NVAX - NASDAQ

Good morning and welcome to Novavax' Third Quarter 2024 Financial Results and Operational Highlights Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the call over to Luis Sanay, Vice President, Investor Relations. Please go ahead.

Good morning and thank you all for joining us today to discuss our third quarter 2024 operational highlights and financial results. A press release announcing our results is currently available on our website at novavax.com and an audio archive of this conference call will be available on our website later today. Please turn to Slide 2. 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 value drivers and near-term priorities, its partnerships and expectations with respect to potential royalties, milestones and 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, full year 2024 financial guidance and Novavax's future financial or business performance. Each forward-looking statement contained in this presentation is subject to certain 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 3. This presentation also includes references to a non-GAAP financial measure, which is forward-looking information for combined R&D and SG&A expense as adjusted for expense reimbursement from Sanofi under the Sanofi agreement. Please turn to Slide 4. Joining me today is John Jacobs, our President and CEO, who will provide an update on our progress during the quarter and highlight our four key value drivers. Additionally, John Trizzino, our President and Chief Operating Officer who will provide an update on our current commercial season; and Dr. Bob Walker, Chief Medical Officer who will discuss our clinical development and R&D strategy. Finally, Jim Kelly, Chief Financial Officer and Treasurer who will provide an overview of our financial results. I would now like to hand over the call to John Jacobs.

Thank you, Luis, and thank you, everyone, for joining us. Please turn to Slide 5. I'm pleased to be with you here today along with members of our executive team to discuss Novavax's progress during the third quarter as well as how we have advanced the new corporate growth strategy that we outlined during our second quarter call in August. This strategy is focused on driving future value from additional business development activities and organic research and development using our proven technology, all while reshaping the company into a leaner and more agile organization. This strategy has already resulted in the Sanofi partnership we announced this year, which has enabled us to transition away from Novavax's prior business model of devoting all our resources and time to commercializing one product, our COVID-19 vaccine, and to move instead toward additional value generating activities, which we will talk about more today. First, I want to take a moment to recap the four key drivers of value for this strategy and then share with you both the progress we have already made and our next steps on each. The four value drivers are Value Driver 1, the Sanofi partnership; Value Driver 2, our late-stage pipeline, CIC and Flu; Value Driver 3, leveraging our proven technology platform to drive additional partnerships and deals; and Value Driver 4, our emerging early-stage pipeline. We intend to deliver on these value drivers using a more lean corporate infrastructure built on the core capabilities needed to execute this new approach and disciplined expense management, on which we have already made significant progress and will elaborate on later in the call. So first, let's talk about Value Driver 1, the Sanofi partnership. As we discussed last quarter, the partnership with Sanofi is a license and collaboration agreement that combines Novavax's proprietary protein and nanoparticle technologies, Matrix-M adjuvant and our R&D expertise with Sanofi's world-class leadership in launching and commercializing innovative vaccines. Sanofi will take the lead co-commercialization role for our COVID-19 vaccine starting in 2025, enabling us to monetize our existing COVID-19 vaccine program through double-digit royalties from Sanofi sales into the future. We also have the potential for multiple additional revenue streams generated from other vaccines developed by Sanofi, either in combination with our existing COVID-19 product or using our Matrix-M adjuvant as they look to leverage the power of our proven technology. As a reminder, in the second quarter, we received an initial cash payment of $500 million upfront and an approximately $70 million equity investment in Novavax. We are also eligible to receive up to $700 million in additional milestone payments related to our COVID-19 vaccine and Sanofi's own combination COVID-flu vaccine. Along with future milestone payments and royalties we anticipate from these programs, we also have the potential for additional royalties and/or milestones from other vaccines developed either in combination with our existing COVID-19 product or using our Matrix-M technology. As you can see, Sanofi's strong global presence and proven track record in developing and commercializing vaccines, combined with Novavax's R&D expertise, has created the potential for this partnership to drive significant value for years to come, both for our shareholders and the people who would have broadened access to our vaccine technology and the protection it can provide. Our Second Value Driver is Novavax's late-stage pipeline. Our late-stage pipeline is comprised of our COVID-19 influenza combination and standalone influenza vaccine candidates. We believe that combination vaccines such as our CIC candidate represent a significant market opportunity, and we're excited about the prospect of advancing these assets. In addition, our standalone influenza vaccine program is based on a platform that has demonstrated enhanced immunogenicity in late-stage trials. And we believe that if successful, this could be the first and only recombinant based protein adjuvanted flu vaccine in the market and one which can serve as the foundation to advance an innovative and differentiated pandemic influenza program as well. As we previously communicated, our intention is to partner these assets. Dr. Bob Walker will provide updates on this program shortly. And now moving on to Value Driver 3, which is to leverage our proven technology platform to drive additional partnerships and deals. Our proven tech platform consists of both our Matrix-M Adjuvant and our nanoparticle protein based technology, which we believe provide us the potential for multiple business development opportunities with a diverse set of potential partners across a range of vaccines. We believe Matrix-M holds incredible promise, not just to develop our own vaccines, as we've already seen with our marketed COVID-19 product, but importantly, to also potentially improve other companies' existing vaccines and/or enable them to develop new vaccines using our adjuvant. Last quarter, we shared data from existing vaccines combined with Matrix-M to demonstrate how our adjuvant can be leveraged to potentially improve them. The data we showed of inactivated influenza and bacterial polysaccharide vaccines adjuvanted with our Matrix-M are just two examples of the significant value we believe our adjuvant could provide to the existing vaccine portfolios of other companies and we continue to explore other ways to leverage its potential. And finally, Value Driver 4, our emerging early stage pipeline. Our Fourth Value Driver focuses on generating additional value from our tech platform through the development of a new diversified pipeline. Employing a disciplined approach, we intend to develop an early stage pipeline based on our proven technology platform, starting from our core of infectious disease and potentially going beyond that core into other areas where we see the most unmet medical need and the greatest potential for our technology. Importantly, we intend to expand our pipeline strategically using a rigorous set of guiding principles aimed to focus our time and investments on the highest value programs. This will include considerations such as scientific rationale and reasons to believe our technology can be differentiated and win in a specific therapeutic area, market opportunity and the level of unmet medical need, emerging competitive pipelines, attractiveness of the asset to other companies and ability to partner and several other factors to help us make high quality choices with our investments in R&D. Importantly, we intend to execute this strategy in a capital efficient manner, one that maintains our flexibility and preserves the potential for maximum value creation. Dr. Bob Walker will expand further on both how we intend to apply these guiding principles and our next steps during his portion of today's call. So in summary, our corporate growth strategy channels all of our resources into driving value from our proven technology platform via partnering in R&D and to doing so in a much more lean and efficient organization. For the remainder of this year and in line with our key value drivers, we're focused on executing our four priorities, which you will see on Slide 6. Priority 1, the successful execution of our partnership with Sanofi. Priority 2, driving incremental value from our technology platform with the advancement of our CIC and Flu programs, the ongoing development of an emerging early stage pipeline and pursuing new business development opportunities. Priority 3, further reduction of our R&D and SG&A costs in line with our guidance, along with implementing additional reductions to scale as we enter 2025 and beyond; and Priority 4, delivery of our updated COVID-19 vaccine for the '24-'25 vaccination season. Before I hand the call over to additional members of our team, I want to take a moment to welcome Dr. Ruxandra Draghia, our new Head of R&D, who started just yesterday. Ruxandra brings more than 20 years of extensive clinical, corporate and global public health expertise to Novavax and we believe she will be instrumental as we evaluate our future pipeline and opportunities for our tech platform. You will hear more from Ruxandra in the coming weeks as she settles into her new role. Now to discuss our third quarter in more detail, I'd like to turn the call to John Trizzino for our operating updates. John?

Thank you, John. Please turn to Slide 7. We are pleased with the progress in our COVID vaccine program through the first part of the '24-'25 season. And with this progress, we are already seeing that season-to-date, Novavax's vaccine administrations in the US already outperform those done in the entire '23-'24 season with our current weekly market share averaging about 3%. Let me take a moment to highlight our progress last quarter, all of which we believe will position Sanofi for success when they take over lead commercialization of Nuvaxovid in the '25-'26 season. Please turn to Slide 8. Our primary commercial efforts remain dedicated to the largest market opportunity, the US. We initiated our '24-'25 COVID-19 commercial season in mid-September shortly after achieving our goal to get our vaccine authorized at the end of August in line with the timing of the competitors in order to facilitate a timely season start. Compared to last season, this was a significant improvement in timing for Novavax. At the same time, the current COVID-19 vaccine season initiated three weeks earlier in the US as compared to last season, and we believe that if current trends continue, the total market size could be approximately 40 million to 50 million shots in arms this season. Specific progress for this season also included our product presentation offering our vaccine in a prefilled syringe compared to last year's 5-dose vial presentation. Broader access and improved contracting, doubling the number of locations with Nuvaxovid available in over 30,000 locations, including CVS Pharmacy, Rite Aid, Walgreens, Meijer and hundreds of other grocers and thousands of independent pharmacies. Higher visibility of Novavax on vaccine schedulers in most major retailers and a targeted commercial approach executing marketing and selling activities targeted to select opportunity markets rather than last year's broader national approach. Please turn to Slide 9. In situations with more favorable market access contracts, Novavax is demonstrating the ability to compete with the mRNA vaccines. In one regional supplier of vaccinations, Novavax has achieved approximately 70% market share as reported by that retailer. In addition, we executed on a targeted marketing strategy geared towards select age cohorts. And to-date, we are seeing that 53% of the Novavax claims are in our primary target audience of 65 plus. It is important to note that this audience aligns to ACIP's recent recommendation for this age cohort to revaccinate this season after their initial updated seasonal dose. At the same time, we experienced some challenges that have prevented us from achieving our initial market share goals, namely minimum purchase commitment contracts for mRNA vaccines, limited initial retail stocking of our vaccine, a limited commercial infrastructure of just 30% of our previous size and three month product expiry dating for our prefilled syringe, which we intend to work with the FDA to improve for future seasons. We are managing through these challenges and we do not believe our current market share is representative of the overall demand and potential of our COVID-19 vaccine. In fact, of the greater than 30,000 retail outlets stocking our vaccine, we have seen an increase in the level of restocking quantities demonstrating growing demand. As we advance through the remainder of the season, we believe these efforts will continue to strengthen the opportunity and establish a solid foundation for Sanofi in preparation for next season. We continue to work closely with our partner to enable a seamless transition of lead commercial activities. We believe that Sanofi's significant scale and strong presence coupled with the increasing consumer demand we have seen for Novavax's COVID-19 vaccine will result in successful upcoming seasons for the product. Please turn to Slide 10. Outside of the US, we were pleased to receive marketing authorization for our updated vaccine from the European Commission last month. We remain focused on conducting a lean, limited and targeted commercial season in Europe and Asia, while we continue to work with Sanofi to position them to take over lead commercial operations for the '25-'26 season. In other regions, as we've noted in the past, we are continuing to prioritize the completion of our APAs with the intent to transition key markets to Sanofi. In summary, we believe there remains a continued demand for COVID-19 vaccines and believe that Sanofi with its large commercial reach and greater resources will drive additional market share in 2025 and beyond. With that, I'd like to hand the call to Bob to discuss our research and development updates.

Thank you, John. Please turn to Slide 11 and 12. Today, I will elaborate on important updates in our research and development program that support each of the four key value drivers John Jacobs outlined earlier. I'll start with our updated '24-'25 COVID-19 vaccine, followed by our late-stage program in CIC and influenza. Then I'll discuss expanding potential opportunities for Matrix-M and conclude with an update on our internal preclinical pipeline and our R&D strategy going forward. Please turn to Slide 13. With regard to our '24-'25 COVID-19 vaccine targeting the JN1 strain, we continue to monitor the performance of our vaccine against newly circulating variants in non-clinical models. And these data continue to demonstrate broad cross-neutralizing antibody responses to each new strain, including both KP.3.1.1 and XEC. Please turn to Slide 14. This slide shows neutralizing antibody responses pre and post receipt of our JN1 vaccine in rhesus macaques. You can see that the antibody titers are robust against all of the variants tested, including the KP.3.1.1 and XEC variants that are now widely circulating. So these data for the newer variants indicate that our vaccine should provide acceptable coverage against the variants that are currently circulating. Please turn to Slide 15. I'll now move on to our late-stage pipeline comprised of our COVID-19 influenza combination or CIC vaccine program and our seasonal influenza vaccine program, which is the second value driver that John discussed. We issued a press release yesterday stating that the clinical hold on our IND for our CIC and standalone influenza vaccine candidates has been removed by the US FDA. The safety event recently reported by a participant in our Phase 2 study was reviewed in detail by the FDA along with our responses to their comments and they determined that we had satisfactorily addressed all clinical hold issues. The information provided to the FDA supported our assessment that the serious adverse event was not related to our vaccine. We intend to begin enrolling our Phase 3 immunogenicity trial as soon as possible. Please turn to Slide 16. Data from our now completed Phase 2 CIC study support non-inferior immunogenicity of both our CIC and influenza vaccines. During the Phase 3 pre-IND process, the FDA and Novavax aligned on a single Phase 3 trial for both candidates with an updated trial design as shown in the graphic on the right. Participants will be randomized to one of four vaccine arms and immunologic comparisons to establish non-inferiority for CIC will be made to the Novavax COVID-19 vaccine and to an age recommended commercial influenza vaccine. Immunologic comparisons to establish non-inferiority for our Novavax seasonal influenza vaccine will also be made to the same commercial flu vaccine. The trial will enroll adults aged 65 years and older and is currently planned to be conducted in Australia and New

Thank you, Bob. Please turn to Slide 19. Today, we announced our financial results for the third quarter of 2024. Details of our results can be found in our press release and in our 10-Q filing. Please turn to Slide 20. We remain focused on improving the financial strength and performance of Novavax to drive shareholder value. I'll start by covering key themes for the third quarter and a look towards the remainder of 2024 and beyond. For the third quarter of 2024, Novavax recorded total revenue of $85 million including $38 million primarily from the US market sales and reflecting initial stocking orders that were in line with our expectations. Although we are seeing an improvement in market share compared to the 2023 vaccination season, our current market share of approximately 3% is trending below our full season expectations. And as a result, we are updating our full year 2024 total revenue guidance. As we continue to transform Novavax into a more lean and agile organization, we reduced our Q3 2024 R&D and SG&A expenses by 26% compared to prior year. For full year 2024, we are reiterating the guidance range for R&D and SG&A expenses of between $700 million and $750 million. At midpoint, this reflects a decrease of approximately 40% and $500 million as compared to full year 2023. Novavax is prepared to initiate an additional cost reduction program to reduce combined R&D and SG&A expenses in 2025 and 2026 to better align our go-forward cost structure with our value creation strategy. We maintained a strong cash position and ended the third quarter of 2024 with over $1 billion in cash and accounts receivables. And finally, we remain focused on prioritizing the completion of our APAs to enable a smooth transition to commercial leadership to Sanofi. Please turn to Slide 21 for a more detailed view of our third quarter 2024 financial results. For the third quarter of 2024, we recorded total revenue of $85 million compared to $187 million for the same period in 2023. Of note, product sales for the third quarter of 2024 were $38 million compared to $2 million in the same period for 2023 as a result of higher US market sales in the current quarter. Our cost of sales for the third quarter of 2024 were $61 million as compared to $99 million for the same period in 2023. For the third quarter of 2024, Novavax's combined R&D and SG&A expenses of $158 million reflects a 26% reduction from the same period in 2023. Approximately $30 million of this current quarter amount is related to commercial and medical affairs related spend that we do not expect to incur after this year. Based on this, we believe we're on track to further reduce our cost structure in 2025 and beyond. Please turn to Slide 22. We are committed to creating a more lean and agile organization to align with the company's market opportunities. To advance that goal, we expect to reduce our R&D plus SG&A to approximately $350 million in 2026 an approximately $1.4 billion and 80% decrease when compared to full year 2022. For 2025 and net of expected reimbursement, we expect our non-GAAP combined R&D and SG&A to be approximately $450 million. To achieve this, Novavax is prepared to initiate an additional cost reduction program to better align our go-forward cost structure with our value creation strategy. As we transition lead commercial activities to Sanofi, this will enable the reduction of commercial and supply chain costs. We are also actively exploring the sale of our Czech Republic manufacturing facility, which could provide both cash proceeds and a reduction to our ongoing operating cost. Please turn to Slide 23. Now turning to our updated financial guidance for the full year 2024. We are revising our guidance for total revenue to between $650 million and $700 million from our prior guidance of $700 million to $800 million. At midpoint of $675 million this is a $75 million decrease to our total revenue guidance. Based on our revised full year 2024 product sales guidance, we now expect product sales of between $175 million and $225 million. At midpoint of $200 million this revised guidance includes $100 million from APAs delivered in the first half of 2024 and $100 million commercial market product sales from the US market and ex-US markets in the second half of 2024. The decrease of $125 million at midpoint compared to prior guidance is driven primarily by our COVID-19 trends in the US market. We are also revising and increasing our full year 2024 licensing, royalties and other revenue guidance and now expect to achieve $475 million. The $50 million increase compared to the prior guidance is driven by a combination of revenue recognition for the upfront payment and cost reimbursement under the Sanofi agreement. A few comments on our expectations for 2025 and beyond. For the remaining APA agreements, our intent is to amicably negotiate or deliver doses or when appropriate exit agreements with the goal of these activities to be cash flow neutral or favorable on a go-forward basis. To be conservative, we have removed APA sales from our forward looking revenue expectations until further clarity is available for each. Our current operating plan, including the multiyear expense targets, highlight a path to our goal of maintaining at least one to two years of cash on hand prior to receipt of cash flows from the Sanofi agreement in the form of milestones and royalties. Please turn to Slide 24. As we enter 2025, the future cash flows to the company under the Sanofi agreement become of greater importance. We expect up to $700 million in near-term COVID-19 and flu COVID combination milestones under that agreement. For the $350 million in Nuvaxovid COVID-19 milestones, we expect to complete database lock of a related pediatric clinical trial in the fourth quarter of 2024, which would enable earning of the first $50 million milestone. Revenue recognition for this milestone will be allocated over the transition services period through 2026. All other milestones under the agreement will be recognized in full in the period when earned. The $175 million BLA milestone is anticipated to align with our BLA PDUFA action date and approval, which is presently targeted for April 2025. The two $25 million authorization transfer milestones are expected to follow as we enable Sanofi to commercialize Nuvaxovid in the US and Europe for the '25-'26 vaccination season. The $75 million technology transfer milestone is expected to follow the completion of our transition services obligations that we currently estimate to occur in late 2026. For the Sanofi flu COVID-19 program, there are two milestones totaling $350 million related to the development and first US commercial sale. Sanofi recently noted on their Q3 earnings call that they expect to start their Phase 1/2 study this year and if that data are positive, they would move towards Phase 3 in 2025. In addition, Novavax is eligible to receive tiered royalties on net sales from COVID-19 standalone and COVID-19 combination products. This enables Novavax's meaningful participation in future economics from the current and future products under this agreement. Novavax will support Sanofi as it prepares to advance all programs associated with this agreement and Novavax will be eligible for cost reimbursement across a host of spend categories. We expect this reimbursement to occur during 2025 and 2026 as we supply product, conduct R&D and technical transfer activities. For products supplied to Sanofi, we will book both cost of goods sold and reimbursement revenue. We look forward to sharing additional updates as we seek to improve Novavax's financial performance, cost structure and strength to deliver shareholder value. With that, I'd like to turn the call back over to John for some closing remarks.

Thank you, Jim. Please turn to Slide 25. Thank you all for joining us today and thank you to all our employees for their continued efforts in advancing our business. I am proud of our accomplishments to-date and excited about our opportunity to drive value in the future with our new strategy. I'd now like to turn the call over to our operator for Q&A.

We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Roger Song with Jefferies LLC. Please go ahead.

Thank you. Thanks for the update and then congrats on the speedy removal of the clinical hold on your CIC and the flu program. So a couple of questions from us. Maybe first on the clinical hold removal, understanding you want to start a Phase 3 as soon as possible, can you give us some clarity around the timing of the start? What will be the gating factor for you to start the Phase 3? And then given this severe SAE occurrence, how much additional safety requirement now is in place or required by the FDA, any potential post marketing requirement suggested or recommended by the FDA? I have a couple of follow-ups. Thank you.

Thank you, Roger. We'll let Bob Walker address your questions, starting with timing. Bob?

Great. Thanks. Well, first of all, let me just say we got the news on Friday. So we after market close or close to market close. So we've had the weekend and yesterday to assess. And I would say that we're working on study logistics right now. Our intent, of course, as you've heard is to start the trial as soon as possible. We're not prepared to give you a specific starting date at this moment, but expected in the coming weeks, we will be able to provide more clarity on the specifically when we plan to start the trial. Let me just remind you that the safety event that was reported to FDA led to the clinical hold was determined by us not to be related to study vaccine. And based on the FDA's reaction, it appears that they concur with our assessment. It certainly substantiates our assessment. So in terms of additional safety precautions that need to be introduced, they're really the standard safety oversight and monitoring that essentially was already in the trial or with slight tweaks in response to the back and forth while we were assessing this event. So what I'm trying to say is we don't expect significant impact from any of those kind of operational changes to the protocol other than the standard types of impacts that are that everyone encounters when they make administrative changes to a protocol.

And Roger, this is John. Thank you for your congratulations on that hold being lifted. We're very excited about that. And we were to just build upon Bob's answer, we were ready to go, on track to go, Bob, right in Q4 with our study. So having this lifted is excellent. There's just a little bit of work we need to do. But in the near-term, we think we'll be able to start that study. We're just avoiding giving a specific date yet as we're still digesting the feedback from FDA, which is clear and expected and we just have to get that reset and going. But we think in the near-term we'll be able to restart that study. We're very excited about it. Thank you.

Great. Thanks for the clarity. Yes, I understand you just got the news and then thanks for confirming you're still going to start a trial in 4Q. So maybe, shift to.

No, Roger, let me just clarify. We're not giving a timeframe right now on it. We're just digesting the feedback and have to reset the logistics to get it started. So it may be sooner rather than later, but we don't want to give a specific date yet until we finish our planning. That's what we were saying. So not giving a specific time frame yet, but in the near-term, we should be able to provide clarity and we think we'll be able to start it in the near-term.

Got it. Okay. Near-term. Thank you. And then shifting towards the commercial, so you got a $38 million commercial sales mostly coming from US. Can you give us some additional color around the stocking versus the real short arm? So we all track IQVIA data. It seems that you've got at least from the -- for a third-party, the script capturing, you have around 160,000 scripts in the retail channel. So how should we think about the percentage captured by the retail versus non-retail? And the last part of the question is what's your working assumption on the net price per dose? Thank you.

Go ahead, John. You want to take that one?

Yes. So just a little bit of clarification on some of the stats there. I think what we're seeing so far with the IQVIA data, which everybody is monitoring, is a season that started a bit earlier than last year, and so we're seeing reflected in some of the trend lines. We're seeing a leveling off of shots in arms into the marketplace through retail pharmacies, and I think that's consistent with what you would see as a normal pattern of vaccination. The trend lines that we're seeing are also indicating that there's a slight increase in overall demand in shots in arms this year over last. We'll have to see how the rest of the season progresses to determine whether or not that's going to hold true for the balance of the full season, the full '24-'25 season, just to be clear about how some other numbers have been reported by other companies. This would take us through the first quarter. So far, we're holding at about approximately 3% market share. We're significantly greater even season-to-date than we did in all of last season, some three to four times the total number of what we did. Already in market expect that to continue. As I mentioned in the script also, we were focusing on the 65 plus market. There's some updated policy that's going to enable some second doses to be administered late in the year and early into next year, so that we'll see some benefit there. But the IQVIA data is hovering somewhere around total 800,000 doses or so shots in arms at this point. And I think that that's significant.

Got it. Thank you.

And the next question comes from Mayank Mamtani from B. Riley Securities. Please go ahead.

Good morning, team. Thanks for taking my questions, and welcome aboard, Ruxandra. So, maybe just on, following up on the prior question, you know, just thinking, forward-looking in terms of having the vaccine now as part of Sanofi's product portfolio and distribution channel next year. Are you able to comment on, you know, what, you know, trends around net price? I know market share might be too early to comment on, but just, split by channel and some of the pricing dynamics could look like. And then I have a follow-up.

Go ahead, John T.

This is really important so far about what is happening this year versus what is happening next year with Sanofi, right. Of course, this partnership is strategically very beneficial to us. We're not seeing the benefit yet of that relationship and we're beginning through all the transition activities. There's a high level of cooperation and collaboration across all markets. And so therefore, what we expect to see happening as they fully embrace the relationship next year is the depth and strength of their marketing capabilities globally, US, Europe, across the globe, but also remember how deeply penetrated they are in the vaccine space, including influenza. Having a COVID vaccine available alongside of their flu vaccines should have a dramatic impact in overall demand. So we see significant progress being made as we go into the '25-'26 season.

Understood. And then on the spend structure, typically, how are you thinking steady state in this '26-'27 timeframe, knowing, you know, you may not have a commercial infrastructure there and may not look to perhaps even do a large scale Phase 3 program beyond, obviously, this Phase 3 CIC program that you're executing?

So I think to make sure I understand your question correctly is, a commercial infrastructure to support any other future development activities, if that's the question. I think what we're primarily looking at is partnering some of these late-stage assets, right. And not having the significant cost infrastructure to support a commercial organization going forward. And we would see the benefit of partnering out these assets going forward, which is exactly what we did with Sanofi and what we potentially do with our own CIC program going forward.

And Mayank if you kind of look back at the some of the prepared remarks I provided earlier, one of the things you're going to see I noted is this quarter we had approximately $30 million in spend related to commercial and call it field-based medical affairs activities. So it annualized to about $120 million that we don't expect and anticipate spending in future years. And that is part of the reason why we've got significant confidence in our ability to continue to decrease our run rate on R&D and SG&A in line with the guidance we've been providing.

Understood. And lastly on your next IND filing coming from Bob and Ruxandra. I know you talked about a number of pipeline initiatives. Just maybe if you narrow down on what could be the next IND filing for, you know, one of your prioritized programs. And in the same context, if you are able to talk to also Sanofi's prioritization of any next candidate beyond the Nuvaxovid would also be helpful. Thanks again for taking my question.

Bob, do you want to take the question on thoughts around our next IND and how we're approaching that process?

Yeah. Sure. As I mentioned in the R&D strategy going forward, we do have two candidates right now that are moving toward IND and in or soon to begin IND enabling activities. And so that's the RSV combination program as well as the pandemic influenza. So too soon I think to give you anything more specific in terms of timing, but those are the two that I think I would regard as being next in line. And then the other areas that we talked about, we'll be able to give you more clarity in the months ahead. But, yes, okay. I think that answers your question. Let me know.

Thank you, Bob. And Mayank, you asked a second question about Sanofi. Obviously, in their most recent earnings call, they noted they're preparing to initiate a Phase 1/2 CIC study this year and with a positive readout, if they get that positive readout, they would move towards a Phase 3 sometime in 2025. You can go check their commentary to clarify that for your notes. And then we can't comment on any other things that Sanofi may be working on right now. But I think just referring everyone back to that contract and the agreement that we have where there are multiple opportunities to partner with Sanofi on our Matrix-M adjuvant and they can also make that they're choosing multiple combinations with our COVID vaccine should they choose to do so. Each new asset they would develop with Matrix-M has towards 200 million in potential one-time milestone payments and ongoing royalties for years to come. So certainly a lot of opportunity in that contract over time to develop multiple assets should they choose to take that pathway, you'll have to look to them for further commentary on their plans.

Noted. Thanks for that helpful color and congrats on the progress.

Thank you, Mayank.

And the next question comes from Alex Stranahan with Bank of America. Go ahead.

Hi, guys. It's Matthew on for Alec here. Thanks for taking our questions and congrats on the quarter. Just two quick ones from us. Curious if you can provide some color on the net price for Nuvaxovid this year and how much of that channel was outside of retail and whether you expect that to be similar going forward in the future years?

Sorry if you could just restate the question real quick. Sorry.

Yeah, just looking for some color on the net price for Nuvaxovid this year and how much of that was outside of retail and whether you expect those dynamics to continue in the upcoming years.

Yeah. Go ahead, Jim.

Excellent. Hey, happy to address the net price question. While we have not given a specific net price, some of the feedback that I've shared more generally about this marketplace has been the following. All three COVID vaccines on a gross basis are approximately the same around 140 per dose. It is reasonable to assume that the net price after deductions would be in the 50% to 75% of gross that would put you at 70% to 100%. And then in addition to that depending on the dynamics of returns at any given time, hey, that number can fluctuate. But I think that does give you hopefully a sort of generalized view. And then with respect to the retail versus non-retail, I'll let John comment on market dynamics last year and what we're seeing this year as well.

Yes, and let me just follow-up just a point of clarification on a previous question, right. So while we're looking at IQVIA data and there are multiple sources of shots in arms data and also there's the what's revenue generating out to the distributor versus what actual shots in arms are. The clarification, I said, 800,000 doses before the actual number is closer to 500,000 doses with the one week lag simply coming off of the IQVIA data. So a lot of data points here. I think where the updated guidance is considering all of the trends, what we're seeing in the market so far, but just to be crystal clear and specific about what the IQVIA data is reporting so far.

Operator, next question.

The next question comes from Eric Joseph from JPMorgan. Please go ahead.

On the Phase 3 CIC trial. Your prior guidance was, for an expected readout in the mid- '25 time frame. Is that still your expectation or should we be carrying a more conservative timeline assumption perhaps in the second half? And just kind of having gone through this clinical hold experience, I wonder to what extent your Phase 3 IND might be exposed to any additional longer term follow-up from the Phase 2 trial. Have you sort of reviewed any potential at risk patients to sort of rule out the potential for similar, you know, SAE type of events? And then finally just when it relates to the standalone flu portion of the Phase 3 study, I just want to confirm whether that would be intended for and the design is intended to support registration of this flu standalone, and if so, whether you have superior immunogenicity in mind there be it within the trial design or if it's more around a non-inferior signal? Thanks for taking the questions.

Thank you for your questions, Eric. I think you had three questions into the question there. So let's but very good point. So number one on timing, we did address that a little earlier. Let me just reframe that so everyone's clear that we were on track in Q4 as we stated before to initiate our trial then the clinical hold occurred. We're happy that that was lifted in a short order and now we're gearing up to reinitiate that trial. So we just got the feedback from FDA on Friday, closed the business or so, worked on it over the weekend and yesterday. So we're not going to commit to a precise timing to restart that trial or to start that trial now, I should say. But give us in the near-term another couple of weeks or so, we'll be able to provide more clarity on trial start timing. But we don't see a significant delay. We think we can get it started relatively in the near-term. But again, we'll clarify once we finish working through FDA feedback. So thanks for that question. Bob, did you want to take the other two questions that Eric had? Thank you.

Sure. So the follow-up on the trial is the standard length of safety monitoring for adjuvanted vaccines. And I think I'll just leave it there. And in terms of the design for the Phase 3 and the flu standalone product, similar to CIC, the intent of the study is to demonstrate non-inferior immunogenicity. So that's true for the CIC product and that's equally true for our flu standalone. The study will be able to obviously generate more than non-inferiority data. So the statistical analysis has the ability to demonstrate superiority, but the study is designed and powered for non-inferiority. So hope that's clear.

Absolutely.

And I think Eric was also asking Eric if we heard your question correctly, is that designed for registration that trial, Bob, could it provide a registrational opportunity?

Yes, absolutely. This study is designed, as a Phase 3A immunogenicity trial to support licensure of the products with the understanding that a follow-on clinical efficacy trial would need to be demonstrated post-approval.

And again that whether or not it can be will be determined by the FDA in their overall oversight based on the data and other factors, Bob, correct?

That's right.

Excellent. Well, thank you very much for taking the questions.

The next question comes from Brendan Smith from TD Cowen. Please go ahead.

Hi. This is Jackie on for Brandon. Maybe just one on your expectations for your analyst event next year. Will you confirm any new pipeline programs? And are you planning to be in the clinic with any other wholly owned assets besides the flu in the next 18 months?

Jim Kelly, you want to take the Analyst Day?

Yes, certainly, and thanks for the question. And as we evolve into the post commercial version of Novavax, we're really looking forward to unveil more and more of our thinking on not just R&D, but all four pillars. Our anticipation of how this will unfold is you can expect more updates from us between now and our earnings for the fourth quarter, which would be at the end of February. And then we think we'd be best positioned to do something like an Investor Day after that time and at some point in 2025. So that's our thinking. Expect to hear more of our thinking unfold as the coming months go by. We're really excited to have Ruxandra here and everything she's going to bring to our very thoughtful and disciplined approach to advancing our investments in our technology.

Great. Thank you.

[Operator Instructions] And the next question comes from Vernon Bernardino from H.C. Wainwright. Go ahead.

Hi. Thanks for taking my question. I actually have two questions. Excuse me. The first question I had is, there's some evidence that the flu vaccine this year was not as good as in prior years. Just wondering how the CIC vaccine formulation for the flu vaccine component is handling that. And then second question I have is, just wondering if you could provide us insight into how the gross margins may change going forward? Thank you.

Bob, you want to take Vernon's first question?

Thanks, John.

So the strains that we're using in the -- that we are planning to use in the Phase 3A trial are the US or Northern Hemisphere strains for the last season for the season that we're currently in. And again, just to remind you, the trial is not designed as a clinical efficacy trial, but is a comparative immunogenicity study, right? So the readout is going to be whether or not the immune responses induced by the flu component in our vaccine are not inferior to the immunogenicity of the comparator flu vaccine. And in good efficacy years or less good efficacy years of the immunogenicity is a kind of a standalone readout that's going to be driving the analysis of this study. So I don't --

That's very helpful. Thank you.

Yes. Okay.

Vernon, happy to answer the question about gross margins in 2025 and forward. This year is our last commercial year certainly in US markets, Europe we had noted that while there's some trailing APAs, we're excluding them from our future guidance at this time. So I'll focus my comments on what will be our cost of goods sold for '25- '26 and beyond. It is going to reflect providing supply to Sanofi for 2025 and 2026. That's on a cost plus basis. And so you'll you can see that the traditional commercial company relevance of gross margin is not going to be the same from '25 forward. That's going to be a more cost plus.

This concludes the question-and-answer session. I would now like to turn the conference back to John Jacobs for any closing remarks. One moment, please, while we reconnect. Ladies and gentlemen, the conference will resume momentarily. Please hold on. I will now turn the conference back over to John Jacobs for any closing remarks. Please go ahead.

Thank you everyone for joining us today. Appreciate it. Looks like someone pressed the wrong button on the phone call, so we're formally closing the call here. Really appreciate you all joining us today. Thank you very much.