Novavax, Inc.

Good morning, and welcome to Novavax Fourth Quarter 2023 Financial Results and Operational Highlights Conference Call. All participants will be in the 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 2. Please note this event is being recorded. I would like to turn the conference over to Erica Schultz, Senior Director, Investor Relations. Please go ahead.

Good morning, and thank you all for joining us today to discuss our fourth quarter and full year 2023 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. Please turn to slide two. 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, operating plans, objectives, and prospects. full year 2024 financial guidance, the amount and impact of Novavax's cost reduction plans, its future financial or business performance conditions or strategies, its partnerships, anticipated timing and outcome of future regulatory filings and actions, and the ongoing development, marketing opportunities, manufacturing capacity, and 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 can cause actual results to differ materially from those projected in such statements. Additional information regarding these factors appears under the heading Cautionary Notes Regarding Forward-Looking Statements in the slide deck we issued this morning and under the heading Risk Factors. in our most recent form 10-K and subsequent form 10-Qs filed with the Security and Exchange Commission available at www.sec.gov and on our website at www.novavax.com. 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. Please turn to slide three. Joining me today is John Jacobs, our president and CEO, who will provide a review of our progress this past year, focusing on our three key priorities looking towards the future. Additionally, John Trezino, our president and chief operating officer, will provide an update on our commercial activities. And Dr. Philip Dabowski, president of research and development, will discuss our clinical development and pipeline. Finally, Jim Kelly, chief financial officer and treasurer, will provide an overview of our financial results. I would now like to hand over the call to John Jacobs. Please turn to slide four.

Thank you, Erica, and thank you, everyone, for joining us. I'm pleased to be with you today, along with the members of our executive team, to reflect on our fourth quarter and full year 2023 financial results and operating highlights, and to discuss our priorities for 2024. In 2023, we made significant progress in our priorities, strengthening our foundation and helping to position us for success in 24 and beyond. Throughout the year, we kept you updated on the progress we were making against our three priorities, which were, number one, deliver an updated product for the fall vaccination season. Number two, reduce our rate of spend, manage our cash flow, and evolve our scale and structure. And finally, number three, leverage our technology platform, our capabilities, and our assets to drive additional value beyond Nuvaxibit alone. So let's take a look back at 2023 and what we were able to accomplish in these three key areas of focus for Novavax. Under priority one, deliver our updated vaccine for the fall season. All of us at Novavax are very proud that this fall we delivered on this priority. And in the face of a COVID market that was smaller than we and many others had projected, We were able to achieve $1 billion of revenue for the full year 23, including fourth quarter total revenue of $291 million. Despite this success, we also had some misses and were disappointed in our U.S. market performance last season. Last season was a transitional season and the first fully commercial one for us in the U.S. market. And we intend to make improvements in key areas for 2024. Later on in our presentation, John Trezino will discuss this topic in more detail. Priority number two, reduce our rate of spend, manage our cash flow, and evolve our scale and structure. 2023 was a pivotal year for the COVID market and for Novavax, as it was the first year post-pandemic and represented the first chapter in our new journey as a company post-pandemic. A key priority for Novavax in 2023 was to scale the organization appropriately and reduce our spend to better align with the evolving market opportunity. To that end, we took decisive action to reduce our expenses and our scale. We entered 2023 with approximately $2.5 billion in current liabilities, and over the course of the year, reduced that figure by over $800 million. And with the resolution of the GAVI arbitration, this number should be reduced further by another $500 million. In addition, we reduced our total operating expenses by over $1.1 billion in 2023, almost $150 million ahead of our stated target. And finally, under priority three, leveraging our technology platform, our capabilities, and our assets to drive additional value beyond Nuvaxivit alone. During 2023, we were able to outline a faster path forward for our flu COVID combination vaccine program with a potential launch as soon as 2026. We are still on track to initiate a phase three study this fall and last week, the FDA confirmed the data requirements to achieve accelerated approval. Dr. Philip Dubosky will provide details later on the call on this matter. So looking ahead to 2024, and beyond, I'd like to say with 2023 now behind us, we intend to build upon our successes, learn from our disappointments, and drive towards a successful 2024. In this second chapter of our new journey post-pandemic, over the next two seasons, our focus will be on share growth in the COVID market, further streamlining our business model and preparing the market for a successful launch of our combination vaccine, which we anticipate in 2026. When achieved, the launch of our combination vaccine will mark our third and potentially most exciting chapter yet post-pandemic, allowing us to expand beyond a one-product company. When combined with the potential for both organic and inorganic product expansion, this further supports our vision of becoming a leading global vaccine innovator. Philip will give an update on our combination program shortly through the course of this presentation. Before handing it over to the rest of the management team, I want to outline our three main priorities for 2024. So please turn to slide five. Our first priority is to deliver an updated product for the 24-25 fall vaccination season with a more competitive presentation, broader retail availability, and early availability in the market with the goal of capturing increased share. Our second priority is to independently launch the phase three trial of our COVID flu combination vaccine product and showcase more of what our scientific platform is capable of through the generation and sharing of new clinical data. Finally, our third priority is to continue the evolution of Novavax with our eyes firmly on the future opportunity, further reducing our operating expenses and enhancing our processes and while maintaining our capabilities so we can deliver on our intended business objectives. We are excited about the prospects ahead of us as we enter the second chapter of our post-pandemic journey. Our base plans, should we succeed in executing them in 24 and 25, promise to place Novavax in a stronger, leaner position, ready to launch our new combination vaccine and accelerate the company towards profitability and significant growth potential. Now I would like to hand it over to additional members of the team to discuss our results from the quarter in more detail, beginning with John Trezino for our commercial updates. John?

Thank you, John. Please turn to slide six. As John explained, 2023 was a year of significant change for our business, and we have learned many lessons that are allowing us to better position ourselves for a stronger 24-25 COVID vaccination season. I'd like to focus today's update on how we plan to translate these lessons into action with a goal to grow share in each of our key regions, as well as the changes we've made to our commercial strategy. Please turn to slide seven. First, I'd like to provide some high level context on 2023 and the opportunities in 2024. Full year 2023 product sales were $531 million, which includes $251 million in the fourth quarter. Over 90% of that came from APA sales from Europe, Australia, and New Zealand, with the remainder of our product sales in the US, Canada, Singapore, Korea, and Taiwan markets. Importantly, we entered 2024 with over $1 billion outstanding in expected APA contract value with deliveries planned for 2024 through 2026. For 2024, our XBB remaining product sales include Q1 APA deliveries for Europe and then for the Southern Hemisphere, and APA sales to Australia and New Zealand upon regulatory approval. We also see incremental opportunity for the private market this year in the UK, as well as the potential for CDC to recommend an additional springtime dose for individuals 65 and over on which ACIP is meeting to discuss today. Please turn to slide eight. As John mentioned earlier, we learned a lot in 2023, which was our first year competing in a dynamic post-pandemic U.S. commercial market. We successfully secured regulatory authorization and approval for our updated vaccine in key markets around the world and made significant deliveries under our APA agreements. In the US, several factors related to our five-dose product presentation and our timing to market entry impacted our ability to gain market share. However, factors outside of our control, namely the disappointing COVID market size at just over 30 million doses, and the fact that the retail channel accounted for over 95% of vaccinations also led to US performance below our expectations. We continue to believe that the US market holds opportunity for Novavax. In the US, we achieved some important milestones that should provide an opportunity for a much better performance in 2024. We built significant levels of awareness for the first time in the US market over 80% aided awareness and have seen pockets of rapid uptake, wherein some retail outlets we saw up to 10% share when we were carried on an even playing field regarding pharmacy processes and availability. For 2024, we are focused on being in market in early September, which we anticipate as the start of the vaccination season. We also intend to offer our vaccination in a pre-filled syringe and, if approved, under full BLA licensure. We know that in the first post-pandemic season, COVID vaccinations overwhelmingly took place in pharmacies, so we have recalibrated and streamlined our customer engagement teams to focus on this channel. Today, we are already leveraging the relationships built this past season and are currently at the negotiating table with the top major retailers who drove 90% of the pharmacy business last season, potentially setting the stage for expanded access to our updated vaccine in the top national and regional retail chains. Additionally, we believe that if we achieve early September delivery, a pre-filled syringe, and BLA approval, we can secure a meaningfully improved market share. We especially see opportunity in the 65 plus segment, which had the highest vaccination rates of 42% last season. And this is where we plan to concentrate our promotional spend in an effort to convert that market to Novavax vaccine shots in arms. We are also closely watching the ACIP meeting today, which will potentially result in a recommendation for spring vaccination for high-risk groups, including those over 65, and increased opportunity to benefit from our updated vaccine. Finally, we are also making important progress on our objective of on-time delivery. We are working closely with the FDA on a rolling submission of our BLA. Please turn to slide nine. Now let's talk about markets outside the U.S., starting with Europe, which converts to a commercial market this year for the first time. Our APA in the European Commission ended in 2023, and we are now entering for the first time a commercial market opportunity in which despite strong competitive pressure from mRNA's APAs, we see revenue potential for our new vaccine in Italy, Spain, and France, as well as in the UK. In these markets, our focus will be on delivering a single dose presentation with timely availability. In the UK, we are planning for the launch of a private market featuring Novavaxivit. The health security agency recently updated its green book to include our vaccine, and discussions are underway with leading retailers and occupational health providers. We are already seeing interest in potential orders for our Novavaxivit vaccine. Finally, in Asia Pacific, remains an opportunity for us for the next two seasons through the expected deliveries under existing APAs. Overall, our commercial efforts in Asia Pacific remain focused on Australia and our largest APA global market, as well as New Zealand, Singapore, and Taiwan. We expect approval of our updated vaccine in Australia and New Zealand soon. Finally, in Canada, we continue to execute on our APA. Our efforts are focused on securing NACI recommendation on par with mRNAs and driving awareness of our differentiated vaccine with healthcare providers and consumers. Now please turn to slide 10. As John noted, we have made significant changes to our organization, to how we work, to our scope and scale, and how we are working tirelessly to coordinate the many critical activities needed to be ready for a successful fall season. Across all key areas, from CMC to regulatory to our commercial efforts, we are coordinating our workflows and streamlining our processes and remain singularly focused on operational execution for the upcoming 24-25 season in all of our key markets. We continue to believe, and our data indicates, that there is significant demand for Novavax's protein-based vaccine, and that Novavaxavid will play a meaningful role across the US, Europe, and the rest of the world. As we focus on the future, we expect continued transformation in our business, with commercial product sales continuing to grow and to contribute to Novavax's total revenue mix over the next two seasons as the pandemic-era APA sales agreements mature and reach their conclusion between now and 2026. We believe that the market is migrating towards seasonal combination respiratory vaccines, especially for flu and COVID. Our market research shows that over half of the flu market is anticipated to convert to combination products, and that 25 to 30% of healthcare providers and consumers prefer a protein-based option. And to date, we believe we are ahead of other non-mRNA competition in combo product development. We think we are well positioned to capture our fair share of that market opportunity by bringing together our technology platform, matrix M adjuvant, proven COVID vaccine, and an outstanding flu vaccine candidate with positive phase three data. To discuss this and other key R&D updates, I would like to hand it over to Philip.

Thanks, John. Please turn to slide 11 and 12. I want to cover two R&D priorities for 2024. The first priority is the delivery of updated variant vaccines. I will share clinical and real-world evidence about the performance of our XBB-containing vaccine before I update you on our approach for the 24-25 season. Our second priority is launching the next phase of our COVID influenza combination program. Like John said, the program is on track, and we have received FDA guidance of how to achieve accelerated approval. Before I move into my slides, I want to reflect on the data we have accumulated over this past year, and that continues to support the promise of our nanoparticle and adjuvant technology. We continue to see broad, long-lived immune responses in our clinical studies, while maintaining a favorable reactogenicity profile. And this has proven to be true for our initial COVID vaccine, our XVB15 vaccine, the R21 malaria vaccine, as well as our experimental COVID influenza combination vaccine. And we've also started to accumulate real-world effectiveness data that shows the immune responses seen in our studies translate to disease prevention in the real world. Okay, let's move to slide 13 and review where we are with strain change starting with a summary of last year's update. Last summer, the strain was updated to XBB15, and we ran a clinical study to reconfirm our strain change approach and evaluate the vaccine's performance. The vaccine achieved its co-primary endpoint of inducing robust XBB15 neutralization and seroconversion responses. On the left-hand side of the slide are neutralization responses in adults who previously received three or more mRNA vaccines. XBB15 responses increased sevenfold with a single boosting dose. Also displayed are the neutralization responses to J1, which is currently the most common circulating variant. As you can see, we had a 5.6-fold response to this forward-drift variant, once again demonstrating this vaccine technology can induce broadly neutralizing responses. Now, on the right-hand side of the slide are local and systemic ractogenesis symptoms. Despite the study subjects having received a minimum of three prior doses of mRNA vaccine, our tolerability profile was very favorable and this has been reported multiple times in academic publications. Okay, let's go to slide 14, which depicts how these immune responses translate into clinical effectiveness. On February 1st, the CDC published early season COVID vaccine effectiveness estimates. They concluded that the overall adjusted vaccine effectiveness of the three vaccine brands combined was 54%, and that included protection against JN1, which was estimated to account for about 39% of the symptomatic cases. The effectiveness was not calculated by vaccine manufacturer or platform, but the vaccine-specific case counts were included in the publication and are depicted on the right-hand side of the slide. This appears favorable for Novavax. The adjustment factors are not available, so individual vaccine effectiveness cannot be calculated. Although this part of the study captures a small number of Novavax cases, we calculated the crude relative rate reduction for our vaccine, which was 75%. The imbalance in the case counts and the relative rate reduction gives us confidence our vaccine is providing protection. Okay, let's go to slide 15 for this year's variant. JN1 is causing the vast majority of disease globally, including in the U.S. It's depicted on the left-hand side in purple dots. As a recombinant protein vaccine company, we make many of the variants and cross-test them against each other. On the right-hand side of the slide is antigenic cartography depicting the antigenic distance between XBB15 and JN1, which is over four antigenic units and represents over 16-fold reduction in immune responses. Despite the fact I showed you data, the XBB vaccine induces good immune responses, and those translate into real-world protection from the CDC publication, we believe it appropriate to update the vaccine to protect from future drift variants. Updating will narrow the antigenic distance and should future prove the vaccine effectiveness when subsequent mutations occur. Therefore, we would advance JN1 into commercial manufacture while continuing to evaluate upcoming variants. Okay, let's go to slide 16 for a brief update of our COVID influenza combination program. We've been interacting with the FDA on the design of our phase three program and the accelerated regulatory approval pathway. We have agreement on the study design, study endpoints, trivalent comparators, and size of licensure enabling safety database. We're still on track to initiate the phase three study in the fall. Based on supportive data from our phase two study, which is shown on the right-hand side of the slide, we have confidence in achieving the agreed upon endpoints. The study is designed to compare the immune responses in two age groups, 50 to 65, and greater than 65, to licensed age-recommended influenza vaccines, as well as our own COVID vaccine. The granting of accelerated approval will occur after the data is reviewed by FDA and meaningful therapeutic benefit is demonstrated. We're also planning a lot-to-lot consistency study in the fourth quarter of the year, which should enable a regulatory filing in 2025 and potential launch in the 2026 season. Okay, let me hand over to Jim for a financial update.

Thank you, Philip. Please turn to slide 17. This morning we announced our financial results for the fourth quarter and full year 2023. Details of our results can be found in our press release issued today and in our 10-K filing. Please turn to slide 18. We are focused on improving the financial health and performance of Novavax to enable long-term value creation. Towards that goal, I'll share a few of the key themes for 2023 and a look towards 2024 and beyond. For the full year 2023 Novavax recorded total revenue of $1 billion and significantly improved our balance sheet profile by reducing current liabilities by $825 million. In addition, The Gavi settlement announced last week removes the risk of arbitration with Gavi and will further reduce short-term liabilities by over $500 million. As we continue to transform Novavax into a more lean and agile organization, we reduced 2023 total operating expenses by $1.1 billion, or 41%, and exceeded our savings targets for R&D plus SG&A by $150 million. As we look to 2024, we are targeting R&D and SG&A expenses of between $700 and $800 million with the intent to drive them below $750 million midpoint, if possible, as we continue to resize our organization. We ended 2023 with cash and accounts receivable of $881 million. In addition, as we enter 2024, we have over $1 billion in APA contract value outstanding with expected deliveries over the next three years. We believe this positions us well as we focus our investments to establish new commercial COVID markets and advance our CIC program. Please turn to slide 19. Turning to a more detailed view of our 2023 financial results, I will provide commentary on our fourth quarter 2023 financial results with specific focus on revenue and COGS. For the fourth quarter of 2023, we recorded total revenue of $291 million compared to $357 million in the same period in 2022. Our product sales of $251 million in the fourth quarter of 2023 were primarily related to EPA deliveries to Europe and Canada, plus commercial market product sales in the U.S., South Korea, and Taiwan. Grants of $38 million for the fourth quarter of 2023 reflect the realization of the full value of the $1.8 billion U.S. government funding agreement. For the full year 2023, our total revenue of $984 million was consistent with our guidance. In the U.S. market, product sales for the 23-24 vaccination season are now expected to come in below $25 million, which is less than our prior target. That said, we are closely monitoring the potential for the CDC to recommend a spring COVID-19 booster and will assess how that could impact demand and potential sales in the first half of 2024. Our cost of sales for the fourth quarter of 2023 were $155 million as compared to $182 million in the same period in 2022. These periods include $30 million and $99 million respectively related to excess, obsolete, or expired inventory and losses on firm purchase commitments under third-party supply agreements. Please turn to slide 20. We are committed to creating a more lean and agile organization to align with the company's market opportunities. To advance that goal, over the past year, we've reduced our workforce by over 30% compared to the first quarter of 2023. We have also reduced our full year 2023 R&D and SG&A by over 500 million compared to the full year 2022. This result was approximately 150 million better than our original target, and we did so while maintaining core business capabilities and progressing our combination vaccine program. For 2024, we are targeting combined R&D and SG&A expenses of $700 to $800 million. In addition, we are prioritizing improvements to our long-term supply chain efficiency, including exploring the sale of our Czech Republic manufacturing facility. Please turn to slide 21, where I'd like to discuss progress on our balance sheet and liability management. During 2023, we reduced the company's current liabilities by $825 million, and with the recently announced Gavi settlement, we will further reduce current liabilities by over $500 million in 2024. Of note, the Gavi settlement provides for an equitable resolution of our differences and spreads any remaining liabilities over five years. allowing us to better manage cash flows and make appropriate investments to grow our business. When assessed on a present value and cost to capital basis, we estimate that the cost of the settlement to be in the range of 300 to 400 million. Please turn to slide 22. Now turning to financial guidance with an emphasis on our total revenue. For the full year 2024, we expect to achieve total revenue of between $800 million and $1 billion. Our projected total revenue includes $500 to $600 million of APA sales based on expected dose delivery schedules and non-APA related revenue of $300 to $400 million from a combination of commercial market product sales plus royalties and other revenue from our partner related activities. we have previously guided to first quarter 2024 expected total revenues of approximately 300 million. Based upon a delay to our Australia XBB regulatory review, we now expect APA sales for both Australia and New Zealand originally anticipated for the first quarter of 2024 to now occur later in 2024 upon their respective authorizations. As a result, Our first quarter 2024 total revenue is now expected to be approximately $100 million. If successful in achieving the guidance outlined today, we believe this will support the funding of our operations for the next 12 months. In our 10-K filing, you will see that we have provided an update on our going concern disclosure, specifically. that this forecast continues to be subject to significant uncertainty related to revenue for the next 12 months. We look forward to sharing additional updates as we seek to improve Novavax's financial performance, cost structure, and strength to deliver shareholder value. With that, I'd like to turn the call back over to John for some closing remarks. Thank you, Jim.

Please turn to slide 23. I am proud of the progress we made in 2023 and the opportunities we have identified that should help us to build a stronger business with our key priorities of executing on the 24-25 COVID season, advancing our combination vaccine, and creating a more financially stable organization. We are operating a business in a complex and challenging marketplace, which is undergoing significant change, but which also offers immense opportunity to positively impact global public health, and drive significant value creation in the future. I would like to thank all of our employees and their continued work in advancing our business. Together, we remain committed to generating successful performance and value creation for all of our stakeholders. And with that, we will now take your questions.

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the one on your telephone keypad. Should you wish to cancel your request, please press the star followed by the two. If you're using a speakerphone, please leave the handset before pressing any keys. One moment, please, for your first question. Your first question comes from the line of Roger Song from Jefferies. Please go ahead.

Great. Good morning, everyone, and thanks for the update and taking our questions. maybe start with a few clarifications for the guidance. First is the 1Q, 100 million. So given this is not coming from Australia and New Zealand, so can you specify what are the countries for those APA? And then for the rest of the, for the entire 2024, 500 to 600 APA, It's coming out of the entire $1 billion outstanding APA. And my question is, do you expect to see new APA beyond this $1 billion in the coming years? If so, where will be those countries coming from? And last question related to the revenue guidance is the $300 to $400 million APA 2024 guidance. how much is coming from the U.S., if you can give us some color around that. Thank you.

Thank you, Roger. Three questions in there. Jim, do you want to take Roger's first question on the source of the $100 million in Q1?

Yes, certainly. Hey, good morning, Roger. So when we look at our Q1 guidance for 2024 that we just shared of $100 million, Virtually all of that has, in fact, already been shipped. It is APAs to Europe that were delivered in January. So that is the vast majority of the guidance. As you referenced, our prior guidance for the first quarter of approximately $300 million did include expected sales to Australia and New Zealand. Now, as we have shared with all today, that review of our XBB dossier is still ongoing. And so it is our expectation that upon authorization that we will make those deliveries, but later this year.

Jim Rogers, third question you may want to address as well, just a breakdown of the non-APA revenue and what proportion of that comes from the U.S., if we heard you correctly, Roger.

Hey, exactly. Exactly. So, Roger, the component of our revenue guidance, and I'll just restate it here, the $800 million to $1 billion, mid-point $900 million is split between APA sales and non-APA revenue. You correctly noted $500 million to $600 million, mid-point $550 million for APAs. non-APAs, $300 to $400. And within that, we have two primary buckets. One is related to royalty and other revenue. As you might remember, we have begun to receive some reimbursement related to our R21. That income or economics would come in the form of both reimbursement of the matrix we manufacture in support of launch and ongoing sales. And then finally, also a royalty that we could be eligible for upon those commercial sales. That's a single digit royalty. So that's a component of it. And I would say, frankly, a small component of it. In the remaining commercial portion, This is virtually all US, Europe, UK. And while we have not provided specific breakouts across those, these are exceptionally important markets for us. You heard John Trezino speak a little bit earlier about how we are prioritizing our focus in these markets to establish them this year. And in the case of Europe, an important transition year from APA to commercial markets.

Thank you, Jim. And then finally, Roger, the third portion of your question, John Trezino, perhaps you can answer. I believe Roger was asking, would we expect after this billion that we noted in remaining APA value to have future APAs in the out years beyond 2026? Yeah, thanks, John.

So APAs, generally speaking, were a function of the pandemic period of time in which we had advanced purchase agreements in place. As we transition to the commercial market, you're going to see a mixed of a normal commercial market as in the US, so payer-driven purchases through retailers. In Europe, it's again a mix between tenders and private market. As we're already seeing in the UK, for example, we're going into private market retail and occupational health. And so there's a mix there of what those purchases will be. The traditional APAs will wind themselves down between now and 2026. And then we'll go to the normal commercial markets.

Thank you, John. Thank you, Roger. Thank you.

Thank you. And your next question comes from the line of Eric Joseph from JPMorgan. Please go ahead.

Hi, good morning. Thanks for taking the questions and all of the- Good morning, Eric. As it relates to forward guidance. You can hear me okay? We can.

Good morning.

Morning. So just a clarification question when it comes to U.S. sales this past quarter. There's a $82 million product sales return accrual item that we noticed. Can you just help reconcile that with recorded product sales for the full year of around $29 million in the U.S.? Is the difference there just, you know... difference between growth and net sales and then is there any concentration of those returns by contracted among your contracted pharmacies and then perhaps just one on the development side as it relates to kick and and your expectation of accelerated approval path there can you just sort of clarify what gives you confidence in being able to pursue a sort of uh it sounds like in in an approval on the basis of immunogenicity, just given that there isn't yet an approved reference kick offering in the market. Thank you.

All right, Jim, Kelly, why don't you take the first part of that question, then we'll hand it over to Philip to address the question on Kik.

Hey, certainly. Good morning, Eric. So in our feedback today on the U.S. market, what I shared with folks is that for the 2023-24 season in the U.S., we're expecting total revenues for the U.S. market to be below $25 million. We did not break out the specific number for the fourth quarter, but given that guidance we just gave you, the vast majority is in the fourth quarter. As you are looking at what folks will find in our 10K, which is a gross to net roll forward, what you have identified is that we have a reserve for returns that are embedded within our financials. That number is just over 90 million. What that means is that we have sales into the channel. Those are to our direct purchasers. They in turn sell to retail establishments. And then we make an estimate based on the shots in arms that we have through IQVIA. for what may be eligible and we estimate would be eligible for a return upon the end of the season. It is simply an estimate at this time. We will monitor it closely as the year goes on, but our net revenue in the case of the United States for the fourth quarter is a function of that return estimate that you're seeing in our roll forward financials. It is net of that amount.

Okay, great. That's very helpful.

Philip, do you want to take Eric's second question? Oh, Eric, did you have a follow-up there?

No, no, no. That's fine. Thank you. Yes, the follow-up question on the development side.

Yeah, we have a couple of lines of evidence to give us confidence. I mean, as you know, we've had a prior phase three study that was actually granted the accelerated approval pathway by the FDA, so we know what endpoints and how we need to achieve that. And certainly the immune responses that I shared in the slides today would be adequate to achieve the same ones we used in our prior phase three study. We also know the competitors are talking about timelines, which would indicate that they're pursuing accelerated approval pathway. But I think most importantly, the FDA told us, right? So they reviewed our plans and our study. And what they told us was that if we achieve the agreed upon endpoints, and we are able to demonstrate meaningful therapeutic benefit, then there's a pathway forward to accelerate approval. Now, they also said they would have to wait to see the data before they took the final determination. But the strength of the immune responses we're seeing compared to the comparators, as well as our prior experience, gives us confidence that we have a pathway forward.

Good. Thank you, Jim and Philip. Thanks, Eric. Eric, did you have a follow-up?

One more follow-up, if I could, on Full Year 24 guidance, the non-APA portion of that. To what extent is that guidance sort of conditioned or dependent on additional regulatory approvals or recommendations in the US, UK, and Europe?

Jim, did you want to take that one? And then John Trezino can add color if needed. Go ahead.

Well, hey, certainly. So the non-APA revenue guidance, $300 million to $400 million is virtually all, except for that small portion related to R21, concentrated on the fall vaccination season. And so the regulatory authorizations that would be supportive of recognizing that outcome are all linked to our updated variant, you know, speed the market and regulatory authorizations to support that commercial market performance.

Thank you, Jim. Thanks, Eric.

Thank you.

Your next question comes from the line of Brendan Smith from Cedar Cowan. Please proceed.

Hi, guys. Thanks very much for taking the questions. Just a quick one from us, actually. Apologies if I missed it in your comments, but I think you mentioned that you stopped to about 10% share in the U.S. in retail outlets where you were carried on an even playing field. Just wondering if you could maybe expound on that a little bit, really kind of what that looks like. If there's something about those areas where you could expand even further this year and into next year, maybe what your plans for that would look like. And then just maybe quickly, what kind of the important steps between now and a potential approval would look like if you are to prioritize that pre-filled syringe and any meaningful differences you'd expect to that process versus last year. Thanks.

John Trezino, do you want to take Brendan's question and maybe discuss what's different in our intentions for 24 versus 23?

Yeah, sure. So, yeah, so that was a great example of the 10%, and we also had in other instance where we had a 4% to 5% share in similar circumstances. You know, we, as we said, we came to the market a little bit late, so vaccinations were underway, and five-dose vial created some challenges. And so as we look forward to this, you know, the benefit of having a well-informed pharmacy population and pharmacists educated, is going to help in that regard. Timely availability of product. Pre-filled syringe is going to make it much more convenient for use. And so, as we've mentioned, three critical elements here for success in 24 is early September, on-time availability of product in front of the vaccination season. BLA, which is in process right now through rolling submission. and pre-filled syringe, making it easy and convenient use for the pharmacist. We believe that these will make dramatic difference in what we see as our performance in 24.

And John, just a little bit of additional commentary, well said, but I think that 10%, Brandon, that you mentioned in a key retailer, when we say even playing field, we were still several weeks behind the competition in a five-dose vial, and we were able to achieve that in just a few weeks being on the market. So we're confident that should we execute on the plans we intend to execute upon, which include a pre-filled syringe, an on-time launch in the marketplace, being on an even playing field when it comes to the pharmacy schedulers that consumers can go in and schedule their shots, which wasn't the case in 2023 in our first year in the U.S. market. And we're encouraged by the early dialogue we had starting this past fall with retailers. And I think it was a surprise to everyone that the COVID market in the United States was over, like John said in our earlier commentary, 95% plus retail. nothing really coming out of the IDNs or the physician offices. So we've recalibrated, reorganized our internal team and our focus on retail, started those conversations in the fall. We're very encouraged by where those are headed right now, and that makes us more optimistic for it to be a much better position for success in 24. Thank you. Great. Thank you.

Thank you.

And your next question comes from the line of Mayank Mamthani from B Riley Securities. Please proceed.

Good morning, team. Thanks for taking our questions and appreciate the level of detail, including on the GAVI settlement. So maybe just on the current liabilities section, could you just break out beyond GAVI? What sort of components remain and how they contribute to the influence on going concern language and maybe just, you know, the cash outlays you expect in 2024 specifically, you could just take that down. That would be great. Then I will follow up.

Yeah, and Jim Kelly will take that, Mike, and I think we're very proud that in the past year we've made a lot of good progress on removing a significant portion of the one-time current liabilities that were a legacy of the pandemic, many of the take-or-pay contracts or other matters. I'll let Jim Kelly give you more detail on current liability breakdown, Jim.

All right. Hey, good morning, Mike. And I'm going to reference slide 21 from our presentation for listeners. And so, as Sean noted, we were able to knock down current liabilities by $825 million during 2023. As we look at the impact of the Gavi settlement, we will be in a position to reduce those liabilities by over $500 million, our balance sheet, and that's really by spreading any remaining liability over five years. We are actually exceptionally pleased on what that means in terms of predictability of cash flow and marrying that up with our core operating plan. And then with respect to liabilities at 12-31-2023, I'll reference a couple spots. I'll start with the other current liabilities category of 861. So within that, it's approximately $700 million related to GAVI. And so as just noted... over $500 million of that will move to long-term liabilities as we continue to move forward. And then the remaining components of that were there's $112 million related to the UK. We've got some other small refund liabilities related to other APA-related matters, small items. And then finally, there's a facility operating lease in there as well. So those are the components of the 861. With respect to AP and accrued, when you look at the 527, we continue to have our Fuji matter outstanding. I think folks have or heard the update. You'll see it. We are on a track towards a arbitration hearing in May. We, of course, feel strongly about the merits of our case and await that outcome. In addition to that, as we look at the remaining components of AP and accrued, You know, they're part and parcel, primarily of just the standard business operations of the company. And this is one of the things that we're exceptionally proud of. As the year has progressed, we have increasingly, I'll call it cleared the deck of many of these legacy pandemic era manufacturing taker bays. And we're moving much more to a traditional streamlined balance sheet of operating entity. So hopefully that helps with the balance sheet.

Super helpful. And then just on monetization of non-core assets, any update on the Czech manufacturing plant would be helpful. And then I have just one more follow-up for Philip.

Yeah, go ahead, Jim. You want to take the Czech plant question?

Yeah, well, certainly. And Mike, as we continue to drive towards a more lean and agile organization, supply chain is of exceptional importance to us with that question. And while certainly a difficult decision to explore this sale, we recognize that it is an area of opportunity for streamlining and improving efficiencies in our supply chain. We do anticipate leveraging this check plant this year. It is a part of our network for delivery of doses into Europe and other, I'll call it Europe-reliant markets that rely on their regulatory authorization. And so we're exceptionally thankful to that team and everything they're doing to drive product sales this fall. We are at the beginnings via working with our broker to get indications of interest It's a great plant, and I have every expectation, you know, that we will certainly have a robust interest, and we'll keep you posted on that.

Great. And just last question about the kick combo program integrating what you've learned from the COVID plus and flu monotherapy phase three trials. You know, just what should we look for in these ACIP public meetings for respiratory vaccines you know, help sort of build on the recent FDA interactions that you've had. So just if you could lay that out, that would be helpful. Thanks again for taking that question.

Yeah, I think that's kind of a tricky question. I mean, you know, we don't have any combination COVID influenza vaccines that have received ACIP approval to date, and we really don't expect it to come up before ACIP for a couple years, at the earliest. So I think we'll have to wait and see. We know there's a lot of interest from the public health authorities, both in the U.S. and globally, to reduce the number of jabs to get people protected, and they see it as a way to increase COVID vaccination because people are, in large, getting their flu vaccines. So I think we will see when it happens, but I think that, as you know, us and other people in the world are pursuing this because we think it's the right way to go forward.

Thank you.

Thank you. And your last question comes from the line of Alex Chanahan from Bank of America. Please go ahead.

Hey, guys. Good morning. Can you hear me okay?

We can. Good morning, Alex.

Great. Thanks for taking my questions. Just two quick ones from me. Maybe just to put a finer point on the BLA, I guess based on the latest FDA guidance, Is there a go-forward assumption that a formal BLA will be required to commercialize your COVID vaccine next fall in the U.S.? And maybe if you could walk us through what's going on now and remaining hurdles to get both the single dose presentation and the BLA over the finish line, that'd be great. Thanks.

John Trezino, do you want to take Alec's question?

Yes. Yeah. The BLA pathway is what we're pursuing at the moment, but as you stated, there is an availability for EUA if that's needed given timing. The most significant piece of the strategy here is to be on time for market. So whether that be under EUA or BLA will allow us to be present in front of the vaccination season, allow us to bring our pre-filter into the market for the convenience of the healthcare providers. And so I think those elements are the most significant piece. We do have a lot of work that's being conducted between our regulatory teams and our CMC teams with CBER to ensure that there's a sharing of information. Under this rolling submission, the intent of the rolling submission is to get them as much information as early as possible to streamline their review process. I can't comment upon kind of regulatory timing, but we're making significant headway in making that possible for the fall season. So, you know, look, we're confident in the data that we're providing. We're confident in that process, and we're confident in the data that we have so far to deliver against those three objectives.

Thank you, John.

Thank you.

There are no further questions at this time. I will now turn the call over to Mr. John Jacob. Thank you. Please proceed.

Thank you, everyone, for joining us today. We wish you a great close to your week.

Thank you. That does conclude our conference for today. Thank you all for participating. You may all disconnect.