 12, please. Because most of the subjects in this trial received the Novavax vaccine as a heterologous booster, we had the opportunity to evaluate the magnitude and breadth of immunogenicity in different subsets. Shown on the far left are IgG responses in a small group of seven subjects who received two doses of Novavax priming series followed by a single Novavax boost. We're also showing responses for those who received two prior doses of Moderna, two prior doses of Pfizer, and one dose of J&J. I've superimposed the coercive protection threshold derived by the U.S. government based on our U.S. Phase III trial and the actual Phase III levels we obtained in our two Phase III studies. The post-booster levels we saw in this trial matched or exceeded the levels achieved in the Phase III efficacy study. Consistent with what we've seen previously, we observed the highest antibody titers for the homologous Novavax boosting subset. Okay, let's go to slide 13 and look at heterologous boosting on top of three doses of mRNA. This is a similar setup to the previous slide, but for the groups who received three prior doses of Moderna or Pfizer or two prior doses of J&J. So a full primary course plus one prior boost. In each of these subsets, the antibody levels exceeded the Phase III levels. And for the mRNA recipients, the levels were approximately 20% to 30% higher than we saw in the previous slide with priming with just two doses of mRNA. The group with two doses of J&J had broad conference intervals because of the small sample size. Now let's look at slide 14 to look at the breadth of immune response. Here we evaluated IgG responses to prototype and to Omicron subvariants BA1 and 5. We are displaying the two doses of Novavax boosted once with Novavax as a solid bar on the far left-hand side of each triplet. And that's compared to three doses of Moderna or three doses of Pfizer boosted once with Novavax. In all cases, IgG titers achieved levels predicted to be correlates of protection of approximately 88% to 95%. As before, the highest antibody titers against both prototype and variants were in the homologous Novavax-boosted subjects. In summary, we believe the 307 findings are important both because they confirm consistency of manufacturing, which is critical for vaccine licensure in the U.S., and because they showed robust immune responses to prototype and variants after homologous and heterologous boosting, with post-boosting antibody levels approximating those levels associated with protection in our phase 3 studies. So let's move to slide 15 and talk about the next study. Now I'll review the top-line data from study 311. The study was designed as a strain change study and evaluated the performance of our prototype vaccine, an Omicron BA.1 vaccine, and a bivalent format vaccine when given after two and three doses of mRNA. So let's go to slide 16 of the design. The study was conducted in Australia in adults 18 to 64 years of age. The participants received two or three doses of mRNA and were boosted with either our prototype vaccine, the BA.1 vaccine, or the bivalent vaccine. Today, I will only talk about participants who received three prior doses of mRNA and who were boosted at least 90 days after their last dose. So let's look at the demographics on slide 17. The study groups are well balanced, with racial groups representative of the overall Australian population. The participants received their boost a median of 180 days after their last mRNA dose. You can see that Australia did a better job of controlling infection, as a relatively large proportion of this group did not have evidence of prior COVID infection. So let's look at the endpoints on slide 18. The primary endpoint for the strain change portion was pre-specified to be in the three-dose group in participants who had no prior COVID infections. we compared the day 14 neutralizing responses against BA.1 in the three treatment groups. In the first column, we compared BA.1 neutralization responses after being boosted with BA.1 vaccine to the BA.1 responses after being boosted with prototype. This was a strain change endpoint. And because the BA.1 vaccine responses against BA.1 were higher than those induced by the prototype vaccine, the study achieved a statistical endpoint allowing for strain change if eventually needed. Let's give it a click. The second column compares the bivalent vaccine to prototype. The responses were similar, with the conference intervals overlapping one. And the final column compares the bivalent vaccine to the BA.1 vaccine, and the responses were lower for the bivalent vaccine. Let's have a click. So as far as the BA.1 responses go, the data does not support a measurable benefit for the bivalent vaccine. Okay, let's look at some comparative data on slide 19. Here we're looking at IgG responses against BA.1 in all the participants who received three prior doses of mRNA vaccine. This group most closely resembles the general population. Here the responses were similar between all three vaccines, although when boosted with our prototype, it was numerically higher by about 15%. Please advance to slide 20. Here we're looking at IgG responses against prototype, the Wuhan strain. Once again, the responses were statistically comparable with up to a 20% numerical benefit for boosting with a prototype vaccine. Of course, neither prototype nor BA.1 are in circulation currently, so let's look at four drifted strains. Slide 21, please. Displayed here is a neutralization response against BA.5 measured in a functional pseudo-neutralization assay. BA.5 is an Omicron subvariant that was not in any of the vaccines. but is related to the BA.1, so one would expect a superior response with the BA.1 vaccine. However, there was no benefit observed for either BA.1 vaccine nor the bivalent vaccine compared to the prototype vaccine. In fact, the prototype vaccine gave numerically higher responses. This indicates that boosting with our current vaccine is a viable approach and be considered as a future-proof strategy for emerging variants. Okay, let's look at some reactogenicity on slide 22. When given as a second boost dose for all three formulations, they were similarly well tolerated with patterns consistent with what we've seen previously. Here the most common local reactions are pain and tenderness, the vast majority being none, mild or moderate in severity. Let's go to slide 23 and look at solicited systemic symptoms, and the pattern is also very similar to what we've seen previously with very low rates of grade three events and a negligible fever signal. Okay, let's sum this up on slide 24. So to sum up, we believe our data supports the continued and future use of NAVX2373 as a booster. From our U.S.-Mexico Phase III study using our prototype vaccine, we have described a durable immune response and immunologic data indicating that the levels achieved against drifted Omicron variants were consistent with levels associated with protection in our Phase III studies. Today, I showed you data that when we are used as a heterologous booster after two or three doses of authorized vaccine, we achieve broad immune responses against drifted Omicron variants. And the magnitude of these responses are considered to be protective when applying the NIH-U.S. government calls of protection thresholds. Finally, our study with Omicron, VA1 vaccine, and bivalent vaccine indicated no measurable benefit over our prototype vaccine. So when we think about what will be causing illness over the next few months, it will not be VA5, but there's some variant that is yet to emerge. A vaccine that induces high levels of cross-variant responses might be appealing as a way to future-proof the ongoing boosting efforts. Importantly, the vaccine is currently stocked and can be deployed immediately. Finally, because this is our original vaccine, we have confidence in the preexisting long-lived safety database. This may be a feature that's attractive to individuals who are hesitant to be boosted. Okay, let me turn this over to John Trezino.

Thank you. Our doses delivered to date also include over 19 million doses by our strategic partners, Serum Institute of India, SK Bioscience, and Takeda to licensed territories. We remain in ongoing discussions with our customers around the world, including the EU, U.S., Canada, U.K., Australia, and others, to ensure optimal supply of doses through the remainder of the year and into 2023. Notably, in the UK, we delivered an initial 1 million doses in the third quarter. We are in active discussions with the UK Health Services Agency around supply and continue to provide data to JCVI to support policy recommendations for boosting in adolescents and expect to receive MHRA approval for adult booster imminently. In the EU, we are expanding our presence and strengthening our partnerships for now and well into the future. To support this, we are in the process of finalizing a revised delivery schedule for the remaining 23 million doses committed under our APA. In the U.S., we remain in ongoing discussions around additional supply of our COVID vaccine, now available for boosting of adults 18 and over. Please turn to slide 27. We continue to closely monitor the market landscape, and we believe the current global vaccination trends and the upcoming winter respiratory season present an ongoing near-term opportunity to drive uptake of our vaccine. In the U.S., according to recent CDC data, around 39% of adolescents have yet to complete their primary vaccination series. Additionally, around 47% of vaccinated adults have yet to receive a first booster dose. Additionally, In the UK, Germany, France, Italy, and Spain, around 48% of adolescents have yet to complete their primary vaccination series, and around 20% of vaccinated adults age 18 to 59 have yet to receive a booster. With authorization now received for primary vaccination in adolescents in the US, EU, and UK, and for a booster dose in adults in the US and EU, our recent label expansion aligns with this market need. Outside of the U.S. and Europe, we see similar dynamics that present additional near-term opportunity to expand the portfolio of vaccine options and appeal to those not yet vaccinated or not yet boosted. In fact, we have already begun to see encouraging evidence of healthcare providers and consumers utilizing our vaccine as a booster dose. Based upon available data through October, around 60 percent of new vaxavid doses administered globally have been used as a booster. Please turn to slide 28. Our key focus to capture the near-term and long-term market opportunity is to expand our label to include adolescent boosting based upon the compelling data Philip discussed today, and in the U.S., to also include additional booster doses in adults. Alongside this, we will also focus, as always, on gaining supportive policy recommendations. These efforts will build upon our label expansion to date, which includes authorizations for primary vaccination in adults in over 40 countries, authorizations for primary vaccination in adults in the U.S., EU, and 11 additional countries, authorizations for boosting in adults in the U.S., EU, and six additional countries. Please turn to slide 29. Looking to the long-term COVID-19 market opportunity, we expect to see a transition to a commercial market in the U.S. and other key regions in 2023. With clear evidence that the virus is not going away, we expect an ongoing need for annual seasonal vaccination resulting in a recurrent COVID-19 booster market. And we believe this opportunity will be larger than the annual influenza market due to COVID-19's greater burden of disease and higher infectivity rate. In the U.S., we believe an annual booster market in 2023 and beyond can include around 225 million individuals, which is significantly larger than the annual U.S. flu market in recent years of 170 to 190 million individuals. In the UK and the other key markets in the EU, we believe this could be around 250 million individuals. This potential recurring opportunity includes individuals that have already received their first booster dose, as well as individuals that have been fully vaccinated and are eligible to receive a booster. Importantly, beyond these geographies, we believe that a similar sizable and recurring opportunity booster opportunity will also take shape in other key markets, including Asia Pacific. Please turn to slide 30. As we look toward this long-term market, we believe our competitive product profile will differentiate our vaccine among healthcare providers and drive adoption among consumers. As Philip discussed today, we continue to build on our existing body of clinical evidence with additional data that demonstrate our vaccine's key benefits, such as its high efficacy, strong durability of immune responses, protection against infection, favorable safety and reactogenicity profile, and importantly, its breadth of immune responses against a broad range of variants. We believe these key benefits, coupled with our vaccine's well-established technology platform and favorable transportation and storage profile create a competitive product offering. Based upon our data generated to date, including initial results announced today for our Omicron variant vaccine program, our commercial strategy is to continue deployment of our prototype vaccine. With that being said, as Philip mentioned, we will continue to generate additional data and be prepared to supply a variant-specific vaccine if supported by data or requested by our customers. Regarding commercial strategy, please turn to slide 31. With strong foundational elements in place, we are executing our robust commercial strategy. I'd like to highlight a few of our key commercial priorities that we believe will drive success in 2023 and beyond. First, we are expanding our commercial footprint in priority markets. We have established our EU regional office in Switzerland, are expanding our commercial structure in the Americas, including U.S., Canada, and Mexico, and building our commercial presence in Asia Pacific. In parallel, we will continue to partner with local policymaking bodies to advance supportive policy recommendations. This will be critical to ensuring widespread access and capturing a significant share of the anticipated recurring market outlined today. We are also building brand awareness among healthcare professionals and consumers through a comprehensive marketing strategy to communicate our vaccine's strong data and key benefits. In an effort to position Novavax as a key player in a commercial market, we are also developing a commercial network and building relationships with key stakeholders, such as pharmacies and purchasing groups. We will be transitioning to single-dose vials and expect to make available pre-filled syringes in 2023 in order to enable easier administration and lower waste of doses, serving as a competitive advantage for our product. We believe ongoing execution of this global commercial strategy, coupled with our vaccine's competitive product profile, will support our long-term success and solidify our role in the recurring COVID-19 market. I will now hand it over to Jim to discuss our financial results for the third quarter.

All right. Thank you, John. This afternoon, we announced our financial results for the third quarter of 2022. Details of our results can be found in our press release issued today and our 10-Q filing. I will begin by providing an overview of our third quarter 2022 total revenue performance, net income, and cash position. Then I will discuss our quarterly results in additional detail. as well as provide commentary on our refined full-year 2022 revenue guidance. In the third quarter of 2022, we recorded $735 million in total revenue compared to $179 million in the prior year. Total revenue for the third quarter included $626 million in product sales based on 35 million doses sold by Novavax. Grant revenue of $106 million in the third quarter of 2022 includes revenue on the delivery of 3 million doses to the U.S. government and compares to $135 million in the prior year. Additionally, we recorded royalty and other revenue in the third quarter of 2022 of $2 million. Our cost of sales for the third quarter of 2022 were $435 million. I'll discuss this in a bit more detail in the next slide. R&D expense for the third quarter of 2022 were $304 million compared to $408 million for the comparable period in 2021. The decrease was primarily the result of a $98 million benefit from the settlement of a manufacturing agreement. Additionally, we recorded selling general and administrative expenses of $123 million in the third quarter of 2022 compared to $78 million in the third quarter of 2021. The increase in the period was primarily the result of activities in support of the commercialization of Nevexavit. For the third quarter of 2022, we recorded a net loss of $169 million compared to a net loss of $322 million in the third quarter of 2021. And finally, we continue to maintain a full tax valuation allowance, and we ended the third quarter of 2022 with $1.3 billion in cash. Please turn to slide 35. Cost of sales for the third quarter of 2022 were $435 million. This amount includes $249 million related to excess, obsolete, or expired inventory and losses on firm purchase commitments. The recognition of these costs was driven by our efforts to align our supply and third-party future purchase commitments with anticipated demand for Navex of it. If inventory sold for the third quarter was valued at expected standard cost, adjusted cost to sales for the period would have been approximately $444 million, an increase of $9 million as compared to cost to sales recognized. NAVAC's evade gross margins on sales to high-income countries are expected to be between 70% and 85% of product sales. As noted earlier, we are refining our full year 2022 total revenue guidance to approximately $2 billion, the low end of the previous guidance range of $2 to $2.3 billion. As a reminder, total revenue reflects all sources, including product sales of Novavaxivid by Novavax, grant revenue, royalties, and other revenue. We look forward to sharing additional updates as we progress in the upcoming quarters. With that, I'd like to turn it over to Stan to discuss our upcoming strategic priorities.

Thanks, Jim. So if you'll turn the slide, please. With a strong third quarter reported today, we are pleased with the momentum we're generating across our business. Moving into the end of the year, we are focused on executing against our key strategic priorities. These include... Delivering doses globally to achieve our revenue guidance, ongoing expansions to our label, and supportive policy recommendations for Nuvaxivin, and initiating our Phase 2 trial for our COVID-19 influenza combination vaccine and standalone influenza vaccine by the end of this year, which will enable a Phase 3 efficacy trial expected to start in 2023. So as we prepare for For the upcoming winter COVID season, as well as 2023 and beyond, we believe we are well positioned to be a leading provider of COVID-19 vaccines. And as you've heard today, through our data generated to date, we are confident in our prototype vaccine's competitive profile, including its durability of immune responses, its ability to address a broad range of variants, its protection against infection, and storage and handling benefits. We believe these differentiating factors, along with our ongoing label expansion, global manufacturing and supply network, will allow us to capture a meaningful share of the recurring COVID-19 market. So thanks for your attention, and I'll now turn it over to the operator for Q&A.

Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the key. question, please press star then two.

And our first question today will come from Roger Song with Jefferies. Please go ahead. Great. Thank you and congrats for the quarter.

A couple from us. The first one is the variant-specific vaccine. So given the data you presented today, seems the bivalent have less immunogenicity against the So just curious, what is the plan for the variant-specific vaccine moving forward, monovalent versus bivalent, and what kind of variants you plan to do moving forward, given, you know, so we are having new variants almost every once in a while? I'll have a couple follow-up.

Thanks. This is Philip. I mean, Stan and John both mentioned that we do plan to develop a variant vaccine as well as a bivalent to realize service market is needed. But your observation is right. I mean, what we saw is that our responses against BA.5 were very good. And the transmission or the amount of infections caused by BA.5 is plummeting. So it's less of a relevant... strain for us to pursue. So we're actually shifting plans a little bit, and we're pushing forward with a BQ1-1 variant, and we're going to develop that up and take that into the clinic and also formulate that as a bivalent product. Whether, you know, time will tell whether that's required or whether the customers want such a vaccine, but the timelines will allow us to bring that really to the market in a time when the southern hemisphere should be surging in the second quarter of next year.

Great.

Thank you. Okay. All right. So the next question relates to the financials. Just curious, what is the – I know you're referring the guidance for second half to the entire year for $2 billion. Just curious, in 4Q so far, what have you been seeing, and what's the preorder looking like, and how did that compare to the 3Q you just reported?

Yeah, hi, John Truzzino. You know, we're confident with our order book at this point through the end of the year, and I think that we're being conservatively cautious about what deliveries we think we'll be able to make toward the end of the year as we get into you know, the holiday season and product being shipped out and received during that period of time. So I think, you know, the guidance is still strong and just adjusting and refining a bit down to the low end of the range.

Awesome. Okay, maybe just the last one from us.

Just looking ahead for 2023 and then 2024, If I calculate this right, you probably have around like a 150 plus APA, 150 plus doses for APA. So just curious, how should we think about the rest of the APA and when they will start to fulfill in the coming years?

Yeah, it's really difficult to predict what 2023 is going to look like, and I would hesitate to even whisper at guidance at the moment. I think, you know, with the transition to more of a commercial market, looking at variance trains or bivalence trains as a possibility, and then thinking about what those markets will look like in policy recommendations, as I think you've even heard from some of the other manufacturers, it's a little bit challenging to to assess at the moment. I think what will happen as we come through the next couple of months, look at what our book of business looks like and still remain strong, I think we'll have a determination about whether it's existing APAs or incremental business coming into 2023. I think the messages that I make should be reinforced, which is that the virus is not going away. We still have variant strains emerging. It looks like we're going to have a southern hemisphere boosting season as well as northern hemisphere in the fall again. And I think this overall market size is going to be larger than the existing flu market. So while we would rather not be thinking about the downside of the virus, we have to be prepared, and that's what the purpose of the vaccine is. And I think more will come in the next few months.

Okay, I look forward to that.

Thank you for taking the question, and that's all from us. And our next question will come from Georgie Yordanoff with Cowan & Company.

Please go ahead.

Hello, everyone. Congratulations on the progress. So a few on our end. The first one, I guess, for Philip, not sure if I missed that, but one of the most crucial pieces of data that we thought was missing from this morning's release was the full increase in neutralization titers for the three different products that you looked at. This has been basically kind of like the main factor that regulators and the scientific community has been looking at, so we thought that that would be interesting to have, and then we have a couple of follow-ups. I guess the question is, can you provide that on the call, or if not, when can we expect to see it?

Yeah, we haven't prepared that data for disclosure today, and I'm not sure we have specific plans of when we would disclose that. I mean, the fold increase certainly is interesting. That shows the ability of a product to boost. But in my mind, what's actually more relevant is the absolute tires achieved after you boost, because that's going to translate directly into protection. Especially if you think about the breadth that we demonstrated today, I have a lot of confidence that what we have in hand now is relevant to the currently circulating strains. A point that Greg, my boss, likes to make is we're not claiming this is a universal vaccine. We're vigilant, and we test each of the new variants that come up to assure ourselves the immune responses that we're inducing are really relevant for that. So I think you're going to have to hold on until we come up with a – until we announce a plan of how to announce additional data on this study.

Got it. I guess, like, the only – our issue is that basically a lot of our consultants see the correlates of antibody protection as quite problematic in the community, and just because we haven't had enough data. So that's why it would be important to see that data from you, specifically the default increase.

Let me just comment on that because I think you know the Fong publication, and that wasn't developed by us. That was developed by the NIH and USG. In that publication, they found that the better core of protection for our specific vaccine was actually IgG. That's different from what they found for other vaccines where they thought that neutralizing antibody was a better core of protection. But I showed you data today on the pseudonewts for BA.5. And those were really comparable among the treatment groups. And that gives us the confidence to believe that our prototype vaccine we have in hand now is relevant to what's circulating.

Got it. And then maybe specifically on the FDA label, maybe can you walk us through the steps of how do you think you can kind of like remove that restriction is only being used as a first booster? I guess you've present some of the locked consistency data that supports that. See if you can just help us understand the timelines to when we could expect that to happen.

Yeah, that's right. I mean, this is what we were asked to develop and we had been developing. is what it looks like when we use our booster, not only as a first boost, but as a second boost. And that's the data I showed you both from Study 307 and 311, and that data is being prepared now for submission to the FDA. This is kind of a unique position we are in the U.S. As you know, globally, we don't have label restrictions on the first versus second or third or subsequent boosts. Be that as it may, you know, the data is being pulled together and is being prepared for submission. I want to perhaps remind you that some of the studies that the FDA does not like to consider, like our one-on-one study, did in fact have multiple boosts in up to four doses, and that has been considered by other regulatory agencies.

Got it. And then finally, a question just on the commercial side. as we kind of start to think about the potential commercial market transition in 2023, maybe, John, can you talk about, like, when does contracting usually start? Have you had any initial conversations? Some of your competitors have mentioned that they are in conversations with the EU and other markets. And specifically for the U.S., sorry to be too U.S.-centric, but... Our understanding is, in order to be covered by a commercial insurer, you would have to get full approval by the FDA. Can you update us on, do you believe you can get there in time for those contract negotiations, and where do you stand with the full BLA submission?

Yeah, Yogi, those are great questions. Thank you. So, listen, each one of those contract negotiations is kind of different around the globe. You know, right now we're still under EU commission discussions, and It could be that through 23, that's the basis for the existing APAs and any reordering that would come. Similarly, in other countries like, you know, Australia and Canada, we'll have some unique contract, and we likely expect that those countries will stay under the existing kind of APA structure with the opportunity for incremental purchases as well. So we're in constant communication around the globe where we're already – and talking to those procurement authorities about what that's going to look like. In the U.S. in particular, we will not have any restrictions with the private payers or the government payers with the EUA in place. Those are conversations that we've already had and are confident in our positioning while we're under the EUA. So the EUA will have... some very minor implications to us who ultimately will be filing for the BLA, um, during the course of next year, but not having the BLA fully approved, uh, will not restrict us in the fall booster campaign.

Got it. Thank you so much. And our next question will come from Mayank Matani with the Riley security.

Go ahead.

Um, good afternoon, Dean. Thanks for taking our question. So maybe just, uh, following up on that last, um, flow of questions. So, John, you know, in context of dozers that are remaining as part of, for example, the US EPA, is there an absolute minimum that you have to satisfy, you know, before you kind of move towards a private commercial pair kind of setting? Is there something that has to happen as part of the EPA to before you could, you know, play at par with the other vaccines in the private market. And I have a couple of follow-ups.

I don't think I quite caught all that in my ink, but are you referring to the ex-U.S. APAs or the EUA in the U.S.?

Excuse me, I was referring to the U.S. APA, the current, you know, 110 million doses. contract that you have, is there some sort of a minimum you have to satisfy before we can think of a private market in 2023 and beyond?

While that contract is still in place, I think likely we're going to see a movement to traditional procurement. Again, it's really hard to say when, but if we're keying off of what happened this year, you would think that there would be a full vaccination campaign. We'll learn probably early in the year about, you know, what that process is going to look like, what strains are being expected, what vaccine format the U.S. government's going to want. So I think that's why the comments I made earlier are, you know, let's kind of stay tuned through the balance of the year and into Q1 as we see how that unfolds, whether the U.S. government will fund the purchase of additional vaccine or they will rely on the public-private market to take that over during the course of 2023. So I think it's stay tuned, but I think likely you're going to see procurement taking place in the commercial market in 2023. Okay.

Thank you for clarifying that. And then on the fourth quarter delivery estimates that you have, it looks like you only need, I think, an incremental 15 million doses to get to, you know, that $2 billion refined guidance. Can you confirm that, you know, what countries you could get that from? Is that basically EU, UK, and Australia, New Zealand? Is that essentially the countries and customers that – can you just clarify that?

Well, I think the guidance is kind of – clarifying that. I don't think we're going to give specific doses by country, but it will likely be across all of our APAs in varying dose amounts, but we're not going to disclose what those specifics are country by country.

Understood. And then on the R&D expenses, just quickly, It looks like it did come down quarter over quarter, but it was a result of a manufacturing agreement. Can you speak to what leverage you may have going forward, you know, as you think about fourth quarter, but also next year and recognizing that, you know, you're being very strategic about investing behind trials and scaling up for the variant-specific vaccine?

Certainly. You know, when you look at our R&D expenses this quarter, you're correct. It was about a $98 million benefit. So, of course, that would take you up to about $400 million. We do expect, you know, some continued decrease in R&D as we bring more of our manufacturing capabilities online, capitalize them in the inventory, including our CZ plant. So you'll see some trending down there over time. I would say that in this period as well, we had a bit of an offset of some ins and outs of the benefit from capitalizing our CC plant. And then we also had some, I'm going to call it R&D related manufacturing activities that we wrote off that I wouldn't expect in future periods. So you'd be correct to see a trending down R&D in some future periods.

Thanks for the good questions. And our next question will come from Eric Joseph with JP Morgan. Please go ahead.

Hi. This is Hannah on for Eric. Thanks for taking the question. Just a few from us. So first, I was wondering if you'd talk about the impact of that can occur from migrating to a single administration format. And relatedly, what would you need to do in terms of additional supplemental approvals to getting that syringe product out. And then also, just on the RSV front, just wondering how your thoughts have evolved as it relates to reentering the RSV game, given the successes of the perfusion competitors.

You were really hard to hear in the first part of that question. Would you mind just kind of repeating, please?

Oh, so that was the first part of the question, impact-related cogs from the syringe product. And then also, what would it take in terms of submitting approvals for getting that out, getting that product out?

Yes. So we would expect for those, you know, pre-filled syringe impact that we would see that happening later in the second half of the year, you know, specifically in those markets in the Northern Hemisphere. So I think we would expect to see some reduction in vial size, total amount of doses in a vial in the southern hemisphere, but certainly moving toward pre-filled syringe or unit dose vials in the second half of the year.

And then on the RSV, I'm sorry, RSV given the success of the perfusion competitors.

RSV? Yeah, well, I think, look, it's something that of particular keen interest to us. As we've mentioned before, you know, that technology platform for recombinant protein nanoparticle as well as adjuvant, you know, is robust and beneficial as we're seeing it in, you know, our COVID-19 vaccine. We've learned significant lessons over the course of the last couple of years, you know, about how to leverage that technology effectively. platform, and while there's good data from competition at RSV, I think we have an opportunity to have even better data given our technology platform in the context of multiple doses and the use of our adjuvant. So stay tuned for more details relative to RSV in our pipeline.

Okay, great. Thank you for taking the question.

And our next question will come from Alex Stranahan with Bank of America. Go ahead.

Hey, guys. Thanks for taking our questions. Just a couple from us. First on BA5, could you help us draw a line between the pseudovirus GMT response that you showed with the prototype Nuvaxavid for BA5 to what you saw in Prevent19? Just wondering if GMT is declining on an absolute basis and how this may correlate with protection. And similarly, I believe there was also a BA5-specific vaccine in biovalent in the Phase 3 study that you presented today. So any guidance on when you'd update the markets on that data would be helpful. And secondly, maybe one for Jim, looking at your debt commitment to CEPI and the convertible note as well as potential for repayment to the U.K., And Gabby, which cumulatively is not an insignificant amount of cash potentially on the line, could you just speak to your view on the liquidity heading into next year? I know you're roughly at $1.3 billion balance now. Thanks.

All right, Alex. And, Wilson, thanks for your question. You know, we ended the quarter with $1.3 billion. We are looking forward to February of next year as the time when, of course, our convert, the $325 million comes due. We feel like we have ample cash flow to either retire that convert for cash or we'll monitor market conditions, consider what we might do there. When it comes to Gavi, because you mentioned that one, and I think that's an important one for clarification, We received $700 million from Gavi, COVAX, related initially and up front for our commitment, 350 million doses. And then, of course, the other 350 upon approval by the World Health Organization. We do not believe Gavi has any right to a return of that capital. So for that reason, we would put that off to the sides. And then with respect to, you know, some of the other puts and takes of, call it potential returns of capitals, you know, we'll continue to provide updates on our cash flow as we guide into next year. But we go into this with great confidence in our commercial launch and the VACs of it and what that means for operating cash flow.

And maybe just a bit of commentary about the pseudonewts. I mean, the data I presented you today is preliminary data that's being confirmed in a validated assay, and we'll have those results soon. They'll be more able to compare between the pseudonewts of BA5 versus the other subvariants in the prototype. You know, it's a bioassay, and there's a lot of variability in the results that you can get from that. But still, we were quite pleased to see the levels we got. It was within the levels that are thought to be protected, at least by the NIH course of protection analysis.

And our next question will come from Vernon Bernardino with HC Wainwright.

Go ahead.

Hi, everyone. Thanks for taking my question, and congrats on a a fantastic revenue quarter. Just perhaps a question for John. You had mentioned one thing that still remains underappreciated, in my opinion, is the advantages that you have for Novavax of it as far as storage and distribution. Now, thinking down the road, that advantage probably is going to continue to be there. What are you seeing as far as competitors and their storage capabilities and what they're changing and what the market may be thinking as far as down the road in the storage of the mRNA vaccines? After that, how do you think their capabilities as far as manufacturing, which they had initially been interested in wrapping up in these territories that are lower income, might be something that helps them up with their commercial viability of mRNA vaccines is changing? Any insights you could provide would be helpful. Thank you.

Yeah, Vernon, good question. As I briefly mentioned in the presentation, we indeed still have a significant advantage in the refrigerator stability of our product. And then, of course, we would be moving to a smaller dose presentation and ultimately to pre-filled syringes, which is yet a significant advancement. It's unclear where the competition is going, and we'll remain to see what they're doing. But at least for the moment, we know that they're still shipping frozen multi-dose vials That requires storage while it's still, before it's used, a thawing and then a fairly short durability, I'm sorry, stability of product after it's thawed. So we'll continue to see that advantage, we think, for some period into the future and certainly into... you know, for our other partners into low and upper middle income markets where freezer capabilities are limited is an advantage for us as well. So thanks for pointing that out, and we'll have to keep an eye on what happens with whatever they are able or unable to do with mRNA vaccines.

And as far as the market then is concerned, are you seeing any difference or changes in the end user as far as their thinking and storage and perhaps future needs for mRNA vaccines versus yours?

Yeah, I think our interest in getting to the commercial markets, I think you'll see the health care providers then having some more optionality to access an easier-to-use presentation. And so that's certainly one aspect that we're going to be pursuing in the U.S. and EU markets. Thank you.

And this will conclude our question and answer session. I'd like to turn the conference back over to Stan for any closing remarks.

Thank you, Operator. I appreciate the time everybody has spent taking this call. It's been a very Big and important quarter for us. We've made a lot of advances on every front and look forward to showing you more of the same for the coming quarters. Thank you.

The conference is now concluded.

Thank you for attending today's presentation.

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