Novavax, Inc.

Good morning and welcome to Novavax third quarter 2025 financial results and operational highlights conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star and then the digit one on your touch-tone phone. To withdraw your question, repeat the steps of star and one. Please note, this event is being recorded, and I would now like to turn the conference over to Louis Sene, Vice President, Investor Relations. Please go ahead, sir.

Good morning, and thank you all for joining us today to discuss our third quarter 2025 financial results and operational highlights. A press release announcing our results is 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 but not limited to statements related to Novavax's corporate strategy and operating plans, its strategic priorities, its partnerships, and expectations with respect to potential royalties, milestones, cost reimbursements, its expectations regarding manufacturing capacity, timing, production, and delivery for its COVID-19 vaccine, the development of Novavax's clinical and preclinical product candidates, the timing and results of our clinical trials, timing of regulatory filings and actions, its APA agreements and related negotiations, full year 2025 financial guidance and revenue framework, full-year 2026 revenue framework preview, and Novavax's future financial or business performance, including long-term growth, savings, and profitability targets. Each forward-looking statement contained in this presentation is subject to risks and uncertainties that could cause actual results to differ materially from those projected in such statements. Additional information regarding these factors appears under the heading Cautionary note regarding forward-looking statements in the presentation 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 Securities and Exchange Commission available at 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 update or revise any of these statements. Please turn to slide three. This presentation also includes references to non-GAAP financial measures, which are total adjusted revenue, adjusted licensing, royalties, and other revenue, combined R&D and SG&A expenses less partner reimbursement, and non-GAAP profitability. Please turn to slide four. Joining me today is John Jacobs, our president and CEO, who will highlight our growth strategy and provide an update on our progress during the quarter. Dr. Aksandra Draghi, head of R&D, will discuss our R&D updates, and Jim Kelly, chief financial officer and treasurer, will review our financial results and 2025 financial guidance and revenue framework. I would now like to hand over the call to John.

Thank you, Louis. I'm excited to be here today with members of our executive team to share our third quarter results. During Q3, we progressed our corporate strategy of driving growth and value by continuing to strengthen existing partnerships and build new collaborations while advancing R&D innovation and our early stage pipeline. Please turn to slide five. We've been on a steady path to transform Novavax since I joined the organization in 2023. With our new corporate strategy as our guide, we have an exciting opportunity to drive value for our shareholders and the communities we serve for decades to come. Let me take you through how we intend to get there and the progress we've already made. When I joined the organization in 2023, we were a fully integrated commercial organization, primarily focused on sales of our COVID-19 vaccine. Our imperative at that time was to stabilize the company financially. And to that end, we removed more than $1 billion of current liabilities by year-end 2024 compared to 2022. During that same period, we also reduced almost $1 billion in operating expenses. In addition, in 2024, we announced a significant and multifaceted partnership with Sanofi, which has now allowed us to accelerate the next phase of the company's planned evolution. This year, we relaunched Novavax as a company focused on partnerships and R&D innovation. Our new strategy is centered on amplifying the impact of our technology platform through collaborations with other biopharmaceutical companies and a new diversified pipeline. And this represents a strategic and thoughtful departure away from a single focus on the resource intense commercialization of one product, our COVID vaccine. To date, we have made significant progress on this strategy. For example, over the past eight quarters, we've achieved approximately $1.1 billion in non-dilutive cash flow to the company, including $800 million from our partnerships in the form of upfront payments and milestones earned to date. We also just recently expanded our Sanofi partnership to include use of our MatrixM adjuvant in their pandemic flu vaccine candidates, for which Sanofi received a U.S. BARDA grant. We renegotiated our agreement with Takeda, which enhanced our revenue opportunity from their activities with Nuvaxavid in Japan, one of the world's largest healthcare markets. On the R&D front, via a lean strategic investment approach, in Q1 of this year, we launched a new early-stage portfolio, including programs targeting C. diff, shingles, RSV combinations, and pandemic flu, and initiated an exploration of our MatrixM technology platform to assess its applicability in oncology. And finally, on our financial profile, we continue to improve the financial strength of the company while maintaining our capabilities. For example, most recently, we brought in $60 million in near-term cash, and anticipated long-term savings of approximately $230 million by consolidating our Maryland campus footprint. With this steady progress since 2023 to transform our company, we are now in a new phase of opportunity for Novavax. As we look ahead, the work we are doing now is intended to position the company well for a period of long-term growth and profitability. The intent is for this growth to be driven by a growing and diversified revenue base that stems from multiple partnerships, milestones, royalty streams, and our emerging R&D portfolio. Assuming continued execution of our plan and by our partners, both existing and new, we are executing toward a future for Novavax in which we have the potential to achieve non-gap profitability as early as 2028. During this time of transition, before we reach our intended goal of profitability, we expect our revenue mix to change as we rely on milestone payments in the midterm to bridge to an increased emphasis on licensing and royalty revenue, which we expect to grow over time both in magnitude and in the number and diversity of our royalty streams. With this as our focus, our 2025 priorities to advance our strategy and grow shareholder value are threefold. Number one, optimizing our partnership with Sanofi. Number two, enhancing existing partnerships and leveraging our technology platform and pipeline to forge additional partnerships. And number three, advancing our technology platform and early stage pipeline. Across all three of these priorities, we have made significant progress in the third quarter. In our partnership with Sanofi, we have achieved all milestones expected for 2025, securing a total of $225 million for the year from the BLA approval for Nuvaxivid, and including $50 million from the successful transfer of our marketing authorizations in both the U.S. and the EU. We also completed the transfer to Sanofi of lead commercial responsibility for the U.S., allowing us to fully discontinue our own sales and marketing efforts this year for Nuvaxivid. On their recent earnings call, Sanofi stated that 2025 marks an important transition year for Nuvaxavid, with their full commercial launch in the U.S. and select other global markets expected for the 26-27 season. Beyond Nuvaxavid, Novavax is also eligible to receive milestones and royalties associated with the development of new combination vaccines that include Nuvaxavid. Sanofi indicated preliminary positive Phase 1-2 safety and immunogenicity data for both of their combination products featuring Nuvaxavid and their approved flu vaccines, and are planning to engage with regulators on next steps. And finally, the agreement with Sanofi enabled them to develop new vaccines using our matrix imaginant. Though we cannot speak for our partners regarding any specifics on their plans and activities here, we can say that they are exploring the potential of MatrixM across several early stage pipeline programs. And we look forward to any potential opportunities emerging over time from these efforts. In addition to our partnerships with Sanofi and Takeda, our partnership with Serum and Oxford University on the R21 MatrixM malaria vaccine continues to make an impact on global public health. Through September of this year, approximately 25 million doses of R21 matrix M vaccine have been distributed to about 24 countries in Africa, with the most recent launch in Zambia announced a couple of weeks ago. This is a much needed option for a region where malaria continues to be one of the continent's most persistent public health threats with economic and social impacts, historically killing over 600,000 people annually. and disproportionately impacting children under five in Sub-Saharan Africa. We are very proud that our technology is a critical component of this important solution for global public health. Our strong performance as a partner helps to set the stage for future potential collaborations to generate additional meaningful royalty streams for Novavax for years to come. In a global vaccine market that is expected to grow over the next 10 years, We believe that Novavax is well-positioned to capitalize on this growth by continuing to leverage our technology and expertise to tackle some of the world's most significant health challenges. Finally, during the quarter, our R&D team continued to make progress in advancing our early-stage pipeline. So at this point, I'd like to turn the call over to Ruxandra to share more. Rux?

Thank you, John. Please turn to slide seven. I'm excited to share more about our progress in R&D. I'm just returning from several of the quarter's key medical meetings during which I've had the opportunity to discuss and reflect on the current trends in vaccination. As you know, infectious diseases know no borders, and the need for vaccination is no different. While the need for vaccination globally remains constant, we know that regional differences in actual vaccination rates as well as vaccine confidence can fluctuate greatly. This is the phenomenon known since the introduction of the first vaccine, the smallpox vaccine. Vaccine confidence is a leading indicator of vaccination rates and varies worldwide, influenced by political, historical, cultural, and socioeconomic factors. with highs and lows sometimes varying as much as 50 to 60% in the same region or country year to year. This is something we have seen in the flu and other vaccine markets over the years, and to some degree more recently in the United States with RSV, shingles, measles, COVID-19, and other vaccines. So it is reasonable to expect that vaccination rates could improve in the future. Additionally, many recent reports such as those from McKinsey and others have estimated that the global vaccine market could steadily grow at an average annual rate of six to 8% to reach a size of over 75 billion US dollars by 2030. Coming back to recent medical meetings, I had the opportunity to speak more about our technology and its incredible potential. I am energized by the reception received from colleagues, researchers, and industry participants at this meeting. Like us, they see the potential of our technology in both new and existing vaccines, and are excited to watch our early stage programs evolve. One of the key topics we have been presenting on has been the continued assessment of the tolerability profile of matrix M containing vaccines, a key differentiator of our vaccine platform. For example, active comparator studies of Nuvaxavid versus mRNA COVID vaccines revealed lower frequencies and intensities of local and solicited adverse effects and lower impacts of reactogenicity on quality of life measures among our vaccine's recipients. These findings are consistent with systematic review and meta-analyses which are expected to be published in the near future and are important because we expect that that improved tolerability associated with comparable, if not better, efficacy and durability is likely to lead to higher rates of vaccine uptake. Please turn to slide eight. During the quarter, we have been making continued progress on our four current early preclinical vaccine candidates, C. diff, shingles, RSV combination, and pandemic influenza. We are continuing to refine these candidates, investing smartly and using AI and machine learning to rapidly and cost-effectively inform design, create new antigen, and then test to help prepare the assets for clinical work as program progress. I will provide a brief update of each program. Our CD vaccine candidate targets a major pathogen responsible for antibiotic-associated diarrhea frequently observed in hospital settings. The incidence and severity of CD infections are rising across the world with no approved vaccine. For our work on the shingles program, we are advancing two different activated protein antigens with Matrix-M. Early preclinical results suggest both induced immunogenicity and as anticipated, potentially a better reactogenicity profile. Finally, we believe that our RSV combination program has the potential to meet the desire of both the public and healthcare providers for combination vaccines that can address multiple respiratory viruses at once. For all three programs, we have exciting preclinical data that is beginning to emerge and further indicate the potential of our technology platform to make a difference in these critical areas of unmet need. We look forward to sharing more with you in the coming quarters as our initial data sets from these early programs begin to crystallize. Our Matrix-M activated pandemic influenza vaccine candidate shows promise in potentially being able to deliver a single-dose vaccine option that can be given either intramuscularly or intranasally to protect against pandemic influenza infection in individuals who had previous exposure to seasonal influenza or received a seasonal influenza vaccine. This benefit may be critically important in the context of a future public health emergency, given options for administration and fewer doses needed for protection. We are actively seeking funding from government programs to test our vaccine candidates in clinical trials. Matrix-M has been proven to provide positive clinical benefits in infectious diseases, and we are excited about our early progress with the new pipeline of programs in both viral and bacterial applications. As noted earlier, a key component of our corporate strategy is to leverage our technology platform and to diversify both within and beyond infectious diseases. For example, since January, we have begun early work to explore the potential utility of our adjuvant, including new formulations in oncology. Our early clinical work is aligned with our corporate strategy and is supportive of ongoing discussions with both existing and potential partners. We continue to progress these relationships with the goal of developing new partnerships and in doing so, new vaccines or improving existing vaccines that could have a positive impact on global health for decades to come. I look forward to continuing to update you on each of these exciting programs as more data becomes available. I'll turn the call to Jim now. All right. Thank you, Rox.

Please turn to slide nine. This morning, we announced our financial results for the third quarter of 2025. Details of our results can be found in our press release issued today and in our form 10-Q filed with the SEC. Please turn to slide 10. I'll begin with key highlights from our third quarter 2025 financial results. We reported total revenue of $70 million, and importantly, Sanofi has now taken on the lead commercial role for Novavaxivid in the U.S. and select XUS markets. Sanofi recorded $23 million in Novavaxivid sales in the third quarter of 2025 and reiterated that 2025 is a transition year as they establish their commercial capabilities in the U.S. Novavax has recorded $4 million in royalties related to these sales in the quarter. During the third quarter of 2025, we continued to transform Novavax into a more lean and agile organization. For example, This quarter saw an 18% reduction in our combined R&D and SG&A costs compared to the same period last year, and of note, we reduced SG&A by 55% as we reduced commercial and general infrastructure spending. In October, we announced a set of transactions that enable Novavax to further consolidate our Maryland sites and is expected to result in $60 million in cash proceeds by the first quarter of 2026 and approximately $230 million in cost avoidance over the next 11 years. Investors will see $126 million in non-cash charges in the current quarter related to the Maryland site consolidation and the convertible debt financing transactions. emphasizing that these are non-cash in nature and each transaction serves to materially improve our financial strength as we execute on our growth strategy. Novavax ended the third quarter with $812 million in cash and accounts receivable. This is prior to factoring in an additional $110 million earned for MAH transfers and Maryland site transactions announced in the fourth quarter. Year-to-date Sanofi milestones earned of $225 million is consistent with our 2025 revenue framework and includes the $50 million earned related to the U.S. and EU MAH transfers. Please turn to slide 11 for a detailed review of our third quarter revenue results. For the third quarter of 2025, we recorded a total revenue of $70 million compared to $85 million in the same period of 2024. Product sales for the third quarter of 2025 of $13 million comes from COVID vaccine and MatrixM supply sales to our licensed partners and reflects a change to our business model as we now primarily support our licensed partners who market products that leverage our technology platform. Licensing royalties and other revenue of $57 million in the third quarter of 2025 was primarily from our Sanofi agreement and includes $46 million of R&D reimbursement and $4 million of royalties from the sales of Nevaxavid. Please turn to slide 12 for a detailed view of our third quarter financial results, where I'll focus on our operating expense results and trends. Third quarter 2025 combined R&D and SDNA expenses were $130 million and reflected an 18% reduction from the same period in 2024. While our R&D spend of $98 million exceeds the prior year, $46 million or almost half is subject to reimbursement by Sanofi. Importantly, our SDNA expenses were 55% lower than the same period last year, and are driven by the transition of LEED global commercial activities to Sanofi, plus strong execution on our broader cost reduction plan. During the third quarter of 2025, we incurred non-cash charges totaling $126 million, inclusive of a $97 million asset impairment related to our Maryland site consolidation and $29 million related to loss on debt extinguishment for the convertible debt refinancing. The convertible debt refinancing in August extends the maturity of the majority of the 2027 notes to 2031 with improved terms. This transaction supports Novavax's financial strength during a key transition period for the company. And finally, we reported a net loss of $202 million or $1.25 per diluted share for the third quarter of 2025. Please turn to slide 13. We're committed to streamlining our operating expenses to enable value creation. we are reaffirming our full-year 2025 financial guidance for combined R&D and SG&A expenses of $520 million at the midpoint and narrowing the range to $505 to $535 million. On a non-GAAP basis, a net of partner reimbursement We now expect full-year 2025 R&D and SG&A to be approximately $450 million at midpoint. This reflects an approximately $15 million improvement versus the prior estimate of approximately $465 million. We are also reaffirming our multi-year targets for 2026 and 2027 combined R&D and SG&A expenses net of partner reimbursements of $350 million and $250 million, respectively. We believe that providing both the gross spend and net of partner reimbursement views provides investors with a better understanding of our core operating cost structure. We are awaiting our licensed partners to complete their 2026 planning processes to better understand if there are any new updates to our R&D support. we do not expect potential updates to impact our core spend targets net of reimbursement outlined today. Please turn to slide 14 for a recap of sources of 2024 and 2025 cash flow earned through November 2025. During 2024 and 2025, we significantly improved Novavax's financial strength. by securing $1.4 billion in new cash for the company while, in parallel, reducing our cost structure and liabilities. $1.1 billion, or 78%, of this cash came from non-diluted sources, including partner upfronts and milestones, plus sale of assets. Important to note, we have not raised equity capital from our ATM facility since the second quarter of 2024 as we prioritize non-dilutive funding sources and cost reductions. Please turn to slide 15. Now turning to our 2025 revenue framework. Today, we are raising our prior revenue framework by $25 million at the midpoint and now expect to achieve adjusted total revenue of between $1 billion and $40 million to $1 billion and $60 million. Our 2025 revenue framework excludes Sanofi supply sales, royalties, influenza-COVID-19 combination, and Matrix-M-related milestones. This means there may be revenue in 2025 that is additive to our expectations for adjusted total revenue for the year. At midpoint, The 25 million increase to our 2025 adjusted total revenue is driven by a 7.5 million increase to adjusted supply sales related to increased demand for Matrix M from serum for the R21 Matrix M malaria vaccine, a 12.5 million increase to Sanofi cost reimbursement related to ongoing R&D activities, and a 5 million increase to other partner revenue related to serum and decatur royalties. Please turn to slide 16 for a preview of our 2026 revenue framework. For 2026, we are following an approach similar to the 2025 revenue framework in that our non-GAAP adjusted total revenue excludes Sanofi royalties, KIC milestones, COVID-19 supply sales, and Novavax COVID-19 APA sales. This means there may be revenues in 2026 that are additive to our expectations for adjusted licensing, royalty, and other revenue. That said, we believe that the 26-27 season, the Vaxavid royalties will grow significantly as compared to 2025 as next year reflects the first full year where Sanofi will have the opportunity to prepare for its marketing and contracting efforts and build upon the learnings from the current transition year in the U.S. and markets outside the U.S. This preliminary preview is intended to help investors better track the Novavax transition period revenues under our Sanofi Agreement. Investors should not anticipate a similar update at this time next year, as these activities are expected to be materially completed by the end of 2026. For 2026, we expect to achieve adjusted total revenue of between $185 million and $205 million. This includes a $75 million milestone from the completion of manufacturing technology transfer expected to be earned in the fourth quarter of 2026. $30 to $40 million in R&D reimbursement as we complete our R&D support and technology transfer activities for Sanofi. $30 to $40 million of adjusted supply sales to our licensed partners, which primarily reflect sales of MatrixM. And finally, $50 million of non-cash amortization related to the previously received upfront and R&D milestone payments from Sanofi. In the case of both R&D reimbursement and adjusted supply sales, these preliminary ranges are subject to the completion of our licensed partners' plans for 2026. When comparing our non-GAAP adjusted total revenue for 2026 to 2025, please note that 2025 includes $610 million in non-cash product sales related to the settlement of EPA agreements. While currently excluded from our 2026 adjusted total revenue, there is the potential for a $125 million milestone linked to the initiation of a Fees III KIC program and its addition is pending feedback from Sanofi regarding clinical plans for their KIC programs. We are encouraged by the recent Sanofi announcement of preliminary positive results from both of their KIC Phase 1-2 programs and their intent to engage with regulatory authorities to advance development. As Novavax drives towards our goal of non-GAAP profitability, We expect this could occur as early as 2028. Key to the timing of our path to non-GAAP P&L profitability are the successful development and regulatory approval of the Sanofi KIC program and successful commercial execution by Sanofi on both the COVID and KIC programs. This could be further supported by our expectation that we will add additional cash flow from new business development agreements. We look forward to sharing additional updates as we 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. In summary, we're proud of the continued progress being made on our corporate strategy with a consistent track record of execution to date. We are seeing continued success across our strategic priorities for the year, including optimizing our partnership with Sanofi, enhancing other existing partnerships, and working to forge new potential collaborations. We have been advancing our early stage pipeline and working to expand the utility of our technology platform. This is all underpinned by a continued focus on further improving our financial foundation, while ensuring we have the right capabilities to successfully execute our strategy into the future. We remain committed to our growth strategy and believe that it puts us on the best path to deliver long-term, sustainable value for our shareholders. Our progress to date has set us on the right path heading into the year end and into 2026, and we remain excited about the future of Novavax. Thank you to our shareholders for their support. And as always, we appreciate all of the hard work and dedication of our employees, without whom the success would not be possible. I'd now like to turn the call over to our operator for Q&A.

Operator?

Gentlemen, we will now begin the question and answer session. To ask a question, you may press star and then the digit 1 on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please repeat the steps star and one. That will also remove you from today's queue. At this time, we will pause momentarily to assemble our roster. Once again, ladies and gentlemen, that is star and one.

We'll take our first question today from Roger Song at Jefferies.

Hey, team. This is Nabil on for Roger. Thanks for the updates. Maybe two from us. How do you see the 2025 COVID season as compared to last year? Are you getting any feedback from pharmacies on stocking and consumer preference for the product? And then could you provide some more color on that BARDA grant? And does it reflect any, you know, attitude from the FDA?

Thank you. Yeah, hey, thank you.

Thank you for your questions. Jim, did you want to take that?

Hey, certainly. Hey, why don't I begin and thank you for the question about the COVID season. And by the way, a lot of credit to Jeffries. You put out an exceptional COVID tracker every week. And so what I'll do is, hey, for all your customers, I'm going to reference it. I know it's a lot of IQVIA data, but you do exceptional work. And then on the BARDA piece, which I think is referencing the new pandemic flu BARDA grant to Sanofi, I'm going to have Rux speak to that and some of the latest on the pandemic flu front. All right, so beginning with the COVID season, as folks know, especially in the U.S., we had a policy update this year, certainly more restrictive in the below 65 age groups. When we look at the year-over-year, and I think folks know we started one week late, so if you adjust for that, the season in terms of RXs are down about 20% compared to last year. That's fairly consistent, at least I'll say, with our internal analytics and expectation for how ours and actually others in this market, how their labels have been altered. So when you think about the label for COVID then in the U.S., it's beginning to become far more aligned to Europe and global markets. So when we think about the COVID market this year, and its go-forward expectations, there's just a bit of a resetting occurring in the U.S., and then our expectation is you build from there with sound footing. So that's some of the feedback on the COVID market, and we're really looking forward to, you know, Sanofi and what they're going to be able to do with Novavaxivid, you know, especially starting next year when they get their full year. But with that said and talking about Sanofi, perhaps, Rux, some feedback on the new BARDA announcement.

Yes, thank you, Jim, and thank you for the question, Roger. So we are talking here about a BARDA grant that has been awarded to our partners, to Sanofi, for early stage work with their vaccine candidate for pandemic influenza, but including our Matrix M adjuvant. The companies have announced previously that we've amended our collaboration agreement to include Novavax's matrix M adjuvant in this Sanofi's pandemic influenza vaccine candidate. So this candidate is going to go through phase two. And as you are, we are very keen in seeing the results and obviously eventually contributing to pandemic influenza preparedness in the United States and elsewhere in the world.

Thank you. Our next question will come from the line of Mayank Montani at, excuse me, Montani, rather, at B. Reilly Securities.

Yes, good morning. Thanks for taking our questions and appreciate the detailed R&D updates today. Yeah, thank you, John. On the Sanofi collaboration, it seems like that's progressing well, including the preliminary positive CAKE data they talked about. Could you talk to your awareness on next steps there? And I also ask since you may have some of your own guidance regarding your CAKE program, and it seems from Moderna's earnings this morning, they're still awaiting the FDA feedback on their Phase 3 CAKE package. And also I was curious where you stand with your wholly-owned standalone flu program. And then I have a quick follow-up.

Mike, thank you for your question. We were very excited to hear Sanofi's announcement in their recent earnings call that they had positive data on both of their combination programs, including their world-leading flu vaccines and our new vaxavid. And as our investors, I hope, are well aware, Novavax is eligible for significant future potential royalties and milestones. as they initiate a Phase III program, should they do that, and then start to sell that product and market it or product. Both of those products were fast-tracked by FDA about a year ago. So we're very excited. We can't comment on where they are, but what they did say, we can reference you and our investors to their public commentary that they're approaching the regulator for next steps on that. So we look forward to hearing updates and to them advancing that program, hopefully to Phase III and beyond. Regarding our own program, what we've said consistently about that, Mike, is that we intend to out-license our KIC, our combination COVID flu program, that's phase three ready, as well as our flu program, both of those assets, and that we continue to seek partners for that and have dialogue about that. Not much we can say about that. If we get a partner and do a deal and we sign it, we'll be able to announce it. But that is the intention. And look, we have good data on both of those assets and programs. We think our technology and believe and have seen it proven over time can make a big difference on global public health. And we'll be excited to hopefully see those assets in the hands of another organization someday in the future. That's our intention. We'll keep you posted.

Got it. Thank you for that comprehensive update. And then on the rollout of some of the preclinical data that you talked about on C. diff, shingles, RSV, was just curious if these experiments were done, you know, keeping in mind, you know, head to head comparisons with current available vaccines could be interesting. And was also curious, you know, we've seen some mixed updates, for example, the Pfizer C. diff vaccine not playing out in terms of events after initial immunogenicity data was strong a couple of years ago. Was curious, you know, if you could talk to how we can think of the three programs, you know, as investors obviously want to, you know, start ascribing value there. And then lastly, just quickly for Jim, on the non-GAAP profitability goal now targeted for 2028, can you just clarify if anything has changed to what you had communicated previously. Thanks for taking your questions.

Thank you, Mike. Rox, do you want to take that first question from Mike on our pipeline?

Yes. Thank you, John. So in our experimentation, in all our experiments, we are always introducing a negative control and a positive control. For the positive control, we are typically using either approved vaccines, which will serve as, if you want, the guidepost for our experiment, if such vaccines already are approved and on the market, or in the case of, as you were pointing out, where an approved vaccine is not yet on the market, we are actually using as a positive control constructs that are very similar with what competitors have used in their clinical trials. So every good scientist has to include these negative and positive controls in the experiments. If not, one would not really have the right type of information. So that's from my side to respond to the first part of your question.

Thank you, Roxandra. And, Mayn, thank you for pointing out our three programs. And we're making progress in the lab, early stage, preclinical, and we're looking forward to, in the coming quarters, unveiling some of the learnings. some exciting information we're learning internally here, where the teams continue to progress that quarter on quarter, and we're excited about what we're seeing so far. Beyond the three programs you mentioned, we also have our own pandemic flu initiative, and our team's been working with both the European and U.S. governmental authorities to seek funding for our own pandemic flu. That's above and beyond what Sanofi may do with our MatrixM and their flu product. We're also looking at intranasal application potentially for that asset. And so we'll keep you posted as that progresses. And in addition, very importantly, we're working on MatrixM itself to expand its utility, expand the IP around MatrixM, and its applicability we're exploring in things beyond infectious disease. So we branch beyond just viral antigens to also explore in bacterial, which you mentioned today, and thank you for that, In addition, we're looking to go beyond infectious disease and see what MatrixM can do. And so, Roxandra and her team are deep into the early exploration of some of those other avenues. And, again, we're excited about the potential and excited to unveil in the coming quarters what we're learning there. Pretty good. Jim, did you want to take the profitability question from Mayak?

Yes, certainly. Mayak, I think you and the investors have heard from us consistently that driving this company is to non-GAAP profitability and beyond, throwing off cash as a company, delivering shareholder value is a critical priority for the company. The timing of which, our goals to how we get there, you're watching us control what we can control, which is driving down our costs, seeking non-dilutive funding along the way, making sure we have that strong balance sheet, But we also recognize we're, in many ways, relying on our partners, Sanofi in particular now, but heck, we're moving to bring more partners online as well. New information since last we spoke, great news on KIC, two positive Phase 1-2 studies. But what we also learned, hey, Sanofi's going to be working with the regulators to get those programs advanced. This new information leads us to view the more likely timeframe to potentially initiate a phase three or get to market with KIC to have shifted out probably at least six, 12 months just based on the timing of this update. Therefore, we updated the timing for the as early as estimate from 2027 to 2028. All said, though, when you look at all the pieces to what can drive us to profitability, we're seeing positive trends across the board. You heard our feedback on how we view the market. You heard from Roxanne John how we view our technology, the advancement, and therefore our abilities to partner, including not just early-stage pipeline but also our late-stage assets. And then you're hearing what I think is exceptional news, like I said, from Sanofi on their preparations for next year and beyond with COVID. So, you know, we are certainly going to continue to endeavor and drive to this non-GAAP profitability and beyond, just providing the latest update on that today.

Yeah, Jim, and it's our intent to take a conservative position on that as we communicate with investors, toggle to what we know is in front of us, as we learned, related to the Sanofi deal itself. just that one vehicle can lead to that with our base business that we already have, not including anything new we may do. So right now that's what we see in front of us based on that latest update, and we'll work really hard to do even better than that.

Super helpful. Appreciate the transparency there. Thank you.

Our next question today will come from the line of Eric Schmidt at Cantor.

Thanks. It's Eric filling in for Pete today. First, John and team, just congrats on the complete makeover of your company. You guys were way out ahead of the curve here and far larger companies in the space could certainly learn from your lead. So it's been fun to watch. Question on MatrixM and some of the MTAs you got exploring use of this with potential partners. What's sort of the cadence of timelines and milestones, deliverables that a partner would kind of need to go through in order to convert some of these evaluations to more formal arrangements. What time scale are you thinking about?

It's an excellent question, Eric. I'd love to be able to put a clock on that for you, but I cannot here today. Obviously, there's more we know than we'd be able to say theoretically in any of those types of situations, right? The good news is that we have, to your point, multiple MTAs signed with organizations, a couple of large top 10 pharmaceutical global organizations that have an interest in this technology and this space as well as smaller company outside of infectious disease even. So very, very interesting. That work is ongoing. Those companies, in general, I think the way to frame it in that type of arrangement when you're working with a technology like we have, and this isn't Novavax specific, but I'll give you a framework to think about. Company would take that type of technology put it into the lab, do some experiments. They've done some thought experiment before that, obviously had communications with our team, business development team. We have data we share. We do experiments in our lab. They get interested. They duplicate those and do their own experiments in their lab. But these are not years, right? These are experiments that are shorter than that. They're in animal models and in the lab. And if that's confirmatory, that would be the potential type of early pivot point in that journey. where they might consider an arrangement with us. That's the type of framework to think about. So I won't put a clock to it, but I will say it's not years and years and years down the road. They'll know whether or not they'd like to do something with it as they get results out of their lab on early experiments. And then obviously it takes a certain period of time if we were to get to that kind of point to then negotiate deals. But our team has shown we're able to negotiate deals, whether it's selling real estate and downsizing certain areas that no longer support the new strategy, and thank you for recognizing how we've reshaped the company, or to something like a Sanofi arrangement and even these MTAs. So lots ahead is our intention. We're really excited about the potential, and there's a lot of interest in our technology outside of Novavax. So we'll continue to work to mine that and hope in the near term to have some updates for you that are exciting.

Very helpful. Thanks, John. Maybe another question on Nuvex Ovid. Realizing that this is a transition year and that maybe traditional benchmarks like market share and sales don't really apply, are there things that would make this a successful transition year in terms of distribution channels and maybe softer metrics that you're looking for your partner to achieve? Thank you.

Yeah, I think a lot of that already happened, Eric, and I think Jim Kelly will comment as well here. But certainly the transition from an EUA to a BLA, to a full U.S. license, was a critical first step. And that's a first for Novavax, right? So we handed the baton off on the EUA and picked it up for Sanofi on a BLA. And that happened mid-calendar year. and after initial retail negotiations begin, right? So you're sort of halfway into the cycle. But that was very important, though, that that BLA was approved. Also, pre-filled syringe, also competitive shelf life approved at the same time as mRNAs by the regulatory authorities, right? It's an even playing field now. For the first time since I came here to Novavax, it's now an even playing field. playing field. And it had not been, as you know, through the pandemic and those things, but we got it there and it's in the hands of a world leader in vaccines on an even playing field. So we're very excited. Jim, anything to add to that?

Well, John, really two things I'd add. So while this year set the table with an even playing field, then what do you do with it? Well, we're seeing a couple of things. One is you got a full 12-month cycle time to get the contracting right. And what we know is Sanofi is an infinitely better contractor than we ever were, you know, with that full vaccine portfolio. So really looking forward to that piece of it. And then we also know, given the transition year, Sanofi's doing some piloting, right, across the country on different marketing techniques and sub-markets that Excellent. That means their marketing capability toolkit is going to be optimized as they go into next year. And that's what we meant when we said, hey, listen, we're really excited to have Sanofi as our commercial partner, and we're really happy at what the table has been set to enable them to do moving forward.

Appreciate the thoughts, guys. Thank you. Thank you, Eric.

Our next question will come from Chris Lobianco at TD Securities.

Oh, thank you for taking my questions, and congrats on all the progress this quarter. So we've seen some competitive phase two shingles vaccine data, which showed comparable immunogenicity and better tolerability than Shingrix. Can you remind us what Novavax thinks the clinical bar for success for novel shingles vaccine is, and how might your vaccine platform be differentiated from some of the competitive data we've seen in phase two?

Berkshire, were you able to hear the question from Chris?

I think that, Chris, thank you for the question. I think that you have asked if we have looked at other competitors' data when it comes to the efficacy and tolerability of their singles candidates. Is that so?

Yes, that's correct, and just how Novavax's platform might be differentiated.

So, again, coming to the response that I gave at the previous question, we do actually have positive comparators and multiple comparators in all our preclinical testing using, obviously, for non-approved vaccines. It is really based on the scientific endeavor and on the published data. This being said, in all the experiments, we are including groups that are treated either with shingles, yeah, or with the type of vaccines that could mimic whatever is happening in other people's hands. So we are very confident that the data that we are generating is actually very informative and it's potentially going to compare well in human clinical trials. Obviously, we need to get there with our experiments, and we are actually looking forward to sharing with you more data when that is becoming available.

Yeah, it's a really good question, Chris, and, Rox, let me build upon what you just shared, and thank you for that, Rox. It's a good question. You know, obviously, the shingles vaccine, we've seen data that up to potentially 40% or so in certain markets of consumers may not get their booster shot on the current shingles vaccine because they're concerned about side effects. So obviously, Chris, the bar on efficacy with the current marketed shingles vaccine is very high. That's an excellent vaccine when it comes to efficacy, and we're glad it's there to protect all of us, right, as consumers. The baggage on the side effects pieces is an area for opportunity there for competitors to come in and improve. So we're glad to see other companies are investing there. It's one of the top five or six areas of vaccine investment, actually, according to McKinsey and other sources, right, because of this opportunity that's there. Let me just say this. There's no guarantee, as you well know, in biotech. This includes Novavax, right? But anything coming out of your laboratories will go all the way to success. We're excited about early results we're seeing, but it's early. It's preclinical, right? Like Ruck said, we have to go through all of the different studies and tests to get there. So do competitors. So it's good to see other programs advancing. How many of those may go all the way through full phase three and meet that high efficacy bar that's out there or come close enough to it and deliver on the tolerability in the end in a final product? That's a difficult bar to achieve. We'll be glad. We'll bet on our technology every time because we believe in MatrixM and what we're doing, and we believe that we've got a strong shot to have a competitive product. Again, we're not promising on anything, future deals, things coming out of the clinic, right? There's risk in biotech. You have to execute. It's our intention to do so. We've got a great technology platform. We're confident in it. We're excited to bring it forward.

Great. Thank you. Next, we'll go to the line of Alex Stranahan at Bank of America.

Hey, guys. Thanks for taking our questions, and congrats on the continued progress in the quarter. First, good to see the second 25 million milestone come in a few days ago, so we've got that for 4Q. Looking to next year, appreciate the preliminary guidance for 26. Could you maybe walk us through the 75 million milestone estimate? I guess, what does this entail, and assuming this is fairly high conviction given the preliminary guidance and any other high conviction items that you may be single out beyond the Sanofi milestones next year. And then I've got a follow-up.

All right, Alec, hey, thank you for your question. And you're certainly right. We're very, very pleased with the progress we've made to date, you know, across both pipeline advancement and also support our partners. In particular, as we look at the milestones for next year, the 75 million milestone is that we've included in the 2026 adjusted revenue framework relates to completion of manufacturing tech transfer with Sanofi. So specifically, what that means is we knew when we signed our CLA with Sanofi that we'd be supporting them with commercial manufacturing while they learned what it would take to be self-sufficient, right, to manufacture on their own. And we believe we're right on track to be able to complete that manufacturing tech transfer by the fourth quarter next year. So what that's going to mean for our financial statements is not just the milestone hits, but that 2026 will be the completion. of when we act as a bit of a middleman on getting supply for Sanofi for them to market. And as you know, Serum Institute is who we've been working with for multiple years to do so. So that's the transition period. That's the milestone. And the conviction to complete it really just comes from the methodical work we've been doing to date with a great partner.

Okay, great. And then maybe just a quick follow-up, Jim, on the supply sales piece. Is it right to assume this is essentially just reimbursement for the COGS on new facts of production as you manage through the transition of manufacturing? And I guess is it, for the most part, on-time production, or do you still maybe manufacture some number of doses at risk? Thank you.

All right, excellent. Hey, so our supply sales, right, so that's a new component this year to our product sales, has two primary pieces. One is a COVID vaccine that we provide for Sanofi for them to sell. All right, so that's part one. And next year, that's anticipated to be the final year we do that because we would have completed the tech transfer I described. Under our agreement with Sanofi, the intent is to have, you know, just a little bit of margin on top of our costs there. So think of it more as a just over break-even proposition. Then when you look at the other component of supply sales, well, it's matrix M. And it's matrix M to all of our partners. And that's going to be a more durable stream of revenue. but with the same concept, you know, the intent that, and listen, we're really just trying to support our partners. There's a small margin there. And what you're witnessing with that part, and this is the matrix supply sales in particular, is that as our partner unit volumes grow, and the example I'll give you here that is really going great in volume is R21 malaria vaccine, And you heard that since launch last year, you know, approximately 25 million doses. Well, what that's doing is that's driving us to a critical mass economies of scale for our matrix manufacturing. And so what it does is it allows us to be efficient, right, to be right there for our partners. You also asked a question about just-in-time. So the way this works, the cycle time, and I'll speak just to the COVID right now, is, you know, that manufacturing effort really begins in the first quarter. When you're working through the different variants, you do PPQs, and you do a lot of that DS production early in the season. The more or closer to just-in-time is the DP fills. And you do this so you can maximize shelf life. And those really begin to occur over the summer leading into the season. So that's the cycle time.

That's how production works. Great, thank you.

Our next question today will come from Tom Schrader at VTIG.

Good morning. Thanks for all the details. A quick one on the Sanofi pandemic effort. Is there any guidance on the size the government stockpile would be? And would that be meaningful to you? Is there one royalty for Sanofi? Or because this is a different type arrangement, is that a very different royalty back to you?

And then I have a COVID follow-up.

Yeah, very good question, Tom. No, we don't have guidance on that. what the government may be targeting from a stockpiling perspective. I know there's some historical precedent there that you and our investor base could reference if needed. But what we can say is it wasn't part of the original agreement on our partnership with Sanofi to include our Matrix M in a pandemic flu, because we're working on our own as well. We did agree. We worked with Sanofi to expand our agreement to now include the ability for them to use our matrix M with their flu vaccine. And look, frankly, it's good for business. And even more importantly, it's good for global public health to have options there if that were to hit. So we think it's our responsibility and it's also a very good strengthening of our partnership and could provide a very lucrative opportunity should something like that hit. Now, That being said, what we've left open and what we've said on the last earnings call is should Sanofi move forward and bring that forward and reach a certain point with it, there's a point where we would then negotiate the terms in good faith with them around how the economics would work around that. Let's hope for global public health's sake that that opportunity is not there for these vaccine companies, including us. If it does come, we intend to stand ready, hopefully through partnering our own assets, should we achieve a partnership there with our own flu, and secondarily through Sanofi, of course. So we'll keep you posted.

And then kind of a raging piece of the COVID world is the duration of protection of the mRNA vaccines. People are bashing this number all over the place. And you could be a lot better. And the question is, do you see that as a place you might do more clinical work to show your duration is really better? There are hints of it. But is that something you think you might do? And conversely, do you think it's something that might be thrust upon you? I know it's forward-looking, but thank you.

No, very good question. We'll hand that over to Roxandra. Rox?

Yeah, that's a very good question. So there are some ongoing real-world evidence studies that are undertaken. Obviously, these are studies that last a little bit longer than just one season that are looking exactly at that, at the durability of protection. And as the data is coming in, us and partners We are sure that that type of data is going to be published. As that entails large populational studies, they are typically undertaken by third parties, academic investigators, research institutes, your centers for disease control, because they do impact large swaths of the population. So to make a long story short, that type of studies are ongoing and we hope to see the results soon.

Thank you.

Our next question will come from Jeff Meacham at Citi. Please go ahead, sir. Your line is open.

Thank you. This is Mary Kate Davis. I'm for Jeff this morning. Thanks for taking your questions. We'd love to talk through a little bit more of the strategy behind your early stage pipeline and the impact here. And thank you for giving great detail so far this morning. It's super helpful. You walked us through the progress towards IND and would love to dial in on the opportunities for early data updates and what they could look like. And then as a follow-up, just given the public health burden of these diseases, how are you looking at the opportunity of these chosen targets? And would you consider partnerships in this space as you move these programs forward? Thank you.

Hi, thank you for the questions. I'll let Rux dive in here in just a moment. We took a lot of time as a leadership team. As you know, we're in transition with our company, and we're in really Chapter 2 of that transition, having moved away from a fully integrated commercial organization to an organization that has a great technology platform. It's looking to out-license that, to partner that, and to generate additional opportunities to do that via our pipeline R&D innovation. That's very important. We see our technology platform and our efforts through Roxandra and her team in R&D as an engine that could generate additional and future ongoing opportunities to further partner our tech, to further expand it into new areas, even beyond infectious disease. So you make a good point by saying, would you consider partnering those assets out of your pipeline? It's actually our intention to do so. And what we have said in the past is that we retain the right, the ability to decide for ourselves, and we'll do that through continued economic stability, strengthening our P&L, strengthening our cash runway and our financial framework for the company, which will be ongoing through this transition. We continue to do so to be able to have the choice. If we do get a home run coming out of the pipeline and we want to keep that ourselves, we'll consider that. But our model now is based on partnering with other pharmaceutical companies, keeping a lean and focused infrastructure, leveraging our technology and our assets to generate those revenues and those partnerships, and then the engine in R&D and innovation to create even new future opportunities. Part one. Part two, you asked about our strategy behind the pipeline. Obviously, we looked at where the most significant unmet need lies around the globe. where our technology, we believe, could have the best chance to help address those unmet needs and generate, with good odds in our opinion, competitive assets coming out of those efforts. Obviously, like any biotech company, there's never a guarantee that anything or everything you do out of your pipeline will succeed, but you deal with probabilities of success. So we put a lot of time into placing the bets where we feel we have the best chance to win. the best odds to see one or more or multiple assets coming out in the future that could succeed. We stage-gate those things. This is typical for an organized, efficient, and professional biotech company to have stage-gate markers where you have go, no-go decisions based on outcomes each step of the way. Our entire philosophy on this is lean, intelligent investment to keep de-risking one step at a time, and each step, as we continue to succeed, We continue to approach the target product profile that we believe will be competitive, constantly assessing the competitive landscape to see if that needs to change. We got some questions from Chris and others on that today, very good questions. We're thinking about that as a team. We're paying close attention. We're very careful with any dollar we put down on that bet, and we'll be willing to walk away at any time from an asset that's not delivering. We don't have pet projects here. We're running a business. And we also want to have, secondarily to that, but very important to our employees and to us, our mission to impact global public health in a positive way. Hopefully that addresses your question.

And our final question today comes from Sean Lee at HC Wainwright. Please go ahead.

Hey, good morning, guys, and thanks for taking our question. I just have a higher level one on the longer-term projections that you guys had. Looking at the 2027 expense numbers, we see that the expenses are expected to come down by almost 50% compared to the CS levels. So I was wondering if you can provide some color on which areas you feel that you can cut the most from and what are the areas you feel deserves additional investments? Thanks.

Sean, hi there, and appreciate the question. The primary step downs in changes to our cost structure as we look at 2026 and 2027 are the following. You know, 2026, what you're seeing is that many of the transition activities that we're doing with Sanofi, actually virtually all of them, are completed in 2026. So you're seeing that as we support Sanofi's both commercialization through the form of manufacturing support, strain change, and continue to support their clinical efforts, completion of certain R&D and clinical study activities, those are hitting our financials, and our team is working on them through 2026. But they're becoming smaller year over year, 25 versus 26. As we move into 2027, and these are virtually complete, you're seeing the next step down in activity. And so it's that $250 million net, right, which is our target. Because you never know, maybe one of our partners might come back and say, do you mind doing some incremental work for us? We'll say, certainly, just cover our cost. So it's that net number, which is our core spend target. It is that number that we're driving towards. And we think we have an excellent line of sight to get there.

Thanks for that. This concludes our question and answer session for today.

I would like to turn the conference back over to John Jacobs for any closing remarks.

Thank you, everyone, for joining us today. We appreciate it. Look forward to speaking with you next time.

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