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 Vaxcyte Fourth Quarter and Full Year 2022 Financial Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session.

[Operator Instructions] I now would like to turn the call over to Andrew Guggenhime, President and Chief Financial Officer of Vaxcyte. Please go ahead, sir..

Thank you, operator and good afternoon, everyone. I'd like to welcome you to Vaxcyte'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 Wassil; and our VP of Research, Jeff Fairman.

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 Vaxcyte, 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 statements.

For a 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 Vaxcyte. We reported positive and unprecedented proof-of-concept top line clinical data for VAX-24, our lead pneumococcal conjugate vaccine for the prevention of invasive pneumococcal disease in adults.

These remarkable data validate our PCV franchise and our carrier-sparing approach for broad-spectrum PCVs 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 Vaxcyte team and our partners.

The findings of the large Phase 2 study in adults 18 to 64 years of age indicate a potential best-in-class profile for VAX-24 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 PCV 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 PCV franchise programs, VAX-24 and VAX-31, which we previously referred to as VAX-XP, with several upcoming milestones.

VAX-24, 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 point estimates for the OPA geometric mean ratios, or GMRs, and their comparability to the prior results in our much larger Phase 2 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 2 studies will enable us to perform the statistical powering necessary to our pivotal Phase 3 non-superiority study for VAX-24 in adults.

These data, along with the full six-month safety data from both studies, will facilitate our end of Phase 2 meeting with FDA, which we expect to hold in the second half of this year. To put the U.S.

adult PCV market opportunity in the 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, including increase in adult vaccination rates outside the U.S., and in the U.S., the potential shift to universal adult vaccination starting at age 50 instead of age 65, which itself would expand the market and open up the adult regimen to a prime blue schedule, as is the case in the input 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 the widespread use of the 24-valent PCV, we continue to invest in our 31-valent VAX-31 program.

Similar to VAX-24, we believe our unique carrier-sparing PCV approach gives us the opportunity to expand the spectrum of coverage to address additional pathogenic serotypes 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 Vaxcyte 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 VAX-31 and expect to submit the adult IND 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 VAX-31, a conjugate vaccine candidate designed to prevent infections in both adults and children caused by Group A Strep bacteria, and VAX-PG, which is designed to treat periodontal disease.

We are also introducing a new program called VAX-GI, a vaccine designed to prevent Shigella, a danger bacterial infection with significant totality 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 PCV 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 adult VAX-24 launch in the U.S. market out of existing Lonza facilities.

Plans to ensure and expanded commercial manufacturing footprint to support the infant indication in an ex-U.S. markets are underway. Additionally, we further fortified our extract supply chain via our recent expanded agreement with Sutro Biopharma.

From a financial perspective, we are in a strong position with over $950 million on the balance sheet as of December 31, aided by two successful follow-on financing 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 the 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 VAX-24 to deliver a PCV that includes all of the serotypes covered by the currently marketed vaccines. As confirmed by our strong clinical results from the Phase 1/2 proof-of-concept study, VAX-24 has the potential to provide an additional 10% to 28% of protection for adults compared with the standard-of-care PCVs.

In this study, VAX-24 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 vaccine by delivering broader coverage and higher immune responses relative to the conventional PCV. Looking ahead, we expect top line data for our second Phase 2 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 this study. As a reminder, the study design is identical to the first Phase 2 study, but for the age and the number of subjects at 50 subjects per cohort versus nearly 200 in the first Phase 2 study.

This smaller study was designed to further inform the powering of the pivotal Phase 3 study, while adding to the body of research for VAX-24. 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 interval. That's because you can expect these [indiscernible] 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 3 studies have shown that these ratios are adequate to achieve the non-inferior threshold. We can read some useful insights when looking at the results of the age stratification analysis of the first Phase 2 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 OPA GMRs were relatively narrow. The two additional forest plots show the eight stratified OPA GMRs. In the 16 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 conference 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 precedent Phase 3 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 PCVs. 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 a result program advances, we are also excited to move into the infant population with VAX-24 and plan to initiate a Phase 2 study in the second quarter of this year. This study, outlined on slide 13, includes three doses given the 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 VAX-24 to the broadest standard-of-care PCV, which today is PCV-15.

The stage one portion of the study will evaluate the safety and tolerability of a single injection of VAX-24 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 3:1 basis and will be evaluated for safety at seven days after dosing.

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 VAX-24 when 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 dose.

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 dose, both of which will be compared to PCV15 for the common serotypes.

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 VAX-31, our 31-valent PCV candidate designed to provide coverage of approximately 95% of the IPD currently circulating in the U.S.

adult population. We've now identified the additional seven serotypes included in VAX-31 beyond the 24 serotypes in the VAX-24 and believe this breadth of coverage goes beyond any other PCV in development. We are completing IND-enabling activities and intend to submit the adult IND 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 PCV franchise, we also have a robust earlier stage pipeline for which we continue to leverage our cell-free platform. VAX-A1, 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 antibiotic in the very young. IND-enabling activities continue as VAX-A1 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 VAX-PG, 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 support eventual early-stage clinical studies.

VAX-PG 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, VAX-GI. VAX-GI is designed to prevent dysenteriae caused by Shigella bacteria, which is commonly referred to as shigellosis.

Shigellosis is a bacterial illness with no available prefinitive 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 VAX-GI is IpaB. While this is a well-appreciated antigens, others have been unable to produce IpaB 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 yields, 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 VAX-24 as we invested to prepare for the planned Phase 3 clinical trials and initiated and completed enrollment in two Phase 2 clinical studies; higher manufacturing expenses for VAX31, as we advance 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 VAX-24 Phase 3 program, which will consist of multiple trials and to a much lesser degree, expenses related to executing our VAX-24 infant Phase 2 study, preparing for our planned VAX-31 adult Phase 1/2 study, activities to support a future BLA for VAX-24 and an increase in employee headcount to support our anticipated growth.

Turning to the balance sheet and cash runway. As Grant noted, we continued 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 VAX-24 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 in 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. [Operator Instructions] Our first question will be coming from Jason Gerberry of Bank of America. Your line is open..

Hey, guys. Thanks for taking my questions. My first question is just as you move VAX-24 into peds, just your thoughts on the biggest risk, the translatability of vaccine efficacy going to the pediatric population with a higher valence 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, might that in any way alter how you're thinking about pediatric development of VAX-24? Thanks. .

Yeah. Hey, Jason. Thanks for the question. 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 remarkable consistency using the same formulation whether it was Prevnar or Merck's version Vaxneuvance, 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 the conclusion of the working group was, on the one hand, we have the improved coverage of PCV20. But on the other hand, you have higher immune responses with the 15-valent for Merck.

So that's the trade-off 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 VAX-24 was able to show broader coverage, but in fact better immune responses against the common strains of the less valent vaccine.

So that's the existential choice that they're being forced to make. And the working group basically didn't really indicate how they are 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..

Got it. Thanks guys..

Sure..

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

Great. Congrats for the Q and thanks for taking the question. Maybe just a quick two question related to the statistics.

So, for the upcoming [indiscernible] Phase 2 data readouts, understanding you want to focus on the point estimate, given the smaller size, but maybe can help us to conceptualize what is the level of point estimate you need to hit in order to have a reasonable chance in the Phase 3 to hit a non-inferiority, for that's number one.

Number two is in terms of the sample size for Phase 3, seems 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 serotypes? Thanks..

Yeah. Hey, Roger. Thanks for the question. Yeah. As Jim was touching on in the prepared remarks, what we've seen consistently in the historical Phase 3 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, those are the sort of point estimates we'll be looking to exceed.

And as we saw from the larger study that we read out in the fall, we are 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, the pediatric data for PCV20 was released.

And once again, we saw that they could go down as low as 0.6, which they are at for a few strains. I know one in particular, they got 0.6 in the number that were closed. 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 then, Jim, why don't you take the second part about superiority?.

Sure. I think that what you're seeing with our data from the 50 to 64, is that's reproducible in the 65-plus. We feel comfortable with the Phase 3 side that we can repeat the statistical superior in [indiscernible] that we had seen in the 50 to 64.

But we could, in fact, if we -- again, repeat what we've seen in the 50 to 64 in the Phase 3 goes 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 a lower bound of 1.0 or greater, we think that we can hit seven or eight of those..

That’s great. Thank you..

Thanks Roger..

Thank you. One moment while we prepare for the next question. Our next question will be coming from David Risinger 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 2 in infants with Vaxneuvance as the comparator.

But assuming Prevnar 20 is approved in infants in April, and it's given an equal recommendation to Vaxneuvance by the ACIP this summer, should we just assume that down the line in a couple of years, you would ultimately run a Phase 3 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 3 in adults? I think you had said 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, 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 2 clinical study that we've already guided to beginning in the second quarter of this year, 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, starting out against PCV-15 will be more than adequate. But to your point, there is a precedent where the agency has 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 a core we strike 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 do it -- 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 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. The technical 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 not for that lower limit to exceed 0.5.

But was that more related to the superiority? Okay, Jim, why don't you take it from there?.

Yeah. So, for the superiority, what I've seen in the past year 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 mass 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 play in 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 have raised 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. Our next question will be coming from Seamus Fernandez of Guggenheim. Please go ahead..

All right. Thanks. Thanks so much for the question. So, really wanted to drill in a little bit to VAX-31.

Just hoping you guys could provide us with a little bit of color on what it's going to take to 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 VAX-31.

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 VAX-31. 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 like we saw with VAX-24 last year, these adult studies accrue and readout quickly. So, we have guided to being in receipt of the data from that study, top line data next year in 2024.

So, 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 VAX-24 and VAX-XP.

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 towards the drug product formulation stage. And so far, so good. And as per today, we're maintaining that guidance of second half IND 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, for VAX-24. As it result -- as it relates to the differentiation, maybe Jim and I can tag-team this one.

But 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 will cover 95% of the circulating disease. In Europe, it gets as high as 98%. So, you really feel like you covered 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 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 currently.

And so this is the big opportunity that we have, and we don't believe we face the same trade-off that the conventional PCV developers are facing where, to get the kind of coverage of the newly certain strains, they have to no longer include those strains that have been taken out of circulation.

So, as we mentioned in the prepared remarks, there's historical precedent where vaccination has been withdrawn for currently covered controlled strain can result in a rebound. So, 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'd say first in the infant, VAX-31 will increase coverage against IPD by about 25% or more from what would be the standard-of-care if PCV20 makes it through the fluid stage [ph], even more so, it's referenced against PCV15. So, there is still a substantial impact on invasive disease.

But in terms of otitis media, especially 35B serotype, there's a lot more contribution to otitis media and these incremental strains that are in VAX-31. You get 48% increase in coverage of otitis media. And when you think about it, the incident rate is almost to the point where every kid gets at least one year in [indiscernible].

So -- and if about 35%, 40% of those are of Strep, 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 streps 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 Joy of Evercore. Your line is open..

Hi. This is actually Jon Miller on Evercore. But I'd love to ask about manufacturing expansion that you're talking about. Obviously, this is -- you've 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? And maybe if you could put some bookends on how much a full-size manufacturing footprint might cost in various scenarios..

Yeah. Hey, Jon. Thank you for the question. We'll tag-team this one as well. I'll have Andrew bring it home. But just in terms of order of magnitude, I think the way people should be thinking about that U.S. adult 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. Jon, again, thanks for the question. We are looking at different options in terms of strategy. That includes doing it on our own facility, using Lonza, with whom we have a great and longstanding partnership and other CDMO options as well. And obviously, the magnitude, it will depend on the route we take.

And when we pull the trigger, that's 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 the valuation..

Okay. That makes sense.

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

Well, we can -- 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 Lonza today, that's one of the evaluations that likely -- they have basically still 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 an undertaking..

Understood. Thanks so much..

Thanks Jon..

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

Hi. Congratulations on the quarter and thanks for taking my questions here. So, one question we asked me to get is since that you've already shared proof-of-concept for VAX-24.

And because the market for PCV is getting crowded, why not just move forward with VAX31? And then second question I had for you was on the market opportunities for VAX-A1, PG and GI, what do you think of those? How do you think about potential peak sales versus what you might see for your PCV? And when do you plan to start studying 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 into the market. We believe that VAX-24 is going to be a tremendous introduction for our carrier-sparing PCVs to the market. And we know that upon widespread use of VAX-24, it's only going to enhance the rate of circulating disease for these 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 dynamic 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 Vaxcyte. 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, 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 Shigella. So, we're moving them forward as fast as we can, but in sync with the value equation with PCV at the lead.

But we certainly expect to bring on additional programs coming out of our pipeline going forward..

Thank you..

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

Hi. Thanks for taking the question.

Just given that there's a competitor 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 time lines for VAX-24 Phase 3 data readouts put you in a good position relative to that 24-valent competitor?.

Yeah. Thanks for the question, Joy. Indeed, there is another 24-valent vaccine that has reported Phase 2 data in adults. It's program that GSK is administering to in this moment. The difference is it's -- the defining aspect of pneumococcal conjugate vaccines is the covalent bond between the polysaccharide sugar and the protein.

And that's been 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 VAX-24 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 and the data we've generated, we feel like we've got the more tried and true approach.

We think we've got an 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 PCVs 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 you have to be able to boost in a material way, and we think the adult market is in that direction also. So, 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..

Yeah. Thanks Joy..

End of Q&A:.

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

Thanks everybody..