Novavax, Inc. (NASDAQ:NVAX) Baird 2022 Global Healthcare Conference Call September 13, 2022 8:30 AM ET
Company Participants
Gregory Glenn – President, R&D
John Trizzino – Chief Commercial Officer and Chief Business Officer
Unidentified Analyst
Hey, good morning, everyone and welcome to Baird’s Annual Healthcare Conference. I am really pleased to be kicking off the conference with Novavax. And with me today, I have Gregory Glenn, President of R&D; and John Trizzino, Chief Commercial Officer and Chief Business Officer. Greg and John, thanks so much for joining us today.
A – John Trizzino
Great to be here as well. Thank you.
Question-and-Answer Session
Q – Unidentified Analyst
So to begin, could you provide overview of Novavax? And I think most people here would probably be familiar with Novavax now, but also kind of recent update on progress to-date?
John Trizzino
Yes. So maybe I’ll just kind of kick things off with where we are with our activities since the beginning of the pandemic it’s been quite an adventure as we chatted a little bit briefly this morning. But we are in such a strong position right now. All the fundamentals are in place. We have had over 50,000 subjects go through significant clinical trials over the last several years demonstrating that we have a very safe and very effective product. And so the information – clinical information is strong. We are now approved for use in over 43 countries around the globe. We have got manufacturing infrastructure in place in three primary facilities or owned facility in Czech Republic acquired in May of 2020, now our significant partnership with Serum Institute in India and then a strategic partnership with SK Bio in South Korea. And at this point, we are shipping product around the globe and establishing strong relationships as we move forward. And as we look forward to 2023, we can talk more about that as well. But I think we are well positioned. All the foundational elements are in place. ‘22 was a year of building out and catching up a bit with adolescent, recommended that label with BOOST label. We have some great news from yesterday from the EU about the label approval for heterologous. So being able to vaccinate on top of any previous vaccination, which is a significant accomplishment for us. And so we have – we did our sales going into ‘23.
Unidentified Analyst
Got it. It’s terrific and a lot of points that will be great to explore further in this conversation. Maybe to begin, could you tell us how Novavax’s COVID vaccine compares with mRNA vaccines? I mean, should we think of it just as kind of doing the same thing, but it doesn’t use mRNA or are there other differences that are important to consider?
John Trizzino
Yes, it’s quite different. So the approach to the mRNA is to provide essentially the gene that is injected into the human and human becomes a factor for me. In the process, the mRNA itself creates an inflammatory response as local that enhances immune response to the product expressed by the cell. Our vaccine is much more aligned with the traditional recombinant vaccine. So we actually make the protein that it’s our protein that’s unique and that we have completely the full – we call it full length with these proteins in nature simply [indiscernible] and they have a very exclusive treatment structure and function. So we make that as a nanoparticle. And then we have [indiscernible]. And the reason we do that is they [indiscernible], so it needs to be set up to receive, to react to them and process these doing very strong. So we have a traditional technology with recombinant and famous examples of safety and tremendous [indiscernible] very well. And so we capitalized on that mechanism of action, but we actually made a full part different [indiscernible] is reflected in the efficacy for our trial so we have any chance preventing infection which we do, I would have done that and so two randomized placebo-controlled trials [indiscernible].
Unidentified Analyst
Okay, got it. Yes. So, that really makes sense with the focusing on the proteins. Can we explore that more about what the implications are of that in the real world, say on efficacy, is there a way that you might see differences emerge over time?
John Trizzino
Could be. So durability is one of [indiscernible] of the recombinant proteins at some point with full [indiscernible] that affects last few years and that really comes with its ideal presentation of proteins throughout integration. Another thing we are seeing, which is very relevant, obviously, the virus – Omicron virus is not going to go away and in another way. So, the challenge is to privately address the new strain. And with the spike protein, which is [indiscernible] today versus what you thought, they are 92%, that’s because these [indiscernible]. So the way it evolves is to have served portions of the spike protein. And our vaccine shows those that we have just very effectively. So our Wuhan vaccine actually, we see a very similar response opposed to [indiscernible]. So, that’s a really important indication of our protein technology. And we can actually describe the scientific portion unchanged mean response and [indiscernible]. So that’s very important feature of our technology.
Unidentified Analyst
Terrific. And maybe one kind of related point is, what are the storage requirements for your vaccine?
John Trizzino
[Indiscernible]
Unidentified Analyst
Terrific. So let’s jump into the rollout and progress to-date of the COVID vaccine. It’s recently been authorized in the U.S. and around the world. Could you just provide us a kind of general update and the status of the commercial rollout?
John Trizzino
Yes. So, there is a couple of pieces certainly relative to that. We have put advanced purchase agreements in place at the beginning of last year. So we are shipping against those agreements to all the countries where we have regulatory authorizations. We are supplementing that with commercial teams around the globe right now. We have a plan for there to be regional office is a pretty typical standard format for doing this in place right now in Europe. We have a commercial office in Zurich with the support team in Brussels for policy in country managers, cluster heads. So we – right now, we are intending to pull through on the government purchased product, right. And that’s been a little bit slow out of the gate, I think mostly because there has been a lull in vaccination rates starting since about May, right. There was a lot of effort put forth for people to not wear masks and not be restricted from going out or travel restrictions. And so I think when you see that happening, you see a little bit less vaccination. But so similarly, in the Asia-Pacific region, we have a very strong relationship Australia, New Zealand, Singapore, Indonesia. We have shipped significant product through to our partner at Serum Institute. The Americas, for example, we – U.S., Canada, Mexico, South America, actively engaged in a commercial team that’s on all the primary areas, right. So, it’s product differentiation, how do we communicate product differentiation? What is the policy needs on a country-by-country basis, just the night tags, the technical advisory groups, payer strategies, right. What’s going to happen when we come out of the government purchased area and is the private and payer – private and public payer strategy is going to be in place? And the answer is absolutely yes. And then, of course, then there is consumer and physician education about what Greg described as a difference between the products, what should you expect is one better than the other, is one less reactogenic than the other. So these are all things that are part of the agenda for the commercial organization.
Unidentified Analyst
Terrific. Recently, we have seen some – I guess could you tell us about label expansions and the strategy there? And I know one of the points is the news yesterday that there was a label expansion in Europe that you might have to tell us about?
John Trizzino
Yes. So that’s been what the foundation laying has been for the last 9 months now is getting all of those pieces in place. So, the strategy at the beginning of the year is what was the commercial opportunity was to make sure that all those that had not been vaccinated receive a first and second dose of the vaccination. And while the vaccination rates were generally high, 60% to 70%, there is still some vaccine hesitant folks who really wanted to have an option about what they were being vaccinated with. And then there was, well, what’s going to happen with booster and then what’s going to happen with the pediatric population. So, some of those label expansions came a little bit later than we had hoped. And so therefore that affected a bit of the uptake in the June through current period of time. But all those pieces are being – are coming together right now. So, ‘22 has been a year of making sure that we have all the regulatory approvals that we want, having all the label expansion. So the heterologous boost, not just the homologous boost. We now have adolescents 12 to 17. We have a trial underway that’s going to take us from 6 months to 11 years of age, having our manufacturing infrastructure in place. So that when we get to ‘23, when it transitions from this pandemic period through a commercial period, we’re ready to go, all of that – all of the labels are in place, and we could ship product to all of our customers around the globe.
Unidentified Analyst
Got it. One of the things you mentioned a moment ago is how there seems to be this transition going on from governments being the acquirers and distributors to private payers at least in the U.S., could you tell us about – more about the implications of that as you grow the uptake of your vaccine?
John Trizzino
It was what was needed at the time, right? There needed to be a lot of product tried over a very short period of time. That product needed to be allocated broadly without any restrictions on what was the motivating factor for where that product was going. So I think aside from the fact that there was hopes and dreams of this kind of equitable allocation and I’ll comment a little bit about Gavi too in there because of what’s going on with whole Gavi and COVAX is there was billions of doses acquired that had to be distributed around the globe, right? We tend in these conferences to be a little U.S. centric, but we’re so global at this point. We could talk a lot about, well, what did the U.S. do and what did European Commission do and what did the vaccine task force to in the UK and what happened in Australia and all over the globe. And so all this product was being purchased countries became very nationalistic when they were trying to provide equitable access and that’s fine. So we’re now past that period of time, and now there is just a lot of product.
So where does the market go from here, right? What does the total dosage globally look like? What does total market size look like going forward. And everybody is trying to assess that. I mean there is ranges from a $5 billion a year market that looks a lot like flu to $30 billion market because there is going to be twice as many doses administered at 2x or 3x the price of a flu vaccine. So it’s tough to pin it down at the moment. But I think this transition at least for us, is important because the market is going to decide. Healthcare providers are going to decide. The consumer is going to decide what product they want and not some procurement department within each of these individual countries, and we believe that’s going to play in our favor.
Unidentified Analyst
Got it. I’d love to hear more about how that could play in your favor, a lot of intriguing dynamics that are all coming together.
John Trizzino
Yes. So right now, it’s very much based upon what commitment a country has made to acquire product. And there is no denying that Pfizer Moderna came out in front of us by about a year or so. And that’s fine. I think we’re now in a position where people are looking for a safe and effective vaccine, and we’ve demonstrated the basis for that. the ease of material handling, as you mentioned – asked Greg before about what’s the temperature – normal refrigerated temperatures. We don’t have to deal with frozen product and then thaw the product and then vaccinate, I think that’s a big deal. I think as we move forward, you’re going to see a transition to pre-filled syringes and not multi-dose vials. I think that there is reactogenicity is going to be an issue. I think there is data is still being collected about reactogenicity data still being collected about durability and protection. We feel we’re in a solid position in both regards there as well. And I think just the overall ability to communicate about the product, right? We’ve lost the ability at least for the moment to talk about the differences in the product. right? You don’t have the ability – and we’re getting closer to being able to do that. But up until this point, we’ve been a bit restricted on what was called promotional, right? So we have to educate and inform that you can’t be promoting. So I think transitioning to the commercial phase will allow us to communicate more effectively.
Unidentified Analyst
Great. So in thinking about the current upcoming – well, first, I’d ask, I’ve heard talk recently from some public health experts that the COVID vaccine market could transition to looking more like an annual flu-like distribution model. Is there a sense how this could play out?
John Trizzino
So there is a couple of similarities and there are a couple of differences, right? I think annual seasonal seems to be what is the consensus around public health officials about what’s going to happen? We’re going to need to have a revaccination every year in front of that normal winter respiratory season. So we expect to have that to happen. We probably expect to see ongoing mutations of the circulating virus. Virus is going to continue to circulate. I don’t think there is anybody that questions that what is going to be the frequency of strain changes. So I think similarities to flu in that regard right now, flus are quite relevant. You’re seeing one to two strain changes a year, so we will probably see that. I think there is still a very high fear factor with COVID, even though I think it’s lulled a little bit at the moment. And I think we know for flu vaccine year after year, I’ve been dealing with flu vaccinations for over 40 years now. in some years, people are worried about a bad season. I think there is already talk about a bad flu season this year, and that caused people to go out and get vaccinations. But I think overall, because of the awareness of COVID and because of the concerns of COVID, in general, you’re going to have a significantly higher demand for product on an annual basis than you do for flu at the moment. So I think that market size by dose is going to be significantly better.
Unidentified Analyst
That makes sense.
John Trizzino
And then the economics of COVID versus flu are very different at the moment, right? So I think there is no question that the cost benefit of having a vaccination has been proven over the last couple of years, right, whereas the economy was shut down and people weren’t going to work and restaurants were closed and significant hospitalizations, there is a significant public health cost that’s been eliminated by virtue of vaccinations. And so therefore, the cost benefit and therefore, the price associated with COVID will probably reflect that.
Unidentified Analyst
Got it. So – and piecing this together, it seems like this – there could be a lot of COVID vaccines distributed in the marketplace over the next couple of months or so as there is the seasonal uptake, and perhaps we will see that again about a year from now around October 2023. And my sense is that Novavax’s market share over the next couple of months will be relatively low, just based on looking at the company’s guidance, for example. But I’m curious, maybe looking ahead to the – a year from now in 2023, are there certain drivers that you’re focused on that could help increase Novavax’s market share in the 2023?
John Trizzino
Yes. Access to the product is probably number one as I look around the globe three of the top 10 pharmacy chains in the U.S. are carrying product. One would ask, why is that the case, right? Government is purchasing. There is no product risk associated with having the product. Yet, I’ve only got three of the major chains that are stocking the product, and they are trying to simplify their activities. I think when we get into commercial market, that’s going to be a different story on how we’re going to encourage them to stock the product. Similarly, in Europe, we’ve got products sitting in warehouses that are not necessarily getting out to healthcare providers or pharmacies. Europe is a bit of a different angle because it varies country by country as to where those vaccinations are being done. So I think access is first. I think, a greater awareness of the vaccines have not been come to known by their brand names. They have been come to known by their company names, right? It’s the Pfizer vaccine or the Moderna vaccine. Novavax is a very unique innovator, but this is a first time licensed product. And so we’re not that household name yet, but we will get there. So I think name recognition and confidence in the product that we’re delivering. I think most people are aware that there are differences between mRNAs and recombinant protein vaccines, but I think a little bit more health care provider as well as consumer education is going to be needed. And I think – those are probably the three primary drivers about what we’re going to be putting in place over the next 12 to 18 months.
Unidentified Analyst
Got it. So this season from public health officials in the U.S., there seems to be a push for these new the Omicron, I believe BA.5-specific mRNA vaccines from Moderna and Pfizer, and that’s what the talk seems about. And I don’t hear Novavax mentioned much from the booster standpoint as is not authorized there. What does the path look like for Novavax having a vaccine authorized as a booster in the U.S.?
John Trizzino
Well, this is where public policy has been difficult to kind of maneuver for everybody, frankly, right? Because in typical flu season, you have a southern hemisphere season and then it kind of cycles through that kind of informs what is the circulating strain at the time. You have got public health officials come together to decide what that should be and then there is a consensus about the product. I mean right now, you have U.S. demanding mostly because of it fits the story for mRNA to have a bivalent Omicron, including vaccine, and demanding that of the manufacturers. Greg will be happy to talk in a minute about why that’s not necessarily true for our vaccine and protein vaccine, and that our prototype vaccine will perform really well in defending against serious disease. But we haven’t had the same ask made of us by other countries around the globe. And so we are still shipping prototype vaccine into those countries, and we will expect to continue to do that through the end of the year and probably beginning into the next year before we get into that annual vaccination cycle. So, there is not a consistency. And then even for Pfizer, Moderna, there is a different product in Europe than there is in the U.S., right. It’s a BA.1 instead of BA.4, 5, bivalent and monovalent for Pfizer instead of just a bivalent. So, there is inconsistencies around the globe and what products they want. We – just to reiterate, we have not had a specific ask outside of the U.S. for the bivalent Omicron vaccine. So…
Gregory Glenn
I think that reflects the – we are all humble here. This virus has humbled us again and again by coming back in new forms, big surges, and that’s all, if you look globally, there has been an awful lot of vaccine deployment. So, this has been a real challenge for public health officials to think forward thinking. So, we were able to introduce our data on the breadth of our immunity in the VRBPAC, which happened, and that was all new information, knowing that we would be coming back and asking for boosting expansion. I think the boosting expansion for us will be very important and allow us to start to go into the market with something that is a fairly simple story. And what we have been doing, I think the data suggests that we really will be – have the right vaccine for the next new strain as well. So, boosting is really important. So, I think there is a scramble, right. We have new viruses. That’s combined with just the natural phenomenon of waning immunity, and those collide and people who getting vaccinated are getting sick. And so it’s been quite reflecting. So, a relatively conservative thing to try is what we have done – what has been done with flu is to try to create a strain match type vaccine. But it’s really unclear, in my view, whether it could be BA.5, for example, it’s plateaued and starting to disappear. So, I think that’s going to happen. That’s the track record of all the other viruses. And just ongoing March, I think we aren’t recognizing just there is an ongoing disease burden, that’s huge. So, the – even now, there has been kind of a downtick in the disease, the monthly rate of death and disease is sort of like the annual rate of flu. And so that’s not acceptable. I think public health officials really see that. And so I think we are in a good place. We have got a great technology. We have got proof that it could give broad protection. There is a lot of comfort with the recombinant vaccine. And so I think we are seeing really receptivity to this concept we presented at the VRBPAC that our prototype vaccine with Matrix-M gives broad levels of immunity and so it could be deployed in this environment. So, that is going to be an interesting few weeks. So, we view it as we are talking with the FDA, we hope that they will act quickly. We are working very closely with them. And I think we will be at some point, able to deploy our vaccine in this environment following U.S.
Unidentified Analyst
Terrific. So, if that materializes and results in an increased demand, whether it would be this year or next year, what does the supply chain look like? Will you have to be able to ramp up the supply, or is it already there to meet increased demand?
John Trizzino
Yes. Supply infrastructure is well in place. I think our partnership with Serum Institute in India has been important. Those – that facility was the facility that we applied for all of our first regulatory approvals and is capable of – more than capable of supplying ongoing need and more, right. So, there is a significant total supply capacity coming out of Serum. Again, we have our owned facility in the Czech Republic that is now ready and filed for regulatory approval so that we can then use that facility to supply Europe. And then we have another contract manufacturing arrangement set up with SK Bio. So, I think we had to start from ground zero, right, back in January of 2020, right. We didn’t have manufacturing capacity in place, have built that out over the last 2 years and confident that we are going to have more than enough capacity to go forward.
Gregory Glenn
If I could just add to that, the Serum Institute of India was the largest manufacturer of vaccines in the globe. And we approached them, they helped us. And they delivered a huge amount of the AstraZeneca vaccine prior to that standard track record. And our collaboration resulted in the FDA approval of their facility, which is really – it was a lot of work, but I think it represents the high-quality work that they do and their capacity is huge.
John Trizzino
Yes. I would just love to kind of go back to another important point that you made about this boost label, heterologous boost label, and we are waiting on the FDA. We have a heterologous boost label now in multiple countries. So, one would reasonably expect that FDA will decide similarly to the others. And so, we are eager to hear what their answer is and confident that we will see the same result that just came out of Europe.
Unidentified Analyst
Yes. Looking forward to that news.
John Trizzino
Yes. We are, too.
Unidentified Analyst
Prior to COVID, Novavax had a lot of successful data with a flu vaccine. Tell us about the potential to combine COVID with the flu vaccine.
John Trizzino
Yes. What kind of got lost over the last 2.5 years was our Phase 3 flu trial that read out just a few months after we were kind of getting into full swing for COVID, and it just ended up being back burnered, frankly, just as a matter of bandwidth and resources to advance that. And frankly, we were under an accelerated review or approval process, which would have required an efficacy trial to be conducted as soon as the product licensure. There is no way we could have done an efficacy trial over the last 2 years for flu because it’s just been virtually non-existent. And so you wouldn’t have had a high enough attack rate to do that. So, you know that we had a data readout of a Phase 1 trial that we conducted looking at flu again, but mostly in the context of a flu-COVID combo. So, we are continuing to pursue that. We are going to go into a Phase 2 with hopes and expectations that we can get into a Phase 3 trial shortly thereafter. The combo is – makes perfect sense, right. It’s the same technology platform, recombinant protein, nanoparticle. With Matrix, its annual seasonal vaccination. So, the combination too, makes sense. But you got to be careful of the conflict between the two antigens. And so we are being very careful about what that looks like. In any case, we know we have got two great products, whether we combine them or not, we know we have got a very highly effective flu vaccine, and we know we have got a highly effective COVID vaccine. But also, you well know, we were in a RSV, and we have learned a lot of lessons during COVID about our technology platform. That was a one dose, not adjuvanted into older adults. I guess if we wish we could do that over again, it would be two doses with an adjuvant with Matrix-M. And so I think that’s going to be part of our going forward. Our prioritization is bringing RSV back into the clinic.
Unidentified Analyst
Got it. So, that looks like we have reached our time, really exciting and dynamic story, so looking forward to following along. And thank you so much for the update.
End of Q&A
John Trizzino
Great. Thank you. John.
Gregory Glenn
Thanks, Jon.
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