Vaxcyte, Inc.

Good afternoon. My name is Lisa, and I will be your conference operator today. At this time, I would like to welcome everyone to the FACT site fourth quarter and full year 2022 financial results conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star one one. on your telephone keypad. If you would like to withdraw your question, please press star 11 again. I now would like to turn the call over to Andrew Guggenheim, President and Chief Financial Officer of AXSET. Please go ahead, sir.

Thank you, Operator, and good afternoon, everyone. I'd like to welcome you to VACCITE's earnings conference call to discuss our 2022 results and to provide a business update. I am joined today by our Chief Executive Officer, Grant Pickering, our EVP and Chief Operating Officer, Jim Wassel, and our VP of Research, Jeff Harriman. Earlier this afternoon, we issued a news release announcing our results. Copies of this and our other news releases latest corporate presentation, and SEC filings can be found in the Investors and Media section of our website. Before we begin, I'd like to remind you that during this call, we'll be making certain forward-looking statements about Backsite, which are subject to various risks, uncertainties, and other factors that could cause actual results to differ materially from those referred to in any forward-looking statement. For discussion of the risks and uncertainties associated with these statements, please see our press release issued today, as well as our most recent filings with the SEC, including the risk factors set forth in our Form 10-K for the year ended December 31, 2022, and any subsequent reports filed with the SEC. With that, I'll turn the call over to Grant Pickering. Grant?

Thank you, Andrew. And to all of you on the call and webcast, thanks for joining us today. 2022 is a landmark year for VaxSight. We reported positive and unprecedented proof-of-concept, top-line clinical data for Vax24, our lead pneumococcal conjugate vaccine for the prevention of invasive pneumococcal disease in adults. These remarkable data validate our PCB franchise and our carrier sparing approach for broad-spectrum PCBs, as well as our cell-free platform. They also represent the culmination of nearly a decade of thoughtful and methodical research and development by the entire VACS site team and their partners. The findings of the large phase two study in adults 18 to 64 years of age indicate a potential best-in-class profile for VACS24 and demonstrate how our novel cell-free technology platform has the capability to overcome the limitations of other conventional approaches. These results and the foundation we have carefully created have us well positioned to advance our PCB franchise to potentially disrupt what has consistently been a crucial vaccine class societally and financially. I'm incredibly proud of the progress this past year, and I'm optimistic about our ability to execute and further scale our business in 2023 and beyond. As we look ahead, we remain focused on advancing both of our PCB franchise programs, Vax24 and Vax31, which we previously referred to as VaxXP with several upcoming milestones. BACS24, our lead PCV candidate, was recently granted breakthrough therapy designation for adults, adding to its fast-track designation, and we remain on track to deliver top-line safety, tolerability, and immunogenicity results in subjects 65 and older in the second quarter of this year. As we've discussed with many of you, for this pending readout, our focus from an immunogenicity perspective is almost exclusively on the and their comparability to the prior results in our much larger phase two study in younger adults. Given the smaller size of this older adult trial at 50 subjects per cohort, these point estimate GMRs are the most important focal point and not the lower bounds of the confidence intervals. This study was not powered to meet the regulatory non-inferiority standard, and as a result, these confidence intervals will be substantially wider. The combined data from both adult Phase II studies will enable us to perform the statistical powering necessary to tee up our pivotal Phase III non-inferiority study for Vax24 in adults. These data, along with the full six-month safety data from both studies, will facilitate our end-of-Phase II meeting with FDA, which we expect to hold in the second half of this year. To put the U.S. adult PCB market opportunity into context, today it is approximately $2 billion of the $7 billion total annual global market and is expected to be the fastest-growing segment of the market going forward. Key growth drivers include an increase in adult vaccination rates outside the U.S., and in the U.S., the potential shift to universal adult vaccination which itself would expand the market and open up the adult regimen to a prime blue schedule, as is the case in the infant market. The infant cohort represents the largest portion of the global pneumococcal vaccine market, with approximately $5 billion in annual sales. And we are thrilled to be launching our first clinical program in infants in the second quarter of this year. This follows FDA clearance of our IND application, which we announced last week. Bringing the broadest PCV to both infants and adults represents an opportunity to significantly reduce invasive disease across the entire population. To maintain a long-term leadership position in this market and to address the serotype replacement phenomenon that we would expect based on a widespread use of the 24-valent PCV, we continue to invest in our 31-valent FACTS31 program. Similar to Vax24, we believe our unique carrier-sparing PCD approach gives us the opportunity to expand the spectrum of coverage to address additional pathogenic stereotypes without compromising the ability to continue to vaccinate against previously circulating strains. This is critical since previously controlled strains have rebounded in prior instances where vaccine coverage was withdrawn. This puts VaxSight in a different position than other sponsors who are applying the conventional PCV approach and are forced to make sacrifices in an attempt to cover newly circulating strains. We have continued to make significant investments in the advancement of AX31 and expect to submit the adult IMD for this program in the second half of this year and deliver top-line data next year. Beyond our PCV franchise, we continue to progress and bolster our early-stage pipeline of novel vaccines, including VaxA1. conjugate vaccine candidate designed to prevent infections in both adults and children caused by group A strep bacteria, and VaxPG, which is designed to treat periodontal disease. We are also introducing a new program called VaxGI, a vaccine designed to prevent Shigella, a dangerous bacterial infection with significant fatality rates among infants in low- and middle-income settings. Jeff will provide additional details on our earlier stage programs later on today's call. Given the magnitude of the opportunity for our PCB franchise, we continue to invest to further solidify our manufacturing foundation. Our strategic relationship with Lonza remains strong, and we believe we are well positioned to support a potential AdultVax24 launch in the U.S. market out of existing Lonza facilities. Plans to ensure an expanding commercial manufacturing footprint to support the infant indication, and ex-U.S. markets are underway. Additionally, we further fortified our extract supply chain via our recent expanded agreement with Sutra BioPharma. From a financial perspective, we are in a strong position, with over $950 million on the balance sheet as of December 31st, aided by two successful follow-on financings last year, totaling $805 million in gross proceeds. This financial strength provides us the capital to fund through several important incremental milestones, which Andrew will highlight later. I'll now turn it over to Jim, who will provide more details on our PCV programs. Jim.

Thanks, Grant. I'd like to start by reiterating why developing broader coverage vaccines to treat pneumococcal disease matters. Despite widespread administration of effective vaccines, the global impact of disease remains significant, and is associated with high case fatality rates, antibiotic resistance, and meningitis. In the U.S. alone, adult and pediatric pneumococcal vaccines only cover approximately 60 and 41% respectively of circulating disease. As a result, the public health community continues to affirm the need for broader spectrum vaccines to prevent invasive disease or IPD. We designed Vax24 to deliver a PCB that includes all of the serotypes covered by the currently marketed vaccine. As confirmed by our strong clinical results from the Phase 1-2 proof of concept study, Vax24 has the potential to provide an additional 10 to 28% of protection for adults compared with the standard of care PCB. In this study, VAX24 met the approval non-inferiority threshold for all 24 serotypes and exceeded the immune response of PCV20 for 16 of the common 20 serotypes. Four of those demonstrated statistically superior responses. Based on these results, we believe we have the opportunity to set a new bar for the pneumococcal vaccines by delivering broader coverage and higher immune responses relative to the conventional PCV. Looking ahead, we expect top line data for our second phase two study in adults 65 and older in the second quarter of this year. With the upcoming second quarter data readout, I want to provide a bit more context about our objectives and the expectations for the study. As a reminder, the study design is identical to the first phase two study, but for the age and the number of subjects, at 50 subjects per cohort versus nearly 200 in the first phase two study. This smaller study was designed to further inform the powering of the pivotal phase three study, while adding to the body of research for VAX24. As Grant mentioned, it was not powered to demonstrate non-inferiority, so it is most important to focus on the point estimates for the OPA geometric mean ratios for each of the serotypes, rather than the confidence intervals. That's because you can expect these confidence intervals to be wider, and it's very possible that several may cross the 0.5 non-inferiority threshold. Yet, if the GMRs are between 0.6 to 0.75 or higher for each serotype, prior Phase III studies have shown that these ratios are adequate to achieve the non-inferiority threshold. We can glean some useful insights when looking at the results of the age stratification analysis of the first Phase II study as seen on slide 12. The graph to the left reflects the data we shared in October of last year from the full study population. in which the confidence intervals for the OPWA GMRs were relatively narrow. The two additional forest plots show the age-stratified OPWA GMRs. In the 60- to 64-year-old cohort shown on the far right of this slide, we had approximately 50 subjects. The results show a general improvement in the point estimates, which is encouraging, and as expected, a significant widening of the confidence intervals due to the smaller sample size. These confidence intervals are relevant because we enrolled approximately the same number of subjects per cohort in the 65 and older study. When we announced our top line data from the older adult study, given precedence A3 programs have enrolled subjects both older and younger than 65, we also plan to share pooled data that includes the results from the 60 to 64-year-old cohort in our prior study. Based on well-established development pathways, We anticipate the Phase 3 study design will include the same validated surrogate immune endpoints that have served as the basis for full approval of multiple prior PCBs. These were also the basis for our positive Phase 2 study. We expect top-line data from that pivotal Phase 3 non-inferiority study in 2025, and we will keep you apprised of other milestones following the planned regulatory interactions in the second half of this year. As our adult program advances, we are also excited to move into the infant population with Vax24 and plan to initiate a phase two study in the second quarter of this year. This study, outlined on slide 13, includes three doses given to healthy infants in the first six months of life. This is referred to as the primary series. Primary series is followed by a dose administered at 12 to 15 months of age, which is referred to as the booster dose. This study will be conducted in two stages, and we will compare Vax24 to the broadest standard of care, PCV, which today is PCV15. The Stage 1 portion of the study will evaluate the safety and tolerability of a single injection of Vax24 at three dose levels compared to PCV15 in approximately 48 infants at two months of age in a dose escalation manner. Participants will be randomized on a three-to-one basis and will be evaluated for safety at seven days after dose A Data Safety Monitoring Committee will evaluate these data, to which we will remain blinded, before making a go-no-go decision to enable us to proceed to a higher dose and ultimately to the second stage of the study. The second stage of the study is significantly larger and will enroll approximately 750 healthy infants. We will evaluate safety, tolerability, and immunogenicity for the same three doses of Vax24 and compared to PCV15. Participants will be randomized equally into four separate arms with serology drawn for immunogenicity evaluations at seven months and before and after the booster does. The key pre-specified immunogenicity study endpoints will follow convention, which includes an assessment of the percent of participants with IgG titers above predefined levels after the primary series and the IgG geometric mean concentrations after the booster does, both of which will be compared to PCV15 for the common series. We expect top-line data from this study following the primary three-dose immunization series by 2025, with the top-line data from the booster dose to come later. As Grant noted, we also continue to advance BACS31, our 31 valent PCV candidates, designed to provide coverage of approximately 95% of the IPD currently circulating in the U.S. adult population. We have now identified the additional seven serotypes included in VAX31 beyond the 24 serotypes in VAX24 and believe this breadth of coverage goes beyond any other PCB in development. We are completing IMD enabling activities and intend to submit the adult IMD in the second half of this year. With that, I'll turn it over to Jeff to provide an update on our early stage program. Jeff?

Thanks, Jim. In addition to our PCB franchise, we also have a robust earlier stage pipeline for which we continue to leverage our cell-free platform. VaxA1, our novel conjugate vaccine designed to prevent infections caused by Group A strep, remains highly relevant given the recent outbreaks that have captured news headlines. Group A strep is one of the leading infectious disease-related causes of death and disability worldwide and is a significant contributor to the prescription of antibiotics in the very young. IND enabling activities continue as VaxA1 advances to the clinic. These include analytical assay method development, immunological assays, and scaling up the processes towards the production of GMP-grade drug substance and drug product. We will give updates as to the anticipated timing of the IND submission as the program advances. I'm also pleased to share that we have achieved our goal last year to name a final candidate for VaxPG. our therapeutic vaccine candidate designed to treat periodontal disease. Periodontal disease impacts approximately 65 million adults in the U.S., resulting in productivity losses that are estimated at more than $50 billion per year. As we await the readout of our final preclinical studies, we have begun the scale up of the production of our candidate vaccine proteins, analytical assay development, and clinical serology assay development necessary to support eventual early-stage clinical studies. BaxPG leverages a key application of our cell-free platform, which is the ability to make tough-to-make protein antigens. This also has a bearing on the nomination of our new vaccine program, BaxGI. BaxGI is designed to prevent dysentery caused by Shigella bacteria, which is commonly referred to as Shigellosis. Shigellosis is a bacterial illness with no available preventative treatment. It affects an estimated 188 million people worldwide each year and results in approximately 164,000 deaths annually, mostly among children under five years of age in low and middle income areas. With the aim of reducing morbidity and mortality due to this disease, the WHO lists Shigella vaccine development as a priority goal. More information can be seen on slide 17. The central antigen in BACs GI is IPA-B. While this is a well-appreciated antigen, others have been unable to produce IPA-B at an amount sufficient to enable a commercial product. Yet, with our cell-free technology, we believe we can produce this antigen at substantially improved yield, allowing for commercial scale production. More information on this unique application of the cell-free technology is available in the publication section of our website. We look forward to sharing more updates on our earlier stage pipeline as the year progresses. I would now like to turn the call over to Andrew, who will provide a financial update.

Thanks, Jeff. I'll briefly cover a few financial points before turning it over to Grant for our closing remarks. With respect to the income statement, The details of our fourth quarter and year-end 2022 results and the reasons for the variances to the comparable 2021 periods are reflected in our 10-K filing and summarized in our press release. The year-over-year increase in R&D expenses was due primarily to higher manufacturing and clinical development expenses for Vax24 as we invested to prepare for the planned Phase III clinical trials and initiated and completed enrollment in two phase two clinical studies. Higher manufacturing expenses for VAX 31 as we advanced that program toward our anticipated IND application submission and increased personnel related costs in our R&D organization to support these key initiatives. The increase in G&A expenses was driven principally by higher personnel related and corporate costs as we invested in our team and infrastructure to support our overall growth. I will note the $23 million charge we incurred in the fourth quarter related to the agreement we entered into with Sutro Biopharma during that period. This amount reflects the upfront cash and stock consideration for the expanded rights we acquired and the option we have to acquire additional rights. The entire upfront consideration was expensed in the fourth quarter. As we look forward, we expect a substantial increase in 2023 expenses over full year and Q4 2022 annualized levels, excluding the $23 million SUTRO charge, particularly in R&D. The expected significant increase in R&D expenses is primarily a function of our investment to make the required clinical trial materials for our planned Vax24 Phase 3 program, which will consist of multiple trials. And to a much lesser degree, expenses related to executing our Vax24 Infant Phase 2 study, preparing for our planned Vax31 Adult Phase 1-2 study, activities to support a future BLA for Vax24, and an increase in employee headcount to support our anticipated growth. Turning to the balance sheet and cash runway, as Grant noted, we continue to maintain a strong financial position. ending 2022 with $957.9 million in cash, cash equivalents, and investments. Going forward, we expect that our balance sheet will be sufficient to fund our operating expenses and capital expenditure requirements through a number of important milestones over the next few years, including the top-line pivotal VAX 24 Phase 3 non-inferiority study in adults, for which data is expected in 2025. As we've noted before, our cash runway outlook does not reflect the potential costs associated with securing additional manufacturing capacity to support, for certain components of our vaccine, expected increased commercial quantities upon the potential approval and launch of X24 in the infant population and to expand into other markets outside of the United States. We continue to evaluate our alternatives to bring on such additional capacity. I will now turn it over to Grant for closing remarks.

Thanks, Andrew. It was an extraordinary year of validation for VAX 24 at our pipeline, and we are in a position to maintain our strong momentum in 2023. We expect this to be a milestone-rich year across our pipeline with a focus on VAX 24 and VAX 31. We look forward to sharing further updates as the year progresses and appreciate your interest by joining us today.

With that, let's take some questions. Operator?

Thank you. As a reminder, if you would like to ask a question, please hit star 11 on your telephone keypad. One moment while we compile for the Q&A roster. As well, please limit yourself to one question and one follow-up. Our first question will be coming from Jason Gilberry of Bank of America. Your line is open.

Hey, guys. Thanks for taking my questions. My first question is just, you know, as you move Vax24 into PEDS, just your thoughts on the biggest risk to translatability of vaccine efficacy going to the pediatric population with a higher valency product. And then my second question, just wanted to get your thoughts regarding the recent ACIP panel and this discussion on Pfizer's PCV20 in PEDS. And if the FDA ultimately agrees with Pfizer's view on totality of data and coverage at the fourth dose, Mike, that in any way alter how you're thinking about pediatric development of Act 24?

Thanks. Yeah. Hey, Jason. Thanks for the question. You know, there's been a long history of PCV development, initially beginning in PEDS and then graduating to adults, and then more recently starting in adults and then going into PEDS. And there's been you know, remarkable consistency using the same formulation, whether it was Prevnar or Merck's version vaccine advance, where they were able to take the exact same dose and same formulation in both infants and adults. Obviously, a different number of doses more being administered to kids, but there's been very good translatability across the age groups historically, but I think what we have seen shown consistently is bigger drop as expanded valence PCVs had gone from adults down to kids. And as you referenced, that was the subject of the discussion at last week's ACIP meeting, where, you know, the conclusion of the working group was, you know, on the one hand, you have the improved coverage of PCV20, but on the other hand, you have higher immune responses with the 15-valent So, you know, that's the tradeoff that's being required with the conventional technology, and that's what has us so excited about the data that we generated last fall, where Vax24 was able to show broader coverage, but, in fact, better immune responses against the common strains of the less-valent vaccine. So, you know, that's the existential choice that they're being forced to make, and, you know, the working group basically, you know, didn't really indicate how they were going to act, but that's the trade-off that they're going to have to consider if the April PDUFA date comes and the FDA approves Prevnar 20. Okay.

Thanks, guys.

Sure. Thank you. One moment while we prepare for the next question. Our next question is coming from Roger Song of Jaffrey's. Your line is open.

Great. Congrats for the queue, and thanks for taking the question. Maybe just quick two questions related to the statistics. So for the upcoming older adult phase 2 data readouts, understanding you want to focus on the point estimate given the smaller size, but maybe can help us to contextualize what is the level of point estimate you need to hit in order to have a reasonable chance in the phase three to hit a non-inferiority. That's number one. Number two is in terms of the sample size for phase three, since you are targeting around 1,000 patients, how should we think about with different data scenario in terms of the non-inferior versus the superior for some stereotypes? Thanks.

Yeah.

Hey, Roger. Thanks for the question.

Yeah. As Jim was touching on in the prepared remarks, you know, what we've seen consistently in the historical phase three studies for the adult space is that you can have as low as a 0.6 point estimate on a relative basis for your vaccine versus the standard of care, which would be Prevnar 20. And that has been about the minimum amount you need to show to make room for the point for the confidence intervals on either side. So, yeah, as we're approaching that 65 plus readout, you know, those are the sort of point estimates we'll be looking to exceed. And, you know, as we saw from the larger study that we read out in the fall, we were well in excess of those. So we're feeling reassured as we did the pre-specified stratification and we're able to look at the 60- and 64-year-old age cohort. So, yeah, I think we feel like we're tracking. And then last week, you know, the pediatric data for PCV20 was released, and once again, we saw that they could go down as low as 0.6, which they were at for a few strains. I know one in particular, they got to 0.6 in a number that were close. And again, that was adequate to exceed the non-inferiority threshold. So I think we're seeing that sort of consistency across adults and pediatrics that has been a bit of a hallmark in this space. And Oh, and then, Jim, why don't you take the second part about superiority?

Sure. I think that if what you've seen with our data for the 50 to 64, if that's reproducible in the 65 plus, we feel comfortable with the phase three size that we can repeat the statistical superiority for the four that we had seen in the 50 to 64. But we could, in fact, you know, if we, again, repeat what we've seen in the 50 to 64 in the phase three, go to as high as many as eight or nine, depending upon what the FDA says would be the requirement for the lower bound to demonstrate superiority. If it's lower bound of 1.0 or greater, we think that we can hit, you know, seven or eight of those.

That's great. Thanks. Thanks, Roger.

Thank you. One moment while we prepare for the next question. Our next question will be coming from David Ringer of SVB. Your line is open.

Thanks very much. And thank you for the updates. So I have two questions. First, obviously, you're planning phase two in infants with vaccine advances, the comparator. But assuming Prevnar 20 is approved in infants in April, and it's given an equal recommendation to vaccine advance by the ACIP this summer. Should we just assume that down the line in a couple of years, you would ultimately run a phase three in infants versus Prevnar 20? And then second, just to follow up on Jim's comment a moment ago, why would the lower bound be different for your phase three in adults. I think you had said, you know, if the lower bound was 1.0 or greater, you might be able to hit seven to eight of those or something. I just wanted to understand that a little bit better. Thank you.

Hey, David, thank you for the question. Yeah, so, you know, the ACIP conversation last week would suggest that PCV20 is on a path toward approval. We'll find out soon enough when the FDA decides in April. But looking forward to our own phase two clinical study that we've already guided to beginning in the second quarter of this year, you know, we have two different stages for that study. The first stage is a safety look for which we have been planning to compare to PCV15 and As you say, if they give a joint recommendation, you know, starting out against PCV15 will be more than adequate, but to your point, there is precedent where the agency is asked to compare to the broadest spectrum standard of care vaccine that's out there, so we will be making preparations in order to potentially switch from PCV15 to PCV20 for that stage two portion of that study. And that would be in accord with each of the investigators who'd be participating in the study. But given the interactions that we've had with the FDA, although we could theoretically have the alternative, I think the preference would be that the FDA would want us to compare to the broadest spectrum one, and we'll be doing what we can to potentially alter that original plan. But that will be a bit of a work in progress as things unfold with the FDA and then the ACIP. And then you had a second question with regard to the lower bound. I hope that wasn't something that I confused the issue around. lower bound threshold in order to show the non-inferiority standard is still to exceed 0.5 but that's where the lower limit of the 95th confidence interval needs to exceed and what we were saying was the point estimate if it's at 0.6 that's usually enough for that lower limit to exceed 0.5 but was that more related to the superiorities okay why don't you take it from there yeah

So for the superiority, what I've seen in the past is that sometimes the FDA wants to take into account some assay variability because if they're going to put a statistical superiority claim in your label, they want to make sure that you're absolutely sure that it's superior. So it wouldn't be materially higher than 1.0, but it might be slightly higher to give some degree of leeway in case there's some assay variability. So we don't expect it not to be 1.0, but even if it's even higher, I think we can achieve at least four and more. And then the last thing I'll say on that is that even if we aren't able to get superiority playing the label, that absolute immunogenicity value will then reset the bar for others to demonstrate non-inferiority again. So even if it's not on the label, we'll raise the bar for others who want to follow to demonstrate non-inferiority.

That's very helpful. Thank you very much. Thank you. One moment while we prepare for the next question. One moment, please. Operator?

Our next question will be coming from Seamus of – sorry, Seamus Fernandez of Guggenheim. Please go ahead.

All right, thanks. Thanks so much for the question. So I really wanted to drill in a little bit to VACS 31. Just hoping you guys could provide us with a little bit of color on what it's going to take to, you know, get that IND through, expand the manufacturing to the 31 valent targets. And then separately, I was just hoping you might help us understand where you see the real differentiation opportunity for VAX31. My impression was that the team was really thinking about some unique opportunities, particularly in otitis media, as an opportunity there. So just love to touch on VAX31. Thanks.

Yeah, thanks for the question, Seamus. So, as it relates to the VAX 31 program, we've guided to an IND going into the second half of this year. And, you know, like we saw with VAX 24 last year, these adult studies accrue and read out quickly. So, we have guided to being in receipt of the data from that study, top-line data, next year in 2024. In order for us to be able to guide to an IND in the second half, it means we're well on our way from a manufacturing perspective. We've said publicly that we made a surplus of the 24 drug substances that are in both Vax24 and VaxXE. So what we've been in the process of doing is manufacturing the incremental seven polysaccharides and then conjugates and then doing the drug product formulation work. So, what we've said in other conversations is that we're well on our way. We've made all the polysaccharides under GMP. We've made the conjugates and now we're heading toward the drug product formulation stage and, you know, so far so good. And As per today, we're maintaining that guidance of second half IMD filing. So really excited about that. And we believe we'll be able to leverage the same Lonza infrastructure for the production of Vax 31 that we've been budgeting for Vax 24. As it relates to the differentiation, maybe Jim and I can tag team this one. But, you know, for starters, in the adult space, Once you get up to 31 strains, you're effectively covering the evidenced pathogenic serotypes for pneumococci. So in the U.S., those 31 conjugates would cover 95% of the circulating disease. In Europe, it gets as high as 98%. So we really feel like you cover the gamut once you get to these 31 conjugates, and what we think we can do with the carrier sparing technology that we possess is not only, you know, scale to cover those newly circulating strains, but not take the pressure off those strains that have historically been pathogenic, but have been brought under control with vaccination, you know, currently. And so, this is the big opportunity that we have, and we don't believe we face the same tradeoff that the conventional PCV developers are facing. where to get the kind of coverage of the newly circulating strains, they have to, you know, no longer include those strains that have been taken out of circulation. So, you know, as we mentioned in the prepared remarks, you know, there's historical precedent where vaccination that's been withdrawn for currently controlled strains can result in rebound. So, you know, it's more than just the coverage advantage. It's also the maintenance of the no longer circulating strains. So that is a big opportunity for us in the adult space. And then your reference to the otitis media is another aspect of the potential advantage as it relates to the infant indication. So Jim, maybe you can talk a little bit about that.

Yeah, and I'll say first in the infant, FACTS 31 will increase coverage against IPV by about 25% or more from what would be the standard of care. if PCV20 makes it through the PDUCA. Even more so if it's referenced against PCV15. So there is still a substantial impact on invasive disease. But in terms of otitis media, especially 35B stereotype, there's a lot more contribution to otitis media in these incremental strains that are in VAX31. And you get 48% increase in coverage of otitis media. And when you think about it, the incidence rate is almost to the point where every kid gets at least one ear infection. So, and if about 35, 40% of those are strep pneumonia, you can see that that's a ubiquitous disease. So this incremental 48% could have a substantial impact obviously on medical expenses, but also on antimicrobial resistance, because it's one of the main drivers for antibiotic scripts in this young age group as well. So that's why we're excited about this for otitis media. Thank you.

Thank you. One moment while we prepare for the next question. The next question is coming from Yung Choi of Evercore. Your line is open.

Hi, this is actually John Miller at Evercore. But I'd love to ask about manufacturing space that you're talking about. Obviously, you talked about only being able to currently do the U.S., but what would it take to do a much larger manufacturing footprint? Is this something that you could do in-house? Would this be a larger Lonza deal? Maybe if you could put some bookends on how much a full-size manufacturing footprint might cost in various scenarios.

uh yeah hey john thank you for the question uh we'll tag team this one as well i'll have andrew uh bring it home but just just in terms of order of magnitude i think the way people should be thinking about that u.s adult uh launch related capacity in the tens of millions of doses whereas when you ultimately get into the full-fledged adult and infant and sort of global reach capacity PCV demand does get into the greater than 100 million doses per year sort of territory. So we're talking about that sort of line of demarcation. And then as it relates to the second part of that question, I'm not quite sure how far Andrew will be able to go, but I'll hand it to Andrew.

Yeah, John, again, thanks for the question. You know, we are looking at different options in terms of strategy. That includes doing it on our own facility. know using lines that with whom we have a great and long-standing partnership uh and other cdl mo options as well and obviously the magnitude will depend on on the route we take and when we pull the trigger i think something over the next 12 to 18 months we're likely to do so we can ensure we have the necessary capacity to meet the demand subsequent few years subsequent to the launch probably premature at this time to kind of range the options, but we're hoping to be in a position to do that in the not too distant future as we get further down this evaluation.

Okay, that makes sense. Is this the sort of thing that you expect Lonza would have the capacity to do already if you ask them tomorrow to do it?

Well, we can, you know, as Grant noted, we can satisfy the expected demand in the adult population in the U.S. out of the existing facilities. As to whether Monza today, that's one of the evaluations. It's likely, you know, they have basically built custom dedicated space for their clients, so it's likely we would need to work and partner with them to develop, build that capacity. So that's something that we're looking into, but it would likely be you know, an undertaking.

Understood. Thanks so much.

Thanks, John.

Thank you. One moment while we prepare for the next question. The next question is coming from Louise Chen of Cancer. Your line is open. Hi.

Congratulations on the quarter, and thanks for taking my questions here. One question we often get is, since you've already shown proof of concept for VAX 24, and because the market for PCVs is getting crowded, why not just move forward with VAX 31? And then second question I had for you was, on the market opportunities for VAX A1, PG, and GI, you know, what do you think of those? You know, how do you think about potential peak sales versus what you might see for your PCV? And when do you plan to start studies for these opportunities? Will it be within the next several years or after you kind of move through the pivotal stuff with your PCV? Thank you.

Thanks for the question, Louise. Yeah, I mean, certainly Vax 31 is going to be, I mean, I'm on record for calling it a category killer, but the reality is Vax 24 has a best-in-class profile in both the adult and infant market, and it is on the fastest track to introduction to the market. And so it's our primary focus to deliver that vaccine to the market. We believe that Vax24 is going to be a tremendous introduction for our carrier-sparing PCVs to the market. And we know that upon widespread use of Vax24, it's only going to enhance the rate of circulating disease for this strains over and above those that are in Vax 24. So we know Vax 31 is going to be important and we have it moving as fast as it can. And with what we know today, this is the right strategy for the company. If there was something to change either from a competitive dynamics perspective or from an epidemiology perspective, We would be in a position to revisit that, but we believe this is the right way to maximize value for Baxite, and we think it's the right thing to do societally as a global health solution. And then as it relates to the pipeline, yeah, we think that what we can do with this cell-free protein synthesis platform is going to continue to pay dividends. Vax A1 is our broad-spectrum group A strep vaccine. We've all been hearing about increasing rates of the circulation of group A strep infections, and like PCVs, group A strep afflicts adults and infants, so this is an important and what could be valuable intervention on both ends of the age spectrum. So we're moving that program forward aggressively. And because of that widespread usage, we do think it has blockbuster potential given the magnitude of morbidity and mortality that it can address. And then as it relates to the other programs, know vax pg we've nominated the lead candidate that we want to advance to address this therapeutic solution for periodontitis likewise we are very excited about the new vax gi program for shigellosis just on friday the cdc came out with an alert about an alarming rate of antibiotic resistance associated with um with shigella so we're moving them forward as fast as we can, but in sync with the value equation with PCB at the lead. But we certainly expect to, you know, bring on additional programs coming out of our pipeline going forward.

Thank you. Thank you. One moment while we prepare for the next question. And our next question is coming from Joseph Stringer of Needham. Your line is open.

Hi. Thanks for taking our question. Just given that there's a competitor of 24-valent pneumococcal vaccine program out there in mid-stage development, can you explain the relative importance of potentially being first to market? And do you think that your current timelines for Vax24 Phase 3 data readouts put you in a good position relative to that 24-valent competitor?

Yeah, thanks for the question, Joey. Indeed, there is another 24-valent vaccine that has reported phase two data in adults. It's the program that GSK is administering to in this moment. The difference is it's, you know, the defining aspect of pneumococcal conjugate vaccines is the covalent bond between the polysaccharide sugar and the protein. And that's then critically important because it ensures that both the sugar and the protein are co-presented to the immune system simultaneously. And non-covalent approaches haven't been able to assure that. So this is a non-covalent bound approach that they're moving forward. And what they've said in their own public filings is that they don't expect to be able to launch that program until the back end of this decade. So it does put Vax24 in a position to find its way to the market potentially significantly earlier than that particular program. And as it relates to first mover advantages, usually that's valuable unless the second or third to market have a material advantage. And when we look objectively about what we're doing, the data we've generated, we feel like we've got the more tried and true approach. We think we've got extremely compelling immunogenicity data and a safety profile that looks remarkably similar to the already approved pneumococcal conjugate vaccines. And the hallmark of these covalent bound PCBs is the ability to boost because that protein carrier and its T cell epitopes being presented to the immune system simultaneously are what deliver that key boost effect. And that's what is often lost when it's not presented simultaneously is that ability to deliver a boost. And certainly in the infant market, that's the price of admission has to be able to boost in a material way. And we think the adult market is going in that direction also. So, you know, we're always vigilant about the competition, but we think we're in an extremely enviable position in this moment as it relates to that particular program.

Great. Thanks so much for taking our questions. Thanks, Joy.

Thank you. This concludes today's conference call. You may all disconnect. Everyone have a great day.

Thanks, everybody.

The conference will begin shortly. To raise and lower your hand during Q&A, you can dial star 1 1.