Novavax, Inc.

Good morning and welcome to Novavax first quarter 2024 financial results and operational highlights conference call. All lines will be in a lesson 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 one on your touchtone phone. To withdraw a question, please press star two. Please note, this event is being recorded. I would now 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 first quarter 2024 financial results and operational highlights. 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, statements related to potential royalties and milestones, 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 risk and uncertainties that could cause actual results to differ materially from those projected in such statement. Additional information regarding these factors appears under the heading Cautionary Note 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 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 uptake, update, or revise any of these statements. Please turn to slide three. Joining me today is John Jacobs, our President and CEO, who will discuss our agreement with Sanofi announced this morning. Additionally, John Chesino, our President and Chief Operating Officer, will provide an update on our commercial activities. And Dr. Philip DeValsky, 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 and implications of the Sanofi partnership. 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 today. Today we enter a new and exciting chapter in the history of Novavax. This morning we announced that we have signed a global co-development and co-commercialization agreement with Sanofi. This agreement is both material and strategically important for Novavax. It is a further validation of our technology platform and provides significant opportunity to drive value creation and benefit global public health. The agreement represents a multi-billion dollar opportunity over time for Novavax. Via this agreement, we generate significant near-term cash flow. a strength and balance sheet, as well as the opportunity to strategically pivot to a new lean operating model, focusing more on our strengths in research and development and pipeline expansion to accelerate our growth and generate long-term value for our shareholders. First, the upfront and near-term milestones associated with this agreement are anticipated to equate to approximately $1.3 billion in cash of which approximately half is expected within 10 days of signing. These cash payments provide us with a significant capital infusion to help us manage our business. And this in turn also enables us to remove the going concern status for Novavax. Second, beginning in 2025, it allows us to leverage one of the largest proven global leaders in the vaccine business to commercialize new vaccine in the U.S., U.K., and Europe initially, and worldwide over time, affording hundreds of millions of dollars in potential cost synergies, enabling us to drive toward a new, more lean operating model with total cost anticipated to be well below our prior stated cost reduction targets. And we expect our royalties and milestones from Sanofi's efforts with Nuvaxavid to exceed the value of what our own efforts might have yielded if we had kept the product ourselves exclusively. By licensing Sanofi to use our new vaxavid to develop their own combination flu and COVID products, and to use MatrixM as a component of other vaccines across their portfolio, we expect to realize substantial additional royalties and milestones valued potentially in the billions of dollars driven by Sanofi's product development and commercialization efforts over the years and decades to come. The royalties and milestones associated with potential new vaccines Sanofi may develop using MatrixM, as well as those royalties and milestones anticipated from sales of our COVID-19 vaccine and the development of Sanofi's combination flu COVID and other potential combination vaccines, should help us to sustain cash flow as we invest in our own R&D in an efficient and thoughtful manner for years to come. In fact, We have done all of this while retaining the ability to broaden and accelerate development of our own wholly owned pipeline. This includes the modification of our planned 2024 pivotal trial for our combination flu and COVID vaccine to now also include the potential to yield pivotal results for our standalone flu vaccine. and we now anticipate readouts for both the combination and our standalone flu vaccine in mid-2025. In addition to our late-stage kick and flu standalone programs, we will now be able to assess and contemplate the addition of some new early-stage programs to our pipeline and do so within the cost structure of a new lean operating model. For both our late-stage kick and standalone flu programs and any early-stage programs we may choose to add to our pipeline in the coming quarters, we will be pragmatic, shareholder-focused, and market-aware about how to bring these assets forward. For example, through partnering, out-licensing, co-development, co-commercialization, or commercializing on our own. And we would consider commercializing on our own only for the right asset and with the benefit of our learnings from the COVID experience. The key here is that we intend to have multiple organic opportunities from our own pipeline with optionality on how we decide to optimize value from them. We look forward to providing additional details and updates on our new pipeline and future growth strategy for Novavax in the coming months as we operationalize our partnership with Sanofi. And finally, this transaction further validates both Novavax's product development capability and the extraordinary value of our MatrixM adjuvant technology, potentially enhancing our future licensing and business development opportunities across our tech platform. In fact, we intend, as part of our go-forward strategy, to seek additional business development opportunities with our organic pipeline, new pipeline assets we intend to add, and our MatrixM and nanoparticle technology platforms. So, in summary, this transaction capitalizes our current business, seeks to increase our future anticipated value from Nuvaxivid, while enabling us to significantly reduce our operating costs and complexity, creates a future stream of royalties and milestones from multiple potential new products to be developed by Sanofi, broadens and accelerates our own development pipeline and enhances our future deal-making capabilities, leveraging MatrixM, our late and early stage pipeline, and our product development capabilities. Jim Kelly will now walk you through the financial terms. Jim?

Thank you, John. Please turn to slide number five. This new agreement with Sanofi provides for a multi-billion dollar potential across upfronts, equity investment, milestone, and royalties. The anticipated present value of the royalties on Sanofi's Novavaxivid and Kix sales are expected to be the largest individual component of value in this transaction. The COVID-19 related terms include the potential for up to approximately $1.3 billion in cash payments and equity investments. plus Novavax is eligible to receive tiered royalties on related product sales. In addition, we're eligible to receive up to $200 million in milestones plus ongoing royalties for each new vaccine developed utilizing Novavax's MatrixM adjuvant. For example, if Sanofi develops five products with our MatrixM, each with a billion in sales, This would represent hundreds of millions in royalties per year, plus up to $1 billion in one-time milestones. During the second quarter of 2024, the initial cash payments include the $500 million upfront and the approximately $70 million equity investment in Novex stock. Near-term Novavax evade COVID-19 milestones of $350 million and kick milestones of another $350 million should provide important future cash flow to the company. In addition, Novavax is eligible to receive tiered royalties on net sales in each of the COVID-19 related product categories that enable Novavax's meaningful participation in future economics from the current and future products under this agreement. Please turn to slide number six. New vaccines developed with Matrix M by Sanofi create a broad opportunity to advance this technology and provide Novavax with multiple revenue generation sources. Novavax will support Sanofi as it prepares to advance all programs associated with this agreement, and Novavax will be eligible for cost reimbursement across a host of spend categories. John will now walk you through the first quarter commentary. John.

Thank you, Jim. Please turn to slide seven. It took a lot of hard work over the past 15 months to get here and a determined focus on the strategic priorities we identified when I first joined the company to better position Novavax to execute significant business development opportunities like this partnership with Sanofi. In fact, since early 2023, the management team and I have been making significant progress on our three priorities. Priority one, delivering an updated product for the fall vaccination season. Priority two, reducing our rate of spend, managing our cash flow, and evolving our scale and structure. And finally, priority three, leveraging our technology platform, our capabilities, and our assets to drive additional value beyond Nuvaxavit alone. Importantly, we had to make significant progress on the first two priorities in order to optimize the potential of our third priority. And over the last 15 months, by strengthening our balance sheet, reducing significant one-time legacy liabilities, including Gavi, and proving that we could streamline our strain selection process and update our vaccine to align with regulatory requirements, we put Novavax in a position to be able to execute meaningful business development agreements. The Santa Fe Agreement is strategically important for our company, as it enables a pivot to a new growth strategy, a new lean operating model, and a new chapter in the history of Novavax. With that in mind, we have made appropriate adjustments to our priorities for the remainder of 2024. For the remainder of this year, we will be focusing on the following. Number one, prioritizing the successful transition of our new partnership with Sanofi. Number two, continuing to expand and diversify organic opportunities and create additional value from our technology platform. Three, preparing to initiate an additional cost reduction program to reduce 2025 R&D plus SG&A expenses net of Sanofi cost reimbursement to below $500 million. And number four, delivering an updated product for the 24-25 fall vaccination season. As our strategy, vision, and new expanded pipeline for the company evolve, we intend to share more with you about the new path forward for Novavax. We will spend the next several months analyzing and crystallizing our future pipeline and our strategic focus, with the goal of sharing our updated plans for Novavax in more detail towards the end of this year. And now, I would like to hand it over 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 eight. We are very excited about the potential of the Sanofi agreement for our business. And as John mentioned, our first priority is operationalizing the agreement to enable Sanofi to commence co-commercialization activities starting January 1st of next year. This collaboration agreement with Sanofi is a validation of the significant investment made in the Novex technology platform to date and of the dedicated and passionate effort of the many people that have contributed along the way. While we are steadfast in our belief that our COVID vaccine is the best one approved for use, it has been challenging to transition from being an innovator focused on developing vaccines for infectious diseases to being a commercial business focused on operational execution. Now, partnered with Sanofi, we see very clearly the opportunity to leverage their brand and global infrastructure for the benefit of public health, revenue generation, and increased return to our investors. The burden of disease for COVID remains clear and well documented. Vaccination continues to be recommended as the best defense for the prevention of severe disease, hospitalization, and death. Advisory committees like the CDC, ACIP, and other health policy bodies around the globe continue to recognize this need. The COVID virus for now continues to circulate throughout the year, but with concentrated disease burden during the typical winter respiratory disease season from late fall to early spring. The ongoing need for both a COVID and influenza annual seasonal vaccination leads to the public health benefit for a single combination vaccine. A single visit and vaccination creates a convenience that we believe will translate into improved vaccination rates especially in older adults who are most at risk. Sanofi is the well-recognized leader in influenza vaccines, and this collaboration agreement creates the opportunity for a COVID influenza combination vaccine with their existing licensed product. In parallel with preparing for Sanofi's 25 commercialization activities, For the upcoming 24-25 season, we intend to support our key markets of the U.S., Europe, and U.K., but to do so in an increasingly streamlined, targeted, and cost-efficient manner during our last season commercializing on our own. Recently, both WHO and EMA recommended the use of a monovalent JN1 lineage COVID-19 vaccine. Novavax plans to be ready to deliver our JN1 protein-based vaccine globally this fall, and we have been developing and manufacturing this vaccine candidate as we anticipate the VRBPAC meeting for U.S. strain selection on June 5th. Please turn to slide nine. In the U.S., we intend to build upon our efforts from the 23 season by offering our vaccine in a more competitive, single-dose, pre-filled syringe presentation, and we intend to have product at distribution centers in the U.S. no later than mid-August and ready for the season start in early September pending FDA release. We expect that the CDC and competitors will do preseason disease awareness campaigns to drive vaccination rates, and we will focus our efforts on building upon our increased healthcare provider awareness of Novavax, which we achieved last season, and we intend to focus our marketing efforts and investment on the retail and 60-plus age group where we foresee the highest potential for conversion to Novavax's vaccine given their historically higher vaccination rates. In retail, we are having encouraging discussions which increase our optimism that we will have improved retail access for the season. As John mentioned, we have completed the submission of our BLA. While we are pleased with this progress, we have decided in consultation with the FDA to seek emergency use authorization for our updated vaccine targeting JN1 in order to be available by early September at the start of the season in a pre-filled syringe. This pathway has been mapped out together with the FDA to enable an expedited review timeframe and a more straightforward review process. This effort will occur in parallel with the BLA review process with the goal of having the potential for full BLA approval sometime this year. Though the BLA is indeed important, we intend to achieve BLA approval. The most important factors for a successful campaign are a timely launch at the beginning of the season, broad availability in retail, high levels of awareness, which we already have from last year, and a competitive product presentation and a pre-filled syringe. We believe we can more effectively achieve these parameters this year by choosing the EUA option in parallel to the BLA pathway. Please turn to slide 10. With our pandemic era APA complete in Europe, we are entering a commercial and tender market for the first time in the region and are prioritizing our goal of timely delivery of an updated COVID-19 vaccine in several key European countries. In our major APA markets in Australia, New Zealand, and Canada, we are seeing a more formal, non-pandemic consumer demand pattern, and we are seeking to optimize the value of these contracts while doing what is in the best interest of public health for these customers. We are in discussions regarding potential adjustments to dose volumes, pricing per dose, and timing of delivery schedules that should better reflect market demand, and Where we can, we are seeking cash prepayment in exchange for moving to future delivery of doses. Due to significant reductions in demand since the pandemic, awaiting regulatory approvals, and ongoing contract renegotiations, we are lowering total revenue guidance for 2024. Jim will discuss guidance on revenue and expenses in more detail shortly. Though We have remaining value on our APAs and intend to optimize the value where we can. Over the next two to three years, we are moving from a pandemic-based APA period and toward a fully normalized vaccine market. We look forward to working with our new partner to optimize our commercial opportunity. Now, to discuss our combination in influenza vaccines and other key R&D updates, I want to hand the call to Philip.

Thanks, John. Please turn to slide 12. Today, I want to cover several topics. First, I want to share data on our J and 1 candidate before I touch base on our revised kick and influenza phase 3 plans. Then I want to show you some preclinical data on our optimized RZ vaccine candidate that we're evaluating for future development. Finally, I want to introduce you to two innovative expansions of our technology, mucosal vaccination and the development of a novel nanoparticle format, which we are exploring as an avian H5N1 pandemic vaccine. As John mentioned, these innovations are examples of work we've been doing over the past year to generate additional value from our technology platform. Please turn to slide 13 and 14. The World Health Organization and EMA have recommended the JN1 lineage vaccines for the 24-25 season. This is a variant we've previously advanced into commercial development. Here I'm showing neutralizing responses in non-human primates that were vaccinated with XVB15 vaccine and boosted with a single dose of JN1. On the left-hand side, you can see the responses to JN1 variants were low prior to boosting. On the right-hand side, the responses to JN1 and JN1 drift variants are robust following a boost. These data provide us confidence our vaccine has utility against the currently circulating strains, such as KP2, as well as potentially future-proofing our vaccine against other variants that evolved from J1. The strain selection will be confirmed by VRBPAC on June 5th, and we plan on submitting our strain change filing shortly after that. Okay, let's go to slide 15 and 16. We've modified our plans for the upcoming phase three study to include the valuation of a standalone seasonal influenza vaccine in addition to our COVID influenza combination vaccine in adults greater than six years of age. As depicted on the right-hand side of the slide, this is planned to be an immunologic non-inferiority superiority study with our vaccine compared to age-recommended licensed comparators. Although we have previously received supportive regulatory guidance for the standalone influenza program, we will reconfirm the acceptability of this design for the flu influenza portion of the study. This study is still on track for the second half of this year, and data for decision-making will be available in the mid-25. Okay, let's move to slide 17 and 18. We have optimized our RCF nanoparticle vaccine antigen with the specific goal of maximizing the breadth of neutralizing responses. Here I'm showing the immune responses in mice vaccinated with our RSV antigen with Matrix compared to the licensed GSK vaccine with the ASO1e adjuvant. We use competitive binning against a panel of monoclonal antibodies known to bind neutralizing epitopes, including sites 0, 2, 4, 5, and P27. On the left-hand side are binning results on our antigen, and the right-hand side are binning results on the GSK antigen. In both cases, a favorable breadth of response is demonstrated for our vaccine. It's interesting to note on the right-hand panel that the P27 neutralizing sequence is not present on the GSK antigen. Okay, let's go to slide 19 and look at RSV neutralizing responses. Here I'm showing new responses for RSV-A on the left and RSV-B on the right. We observed a six-fold increase for RSV-A compared to the licensed GSK vaccine, which represents a difference of titer from 3,700 to over 23,000. And for RSV-B, a titer difference from 440 to over 1,500. This antigen can be used as a standalone vaccine or as part of a broader combination vaccine program. Based on our previous clinical experience with a related construct, we are evaluating whether additional preclinical or toxicology studies are required. Partnering discussions for this antigen are ongoing. Okay, please shift to slide 20 and 21 to look at our early progress in expanding our core technology into mucosal vaccinations. We've developed an intranasal formulation that includes our PSAD nanoparticle antigen with our matrix and matchment. In this experiment, we explored this technology with our COVID antigen. We primed these mice with bivalent vaccine containing prototype NbA5 and boosted them with intramuscular or intranasal XGB15 vaccine formulations. On the far left side, you can see the initial priming sequence induces no XGB15-specific mucosal IgA antibody. In the middle, after intramuscular boosting, negligible mucosal IgA was detected. However, when the mice were boosted with intranasal vaccine, there was a very large IgA signal. This is important because mucosal IgA is the first line of defense against respiratory viruses and has implications for prevention of infection and potentially impacting transmission. So let's move to slide 22 for additional characterization of the immune response. Here we're displaying XBB15 nude responses in the blood on the left and mucosal neutralizing responses on the right. On the left-hand side, unsurprisingly, there was little evidence of serum XBB15 neutralizing response after priming with bivalent BA5 vaccine. However, XBB15 responses were increased 27-fold with intramuscular boosting, and surprisingly, intranasal vaccination boosted the central responses over 10-fold. When we looked at mucosal newts on the right-hand panel, once again, there was no response after priming, but a profound response was seen after intranasal boosting, supporting the hypothesis this approach may have utility in blocking infections. We believe the small rise in mucosal neutralizing responses following intramuscular boosting represents antibody transit from the blood compartment. These results are being prepared for publication, and we are evaluating this approach with different antigens in different preclinical models. If these findings are validated in the clinic, this opens the door for needle-free vaccination and the potential to block infection and potentially transmission, specifically for respiratory and gastrointestinal infections whose point of entry is through the mucosa. Okay, please turn to slide 23 and 24 to look at the development of matrix as a core for a new class of nanoparticles. We've identified transmembrane domains that serve as molecular anchors and can link antigens directly into the matrix adjuvant. On the left-hand image shows a model and an electron photomicrograph of a classic PSAD nanoparticle. You can see the antigens decorating the polysorbate core. On the right-hand side, we have the novel matrix nanoparticle, where the antigens shown in blue are anchored directly into the vertices of the matrix structure. This model is confirmed by the EM image on the right. This new format is larger than the PSAD nanoparticle, and we hypothesize this may facilitate antigen recognition and phagocytosis. This also increases antigen density with up to 40 to 60 copies per nanoparticle, which may increase activation of antigen processing cells. And finally, linking the antigen and adjuvant assures co-delivery into a single endosome in antigen processing cells and may increase T cell responses. And this format is amenable to intramuscular and intranasal administration. Okay, let's go to slide 25 and look how this performs in non-human primates. In this experiment, we used a highly pathogenic avian H5N1-2344B antigen, specifically American Wigeon, as a model antigen. This is the influenza clade that's devastating wild and domestic birds globally and has spread into our mammalian food chain. Here we're primed rhesus macaques with our quadrivalent seasonal vaccine to more closely mimic the immunologic background in humans. We then boosted them with a single dose of H5N1 matrix nanoparticle vaccine intramuscularly or intranasally and measured neutralizing responses. On the left-hand side, a single 60-microgram intramuscular dose boosts H5N1 nude responses to a very high level in all animals. On the right, you can see a single intranasal dose results in 100% seroconversion with a geometric mean titer of 263. I've marked a level of 1 to 40, which has been used in the literature as a level relevant for protection. Single-dose pandemic influenza vaccination has been elusive, so certainly these results caught our attention. If these results are validated in the clinic, it could lead to a game-changing approach because a single-dose vaccination in a pandemic setting would be much easier to deploy and could have a huge public health impact. We're in discussion with government agencies on the best way to advance these candidates into the clinic so we can evaluate them and this approach can be validated. Okay, I covered a lot of territory today. As a summary, we're in commercial production of JN1 variant vaccine, which has shown good results in preclinical evaluation, and our goal is to have this product available at the beginning of the vaccination season. We've expanded our phase 3 study to include standalone influenza, in addition to our combination vaccine and the studies on track to begin the second half of this year, consistent with this original timeline. We've optimized our RSV construct, and we're evaluating additional work that needs to be done before we decide on advancing the candidate into future development. Finally, we've developed two different derivatives of our core technology, the ability to vaccinate intranasally with adjuvanted PSAD nanoparticles, which in preclinical models induce mucosal immune response while boosting serum neutralizing responses. And finally, we've identified molecular anchors, which can attach antigen directly onto matrix. And in non-human primates, prior to the seasonal vaccine, this has resulted in unprecedented immune response with a single dose for H5 pandemic vaccine. Okay, let me hand it over to Jim.

All right, hey, thank you, Philip. Please turn to slides 26 and 27. We're focused on improving the financial health and performance of Novavax to enable long-term value creation. Today, we announced the strategically important Sanofi Agreement and have removed our going concern disclosure that evidence this progress. I will now share a few of the key themes for the first quarter of 2024 and a look towards full year 2024 and beyond. For the first quarter of 2024, NOVAX recorded total revenue of $94 million and significantly improved our balance sheet profile by reducing current liabilities by $831 million. The Gavi and Fujifilm settlements continue our efforts to address legacy contractual matters. As we continue to transform Novavax into a more lean and agile organization, we reduced our Q1 2024 R&D and SDNA by 50% compared to prior year. As we look to 2024, we are updating our targeted guidance for R&D and SDNA expenses of between $700 and $750 million as we continue to resize our organization. For 2025, Novavax is prepared to initiate an additional cost reduction program to reduce R&D plus SG&A expenses to below $500 million, a portion of which we expect to be reimbursed by Sanofi under today's announced agreement. We ended the first quarter of 2024 with cash and accounts receivable of $517 million and and have over 600 million in potential dose deliveries under our APAs over the next three years. With the Santa Fe agreement announced today, we have approximately 570 million in cash payments for the second quarter of 2024 that further improve our financial position. Please turn to slide 28. Turning to a more detailed view of our first quarter 2024 financial results, where I'll provide commentary with specific focus on revenue, COGS, and combined R&D and SDNA. For the first quarter of 2024, we recorded total revenue of $94 million compared to $81 million in the same period of 2023. Our product sales of 82 million in the first quarter of 2024 were primarily related to the EPA deliveries to Europe and reflect the successful completion of the European EPA agreement. Royalties and other of 12 million for the first quarter of 2024 include license fees and Matrix-M reimbursement under our agreements with Takeda and SK Biosciences. Our costs of sales for the first quarter of 2024 were $59 million as compared to $34 million in the same period of 2023. These periods include $15 million and $25 million respectively related to excess, obsolete, or expired inventory, losses on firm purchase commitments, and unutilized manufacturing capacity. As previously noted, for the first quarter of 2024, Novavax's R&D plus SG&A of $175 million reflects a 50% and $180 million reduction from the same period in 2023. Please turn to slide 29. We're committed to creating a more lean and agile organization to align the company with our market opportunity. To advance that goal, over the past year we've reduced our workforce by over 30% compared to the first quarter of 2023. For 2024 we're updating our targeted combined R&D and SGN expense guidance to $700 to $750 million for our prior stated target of $700 to $800 million as we continue to push to find savings in our cost structure. Novavax is prepared to initiate an additional cost reduction program to reduce 2025 R&D and SGA expenses to below $500 million, as noted, a portion of which is expected to be reimbursed by Sanofi under the agreement. In addition, we're prioritizing improvements to long-term supply chain efficiency, including exploring the sale of our Czech Republic manufacturing facilities. Please turn to slide 30, where I'd like to discuss progress on our balance sheet and liability management. Since December 31st, 2022, we have reduced the company's current liabilities by $1.7 billion, including an additional $831 million reduction in the first quarter of 2024, primarily driven by the Gavi and Fuji settlements. Please turn to slide 31. Now turning to financial guidance with an emphasis on our combined revenue and initial Santa Fe payments that total 970 million to 1,170,000,000. This reflects a material improvement to our sources of cash flow for 2024. Beginning with the 570 million of initial payments under the Santa Fe agreement, they'll be received in the second quarter of 2024 and reflect just the beginning. of a potential multi-billion economics across upfronts, equity investments, milestones, and royalties under this agreement. For 2024, we are updating our total revenue and now expect to achieve total revenue of 400 million to 600 million. Our projected total revenue includes 150 to 250 million of APA sales based on expected dose delivery schedules and non-APA revenue of $250 to $350 million for a combination of our commercial market product sales plus royalties and other revenues from our partner-related activities. The $400 million reduction to our full-year 2024 expected product sales guidance reflects the following. $100 million from the Canada APA as we await the Canadian order for 2024. It's our intent to add this back when we have clarity on this order. 250 related to Australia, New Zealand, and Israel APAs as we work with those countries on revised dose delivery schedules for later periods and, where possible, are seeking potential prepayments in 2024. Importantly, these updates reflect our goal of working in partnership with these key customers to adjust dose delivery schedules and volumes to better meet current demand, while optimizing the remaining contract value through their completion. And finally, $50 million from EU commercial sales as we reduce commercial investments in select markets for the 2024-25 vaccination season post the Sanofi Agreement. 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, and thank you, everyone, for joining us today. Before we take your questions, I would like to reiterate our key priorities for the remainder of this year. Priority one, prioritizing the successful transition of our new partnership with Sanofi. Priority two, continuing to expand and diversify our organic opportunities and create additional value via our technology platform. Priority three, preparing to initiate an additional cost reduction program to reduce 2025 R&D plus SG&A expenses net of Sanofi cost reimbursement to below $500 million. And priority four, delivering our updated product for the 24-25 fall vaccination season. I would now like to turn the call over to our operator for Q&A. Operator?

Thank you. We'll now begin the question and answer session. To ask a question, you may press star, then the number one on your touchtone phone. If you're using a speakerphone, please pick up your headset before pressing any keys. To withdraw your question, please press star two. One moment, please, for your first question. Your first question comes from Roger Song from Jefferies. Please go ahead.

Thank you for taking our question. Congrats for the Sanofi deal. Thank you, Roger. A couple questions from us, maybe start from the Sanofi deal. Can you give us a little bit of clarity around the reimbursement for the co-development commercial and regulatory costs? particularly helpful, you already gave us the guidance for 2024 and 2025. How should we think about the cost of moving forward after 2025? Thank you.

Yeah, Roger. Good question, Roger. I'll have Jim Kelly address that, but we believe the deal affords us hundreds of millions of dollars in potential cost synergy. But Jim, why don't you take the question?

Yeah, certainly. And thank you, Roger. You know, the categories of cost reimbursement under this agreement include R&D activities that NOVAX may do under the joint budget to support the COVID-19 program from 2025 forward. And that includes, for example, the pediatric studies that are ongoing and select medical affair activities. An additional category of reimbursement will include activities related to the technology transfer. This is going to be exceptionally important as we support Sanofi as they ramp up their commercial capabilities. In addition to that, we are entering into supply agreements for both COVID-19 supply in the coming years, plus for specifically Matrix-M adjuvant. And so we're eligible for reimbursement across all those. As I look specifically, and I'll put the supply to the side, and I look to potential reimbursement in 2025 with respect to R&D activities and TRIC transfer, we believe that reimbursement amount could be up to $100 million. And so think 75 to 100 million. And then, as I described, driving our R&D plus SG&A to below 500, you then subtract that reimbursement. And now we're talking about, hey, we're targeting 400 million or so on a go-forward basis. You're watching the continued evolution of our cost structure. You know we're nimble. We know we act with urgency. This is our path.

Excellent. That's very, very helpful. Thank you for that. And then in terms of the milestone payment, I see you lay out the milestone payment for the COVID side. Just curious about the COVID flu combination side, how much near-term milestone we should look at? All those are back-ended milestones.

Go ahead, Jim.

Yeah, listen, we're exceptionally excited by the potential for Sanford to advance the combination of our COVID vaccine along with their market-leading flu vaccine. And, you know, those milestones, the $350 million are, in fact, across both product development and approval milestones. So, you know, non-sales-based but rather related to, you know, the near-term development and approval of those programs. We're not offering additional detail at this time, but it is certainly a priority of the agreement.

And Roger, it's John. Just to build upon Jim's response to your good question, I want to make sure that everyone understands that this deal is not a $1.2 or $1.3 billion deal. This is a multi-billion dollar deal. The $1.3 billion represents the initial upfront the $70 million equity investment in the company and the near-term milestones associated with our activities related to Nuvaxavid and Sanofi developing their own combo vaccine. But importantly, the majority of what we see as the future value of this deal, according to our estimates, come from the anticipated royalties that will be ongoing from Sanofi's ability to sell our COVID vaccine and their own combination or combination vaccines, plural, using our Nuvaxavid And through the deal, they have the opportunity to develop their own flu COVID combination, but also other combination products, including additional antigens, each of which we get royalties for. And in addition, there's another component beyond that, which is their access to our MatrixM adjuvant platform, which allows them to develop multiple products using MatrixM. Each of the products they may develop using our adjuvant technology platform has up to $200 million of potential one-time milestones, as well as ongoing royalties, a flat royalty rate for years to come. When you look at the entirety of the agreement between the upfront payments and the near-term milestones, which are the $1.3 billion that we noted, including the equity investment, and then you consider the immensity of the potential royalties when we partner with the power of a company like Sanofi that's a world leader in vaccine development and commercialization with a leading flu franchise. plus what they could do with our MatrixM over time. We truly believe this is a multi-billion dollar opportunity. So I want to make sure people don't misunderstand the potential of this partnership and what it might do for the future of Novavax and for global public health.

Excellent. That's very helpful. Yeah, I understand the milestone payment for the COVID combination is contingent upon the development approval, not the sales milestone payment. Got it. Okay. And then maybe just lastly for the existing APA, understanding you are reducing the APA to 600 million, just want to confirm that's already posted negotiation with different parties of your partners compared to the last time, you know, maybe around a billion dollar. And then, and the second part of the question is for the outstanding APA, given the partnership with Sanofi, who's going to book these sales, or NOAA actually will only get the royalty from the APA. Thank you.

All right. So, I'm looking to John Fusino maybe talk a little bit about the status of our APAs, but I'll just kind of reiterate kind of bridging what the pieces to the change in Our revenue guidance are emphasizing that specifically the 350 million related to APAs, you know, we're continuing active dialogue with these APAs have been great partners. The pieces there were we took 100 million related to Canada and we've placed it to the side while we await that order in time to not have it in our guidance while we await their order for the upcoming season. Our intent is, of course, to add it back once we have clarity. And then when it comes to the 250 million across Australia, New Zealand, and Israel, 200 of which is specific to Australia, there are ongoing regulatory matters related to Australia. I'll let John hit that and perhaps characterize some of the dialogue.

Yeah, and Roger, just to build upon Jim's answer, I think you asked about the 600 total go forward. And I think Jim notes in his commentary that that did not include deferred revenue. from Canadian prepayments in the past. So you might have been looking at that and thinking it could have been higher, but we excluded deferred revenue, which is an accounting matter, and you looked at the 600. I believe you asked about, and we can have Jim further clarify if needed, Roger, you also asked about what happens, if I heard you correctly, as the APAs wind down when it relates to Sanofi. And right now in our commentary, you heard us say that Sanofi will take commercialization on in 2025 for the U.S., Europe, U.K., and then over time, the rest of the globe. So we're maintaining responsibility to manage these APAs through their fruition in 2026, and we take that responsibility seriously and intend to bring forward the majority of value in the remaining APAs, albeit it may be spread out over time to better meet global market demand. But our future is not about the APA business. So as those APAs wind down, it's the final chapter in the legacy of the pandemic. We move to a bright and exciting future for Novavax. And when I first got here, Roger, the APA value in our business was 100% of our business opportunity. It was the business model. It was over $2 billion. We've pulled down roughly two-thirds of that value in the last 15 months. We have roughly a third left. We intend to optimize that between now and the end of 2026. And we're looking forward to a bright future. So as those APAs wind down, it's our intention to have those markets offered to Sanofi so they can begin commercializing our new vaxavid vaccine and the other products they may develop in those markets as APAs wrap up. I hope that answers your question.

Yes, it does. Thank you. Yeah, that's it. That's it from us. Thank you. Congrats again.

Your next question comes from Herrick Joseph from JP Morgan. Go ahead.

Oh, thanks. Good morning. And some of you have my congrats on the deal. What I'm hoping to do is just get a better, a bit of a better understanding of the strategic positioning of your COVID flu program versus Sanofi's COVID flu ambitions, right? Would you be targeting Sanofi? different market segments. And I'm also curious to know whether, you know, you see opportunities for your own blue standalone. And maybe as a follow up to that, can you talk about sort of what works no fee has done on the feasibility of a new vaccinated blue zone quad combination or his own HD combo? Thanks.

Eric, for competitive reasons, we're not going to get into details on specific strategies around our pipeline assets. But what I can say to address your question is we're very excited that we've been able to double our shots on goal in our late stage program by adjusting our original kick clinical trial, as Philip described today, to include a standalone flu vaccine. And Philip shared some exciting data on H5N1 flu and has previously shared positive immunogenicity and other data results from our prior flu work. So we're very excited that we have two potentially registration worthy vaccine assets this time next year should we succeed with that clinical program. And as I said before, our strategy is to consider optionality on how we would monetize those and bring them forward should we have success. And that could include additional partnering and business development, out licensing to other organizations who would like to see those vaccines, creating additional deals of this nature that we have with Sanofi, or deciding to go it alone. What we'll do is allow the data to feed that strategy, Eric, to make sure we see how those cards overturn by mid-next year, and that will guide further strategic thinking on the assets. What we're excited about is the value of our technology platform and that the Sanofi deal has further validated the immense value that MatrixM and our nanoparticle technology have to offer, and we intend to keep optimizing that. And in addition, what you see is we're expanding our portfolio with some early stage work, exploring RSV, et cetera. So hopefully that addresses your question. I'd rather not comment on what Sanofi may be thinking or why they came to the conclusion that this is such an exciting platform to partner with, but we're not surprised because we know the value our technology can offer, and I'll leave it there for now. Thank you.

Great. Thanks for the call.

Your next question comes from Alec Stranahan from Bank of America. Please go ahead.

Hey, guys. Congrats on the deal. This is John, mom for Alec. Probably just some clarification questions for us. I think the first one, for the $350 million in milestones for activities related to new VACs of it, what are the potential milestones in the upcoming, like, a year or two that we could see for your company to receive. So that's the first question. And secondly, for marketing and branding in terms of future commercialization of Sanofi branded products. So like, how would that work? Could you maybe shed some light on the branding message in the future? Thanks.

John T., do you want to take that question?

Yeah, I'll take the second one first, right, which is talking about what the opportunity is in the marketplace. So as John said, we can't comment on exactly what the marketing and sales strategies are, but I think it's good to understand what the marketplace looks like today and how the combination of our COVID vaccine with their flu vaccine could have profound opportunities in the market, as we said, both from a public health standpoint and revenue generation. Understanding that Sanofi is the market leader in flu vaccinations in the U.S. around the globe, There's a clear need for a combination vaccine. Any market assessment for a combo vaccine would include what we refer to as the cannibalization of the flu market, the leveraging of the flu market for the benefit of uptake of COVID vaccination in that combination format. So there's a significant opportunity here with the market leader to identify what that opportunity is and to expand vaccination rates for both COVID and flu by virtue of the combo of vaccine. As we're building towards that, obviously, their position in the marketplace from a co-promote, co-commercialization standpoint would be critical in helping us leverage the Santa Fe brand, leverage their infrastructure, leverage their deep reach into the vaccine market, and their confidence in the strength and safety and efficacy of that product, I think, says volumes about what the potential is. And we see much more significant market share in vaccination rate increase as a result of this relationship.

And then I'm happy to take the first question regarding the breakdown and timing of the 350 million in future milestones. So on slide number five, we mapped it out. You know, the expectation is that, you know, these are all near-term activities over the next 12 to 24 months. Certainly the COVID-19 manufacturing tech transfer may take a little bit longer as we look at these, but the other ones are certainly near-term. We're not at this time providing More timing on that. Beyond that, you know, they're all important strategic activities that are priorities.

And, Eric, as I said earlier, the majority of value we anticipate from this deal goes well beyond the initial $1.2 or $1.3 billion to ongoing royalties of anticipated sales that Sanofi will have for Arnavaxavid and their own combination product. And then in addition to that, anything they may develop with MatrixM, each individual new MatrixM product eligible for up to $200 million in additional one-time milestones and ongoing flat royalty. So I think it's very important to understand the different pieces of value in this deal and why we believe it has the potential to be a multibillion-dollar deal for Novavax.

Thank you.

And your next question comes from Mayank Mantani from B-Radio Securities. Please go ahead.

Good morning, team. Congrats on this landmark deal, and thanks for taking our question. Thank you, Mayank. Good morning. Yeah, good morning. So glad to hear the BLA is already submitted. Is it a PDUFA date granted yet? That's my quick follow up to the prior question. And then with everything in place now, you know, the BLA plan and the FDA, EUA, you know, some pharmacy contracting, preferred syringe looks like on plan. I was just curious in your non-APA revenue guidance, which I assume is royalty revenue focused. Could you comment on what that market share assumption might be in that 250 to 350 million that you have in a footnote? And then I have a couple of follow-ups.

Yeah, John, why don't you take the BLA question first?

Yeah, Mike, there's a couple of pieces to the question there. So first of all, as you well know, we have been intending and have accomplished, in fact, the submission of the BLA to FDA. But there was a couple of steps involved with that. So it was the initial approval of the BLA for the XBB strain that was under emergency use authorization last year. We were then going to be adding the pre-filled syringe and the strain change into that BLA submission and having that all tied up in a nice bow in front of the season, right? While that strategy was communicated to the FDA and it was very thoughtful about the ability for that to get us to the market on time, reassessing that in collaboration and conversations with FDA, we felt like if we focused on the strain change and we focused on the pre-filled syringe, authorization, that the EUA pathway would be the best way to do that instead of the more formal BLA path. So as I said in the remarks, we are going to be pursuing in a parallel path. This parallel pathway ensures our timeliness to the marketplace. And I think that's most critical. The product is authorized for use. There are no restrictions on how we communicate the benefits of this vaccine. We're going to have inventory in our 3PL distribution center in mid-August. As soon as authorization is granted, we're going to be in the market, and I think that's the most critical component of that strategy.

And, Mike, as we said in our comments, and I'll hand it back to John on your market share question, and maybe, John, you could take that as the potential we see in the U.S. marketplace, assuming we are indeed staying on track, which we are now, with our pre-filled syringe and a timely launch this season. Because, Mike, we're excited about the opportunity to perform significantly better than we did last season in the U.S. market. But let's address the PDUFA date question. We will get a PDUFA date from FDA once they formally accept our file, we have completed that file and are waiting for that formal acceptance. Sean, go ahead on the market share question.

Yes, so the yes, the Purdue date question is part of yet another element of why the timing for EUA and BLA was kind of critical balancing act here. While the FDA could act more quickly if they so desired, the PDUFA date is not the ultimate. They don't have to fill to the PDUFA date, but it just streamlined the activities in a significant way. As far as market share is concerned, you know, again, the critical elements, the new strain, pre-filled syringe, on time to the market, awareness of Novavax, access, so awareness and access to critical elements, We think that there's a significant opportunity in the U.S. market, and we're going to see a dramatic shift from where we were last year. As you recall, in the 23 season, we were late to the market by almost a full four to five weeks, and almost 50% of the COVID market had been administered by that time, and we were also in a five-dose presentation. So dramatic shift in positioning for us, and so I think that we'll be well established and set up for the 24 season.

very helpful makes sense thank you and then on the uh phase three kick trial design obviously awesome to see the standalone flu arm added i was just curious since you already have uh you know control data from a phase three study uh for with nano flu and i don't know if this uh candidate is the same as nano flu but could you just talk about what the key immunogenicity objectives are being agreed upon with the fda on the different strains and how, you know, non-inferiority or superiority will have to be relative to the three arms that you're using.

Yeah, Philip, why don't you take that one? Yeah, so you're right. We've kind of trod this ground before, and the real difference in this is twofold. One of them is a specific age population we're targeting because we think that's where the medical need is the greatest and is also the most lucrative market in the U.S. at least. And the second one is the comparators. So the comparators we're choosing are going to position us to have commercial success going into the future. And I'm not going to give any more details about the specific criteria used to establish superiority or non-inferiority, but certainly the non-inferiority criteria that's also well-trod ground which many other sponsors have used in the past.

Understood. And lastly, I don't know if it's too early to comment, but investors care about profitability because you guys do have a real business. So if you could talk about your expectations for breakeven, given OPEX rammed down, should it continue into next year? But then obviously you're looking to build a broad respiratory pipeline infrastructure long term. How should we think about that? Thank you, Mike.

Go ahead, Jim. And then we'll need to move on to the next set of questions. Go ahead, Jim.

Yeah. All right. Guiding principle one, we're building an enterprise towards cash flow positive and value creation. One of the things you heard John mention earlier is we believe that the economics and cash flow under this agreement with Santa Fe across this portfolio is is in fact superior to the cash flow we might have been able to drive to ourselves. You are hearing that we are creating and driving to an important value creation platform to increase shareholder value. And so we will continue to give you updates on how our business model evolves to deliver against that guiding principle.

Your next question comes from Brandon Smith from TD Cohen's. Please go ahead.

Good morning, Brandon. Hi, good morning, guys. Thanks for taking the questions. Huge, huge congrats. It's really great to see.

Oh, Brandon, thank you very much. Appreciate it.

Yeah, maybe just a quick one from us first. Apologies if I missed this, but we've been hearing a little bit from some of the COVID competitors that FDA might actually be considering authorization of the updated boosters even earlier this year, possibly for August. I wanted to see if that's been part of your conversation and if you think that would impact any of your timing or launch capabilities. And then honestly, just stepping back maybe to the broader opportunity now, I wanted to get your thoughts on strategy and what you're thinking, how you're thinking about each of these other non-COVID, non-flu areas for you, namely what's drawing you where and how you're thinking about where to go first, maybe what makes sense for Novavax alone versus part of the collaboration. Thanks very much.

Brendan, excellent questions. I'll take the second question and hand it over to John Trezino and Philip to address your question about strain timing and launch timing for the season. So when it comes to strategy, we're going to continue to crystallize our future pipeline and organic growth strategy from our own tech platform in the coming months and look forward to sharing more detail with you. What we were so excited about sharing with you today was the new science that Philip and his team have been working on new data and approaches to leverage our technology in different ways for months and months now, and we unveiled some of that today to share with the investor community. We're still working through the best way to optimize some of those assets, and we're also considering additional early-stage assets that we can work with in our pipeline, and we intend to do so all within the new lean operating model that Jim Kelly started to outline today. before and his prepared comments and the questions he answered. So more to come on that. We look forward to sharing more details with you as our thoughts crystallize further and we're ready to share them. So why don't I hand it over to John Trezino and Philip to answer your first question.

Right. So you know that the EMA and WHO have already designated a strain, and we aren't expecting the strain to be designated from the FDA until early June. And we've been in discussions with all those agencies on a continuous basis. Right now, what we stated is that we're going to be – submitting our supplemental filing immediately after VRBPAC. And I think that John's mentioned before that we anticipate having product available in mid-August. Now, none of that matters as much as when the season is designated to start by the FDA and by the CDC. So that's really what we're targeting. We feel like we're in good position to be able to achieve really whatever timeframes the season starts in. John?

I think the variability in there is they're reviewing three files simultaneously, so the FDA has a bit of work to do. I think they've already signaled that they're going to have a formal kind of campaign kickoff post the Labor Day holiday in the U.S., and there's going to be a readiness in front of that. As we said, we're going to have product availability in the warehouse. It might even be queued up at the distributors or even in staging awaiting that campaign to kick off. But I think the timing is it makes a lot of sense, right? We're coming out of the summer vacation period. We're coming back to school, back to work. The CDC's campaign, the other competitors' campaigns will begin kicking in that September 1st, first week in September timeframe. And so we're synchronized around that.

Yeah, and finally, Brendan, and we'll take final questions next, but finally, to build on John's point earlier, that's another reason for the dual pathway for regulatory authorizations this year, the BLA and the EUA John mentioned, because it gives us a chance to be more nimble and more quick through the EUA pathway with our pre-filled syringe and the updated strain. We believe we'll be ready, and we're excited about the opportunity in the U.S. this fall. One last comment. When you asked about portfolio, I just want to make sure everyone's clear. that we have a wholly owned independent portfolio and that our combination influenza COVID vaccine is completely ours and completely independent from the vaccine that Sanofi will develop in their pipeline using our new vaxavid. Just want to make sure that that's clear to everybody. Thank you. And we'll take final questions, Erica, from the final analyst.

Your next question comes from Vernon Bernardio from HC Renright. Please go ahead.

Hi, everyone, and congratulations from me also, and thanks for taking my question. I think one thing that needs to be mentioned is I think you've found a great partner because you both are advancing protein-based vaccines. I think that's something to be recognized. Question I have, just like other analysts and what we tend to do, is a three-part question, but maybe it's just only two now. Regarding the combination vaccine, is there any consideration as far as that you'll need to have a BLA approved flu vaccine or COVID vaccine for them to actually progress the work on a combination vaccine that includes their quadrivalent flu vaccine? And then as a follow up to that, I was just wondering, Obviously, the vaccine does not have matrix M. I was wondering if you could remind us the comparison of the efficacy of their quadrivalent versus yours, Fluvax, for example. And with their potential to add matrix M to their quadrivalent, what kind of efficacy enhancement do you think they could actually achieve?

Thank you. Yeah, Vernon, I'll hand the question over to Philip. Excellent questions. We're not going to comment on Sanofi's particular technology platform, but Philip, do you want to address the questions about the BLA?

Yeah, their regulatory path will really involve a standalone BLA. So, in that regard, it doesn't really rely on our regulatory process with Nuvax of it alone. So they're going to put together a package which has to show that their combination of their flu vaccine plus Nuvaxavid is safe and efficacious. And the approach they take is going to be really up for them to define and to get approval with their regulators.

Terrific.

And you won't be able to comment on, What do you think the addition of MatrixM to Sanofi's blue quadrivalent could be?

No, we're not going to comment on that today, Vernon. Okay.

That's one of the questions, and congratulations. Thank you, guys.

Thank you, Vernon. And one comment, though. Thank you for asking, and importantly, again, we don't want anyone to walk away without total clarity that this deal has tremendous value, multi-billion dollar potential deal for Novavax, including the upfront payments of the 1.3, and then well beyond that, anticipated royalties of significant value. We think even greater value than those upfront payments, and then on top of that, to your point, Vernon, what they could do with Matrix M. And we think there's immense potential with Sanofi as a powerhouse in vaccine development and commercialization. And we're very excited about some of the concepts and ideas they may be contemplating about what to do with Matrix M. And with each new Matrix M product, they would choose to bring forward should they do so. We have the potential for up to 200 million in one-time milestones and ongoing flat royalty for years to come. So those pieces of value are absolutely critical, and that's what makes this deal well beyond the upfront milestones and payments that everyone's been talking about, a multibillion-dollar deal we feel for Novavax. Thank you so much, everyone, for your questions. Eric, I'll turn it back to you, and then the operator to close.

This concludes our question and answer session. I would like to turn the conference back over to John Jacobs for any closing comments.

No, thank you, everyone. Thank you for joining us today. We appreciate your time. We'll keep working with humility, diligence, and all of our effort to return value to our loyal shareholders. And I want to thank all of our employees at Novavax for their time, energy, and effort to get us to this next stage in the beginning of a new chapter for the future of our company. Thank you, everyone, for joining us today.

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