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Edited Transcript of NVAX earnings conference call or presentation 11-Mar-20 8:30pm GMT

Q4 2019 Novavax Inc Earnings Call

ROCKVILLE Apr 21, 2020 (Thomson StreetEvents) -- Edited Transcript of Novavax Inc earnings conference call or presentation Wednesday, March 11, 2020 at 8:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Erika S. Trahan

Novavax, Inc. - Senior Manager of Investor & Public Relations

* Gregory M. Glenn

Novavax, Inc. - President of Research & Development

* John Joseph Trizzino

Novavax, Inc. - Senior VP, Chief Business Officer, CFO & Treasurer

* Stanley Charles Erck

Novavax, Inc. - President, CEO & Director

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Conference Call Participants

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* Charles Cliff Duncan

Cantor Fitzgerald & Co., Research Division - Senior Analyst

* Eric William Joseph

JP Morgan Chase & Co, Research Division - VP & Senior Analyst

* Kevin Michael DeGeeter

Oppenheimer & Co. Inc. - MD & Senior Analyst

* Mayank Mamtani

B. Riley FBR, Inc., Research Division - Research Analyst

* Michael John Higgins

Ladenburg Thalmann & Co. Inc., Research Division - MD & Senior Biopharmaceuticals Equity Research Analyst

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Presentation

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Operator [1]

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Ladies and gentlemen, thank you for standing by, and welcome to the Novavax Fourth Quarter 2019 Financial Results Conference Call. (Operator Instructions) Please be advised that today's conference is being recorded. (Operator Instructions)

I would now like to hand the conference over to your speaker today, Erika Trahan, Senior Manager of Investor and Public Relations. Thank you. Please go ahead, ma'am.

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Erika S. Trahan, Novavax, Inc. - Senior Manager of Investor & Public Relations [2]

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Thank you, operator. Good afternoon. I'd like to thank everyone who has joined today's call to discuss our fourth quarter 2019 operational highlights and financial results. A press release announcing earnings 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.

Joining me on today's call are Stan Erck, President and CEO of Novavax; and John Trizzino, Chief Business Officer and Chief Financial Officer. Dr. Gregory Glenn, our President of Research and Development, will be available for the Q&A portion of the call.

Before we begin with prepared remarks, I need to remind you that we will be making forward-looking statements during this teleconference that could include financial, clinical or commercial projections. Statements relating to future financial or business performance, conditions or strategy and other financial and business-related matters, including expectations regarding revenue, operating expenses, cash usage in clinical development and anticipated milestones are forward-looking statements within the meaning of the Private Securities Litigation Reform Act.

Novavax cautions that these forward-looking statements are subject to numerous assumptions, risks and uncertainties, which change over time.

I'll now hand it over to Stan to start today's call.

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Stanley Charles Erck, Novavax, Inc. - President, CEO & Director [3]

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Thanks, Erika, and thanks to all who have joined the call. As you know, we are responding to the emerging coronavirus situation, and at the same time, maintaining our progress with our flu and RSV programs. We are operating in a very exciting time for the company and, hopefully, for our investors. I will use this call to summarize activities in 4 key areas of our operations.

First, we are about to unblind data from our pivotal Phase III clinical trial for NanoFlu. As all who are on this call know, NanoFlu is our adjuvanted recombinant nanoparticle quadrivalent influenza vaccine being targeted initially for the older adult market. This is a market in need of a better vaccine and to remind everyone, there are a couple of key points about this program.

In Phase I and II clinical trials, NanoFlu is compared to the best-selling older adult flu vaccine, Fluzone High-Dose. In those trials, NanoFlu demonstrated higher antibody responses to the mismatch or drifted flu strains that were circulating each year and NanoFlu induced flu-specific T cells that are likely to be important for protection. We believe that these attributes differentiate us from the leading licensed vaccines. The current Phase III trial approved by the FDA, again, compares our NanoFlu vaccine to a licensed flu vaccine. But this time, it is compared to Fluzone, which is a quadrivalent egg-based standard dose vaccine. Success will be determined by showing our vaccine is non-inferior to this comparator. We are confident that we will meet this criteria. In addition, we expect to be able to identify the same key differentiating attributes that we saw in Phase I and II.

Trial has been on target since it started in October of last year and as we have previously communicated, our plan is to unblind and announce top line results by the end of this quarter. From those data, we will have a clear view of the pathway and timeline to file a BLA. The main activity remaining for this program will be to finish all of the CMC or manufacturing activities, leading to clinical consistency lot trials and filing the BLA. To remind everyone, we have been granted accelerated approval pathway and fast track status for this vaccine, and that should help us as we move forward towards commercialization. Both designations validate the importance of the program to regulators and public health officials.

Next, I need to spend some time discussing coronavirus or COVID-19. I don't think that there's anything that I can add about the status and threat of COVID-19 that you already don't know. We all understand a very clear need for new diagnostics, new antiviral treatments and new vaccines. Novavax is among several companies that are racing develop such a vaccine. And to remind everyone, Novavax has a special history in developing vaccines against emerging viruses in record time. Over the last half dozen years, we have developed 2 vaccines against the pandemic influenza strains, the H5N1 and H7N9. With H7N9, we developed a vaccine from published gene sequence to vaccination of human subjects in 90 days. We also developed an Ebola vaccine that went into a Phase I trial and, with the NIH, demonstrated 100% efficacy with very low vaccine doses in nonhuman primates when they were challenged with live Ebola. And finally, we previously developed 2 corona vaccines -- 2 coronavirus vaccines, 1 for SARS and 1 for Middle East Respiratory Syndrome. With this track record, we are now seen as one of the leading companies to develop a COVID-19 vaccine.

This week, we were awarded a grant from the Coalition for Epidemic Preparedness Innovations, or CEPI, to fund our work with the expectation that the funding will cover our costs through a Phase I clinical trial. The steps that we've taken include: taking the published gene sequence and engineering multiple vaccine constructs, taking those constructs and demonstrating that they are properly folded and that they bind to a key human receptor, the receptor that is the pathway for coronavirus infection. And having successfully made these constructs, we are now testing them in animal models, which includes mice and nonhuman primates. The goal is to find the best construct that has the highest affinity binding that produces neutralizing antibodies and that can be produced at high levels.

In parallel, we have contracted with our manufacturing partner, Emergent BioSolutions to make GMP-grade materials for Phase I and II clinical trials. This will be critical for the start of human trials. We're hoping to start the first trial in May or possibly June, with data expected in the summer. We're not certain of the exact pathway to licensure and deployment at this time, but we are working closely with the FDA to define that pathway.

And finally, we are working to identify the best pathway to identify large-scale production that could be initiated before the end of this year. We expect a constant news flow throughout this year as we make our way through this process. Currently, and particularly with the initial CEPI grant, we believe that there will be sufficient sources of capital outside the company that we will not be slowed down by a lack of capital.

With RSV, we continue to believe in our RSV vaccine. We are the only company to have demonstrated potent efficacy in clinical trials in both the older adult population and by vaccinating pregnant women to protect their infants. As we have reported over the past years, when we tested our vaccine in Phase III trials in both cohorts, we failed to meet our prespecified primary endpoints. Those clinical trial outcomes behind us, we also have observed and carefully pointed out that the vaccine actually has had significant effects on hospitalization in pneumonia in both trials. With those data in hand, we are working to design new clinical trials that can take us to a licensed product. We now believe that our vaccine is too important for its impact on global health care to ignore. The main reason that we haven't been able to follow-up as quickly as we want is financial resources. We believe that we can design an affordable pathway to a licensed product over the coming years, and we'll report on that progress in the future.

Moving to new opportunities. As you may have observed, we have been incorporating our Matrix-M management in more of our clinical trials. We purchased a Swedish company, Isconova, the developer of Matrix-M about 6 years ago and Matrix-M has been found to be a very safe and robust adjuvant and is now being used in more and more clinical trials. We have recently used Matrix-M with our NanoFlu quadrivalent vaccine -- I'm sorry, our RSV older adult vaccine, our Ebola vaccine and are now planning on using it with our COVID-19 vaccine. Safe and effective adjuvants are difficult to find and we think we have one of the top-tier adjuvants in the industry.

A new example of the use of Matrix-M is the use with a new candidate malaria vaccine. Professor Adrian Hill with the Jenner Institute at Oxford University, after years of evaluating a long list of adjuvants, chose to formulate his malaria antigen with Matrix-M. He has demonstrated both safety and potent immunogenicity in preclinical and clinical trials involving healthy adults and is now evaluating the vaccine in efficacy trials in Burkina Faso in children 5 to 17 months of age. Data from these trials are expected later this year.

Today, we announced an agreement with the Serum Institute of India, who licensed Dr. Hill's antigen and is developing the vaccine that also contains Matrix-M. Our agreement represents a great product opportunity for Novavax. First, our Matrix-M may become a critical component of a new malaria vaccine to be used in endemic areas. As is well known, a working malaria vaccine is one of the key gaps in world health care. From a commercial endpoint -- important point of view, Novavax retains the rights to the malaria Matrix-M vaccine for use with the military and as a traveler's vaccine for travelers going to parts of the world where malaria is endemic. Under the terms of this agreement, Serum Institute will develop the product through licensure and manufacture the product for Novavax. This is another great example of the value of Novavax's recombinant nanoparticle and adjuvant platform.

Finally, before I turn the discussion over to John Trizzino to cover our financials, I'll steal some of his thunder. Over the past year or so, I believe that there has been concern about whether the company will be constrained by a financial overhang after we report for NanoFlu data. I'm happy to say that we've aggressively addressed this issue, and over the last few months -- over the last few months, and as you will hear from John, our financial position is considerably different than it was since our last reporting period ending September 30.

In the third quarter of last year, we aggressively worked on reducing our quarterly burn rate, and even while running the Phase III pivotal flu trial, we have substantially reduced our operating expenses. In parallel, we took the opportunity to build our cash position to a level that takes us well into the future. While we do not make financial projections as a policy, from this earnings call, it will be clear that we now have over $200 million in cash. We believe that this new financial strength gives us the runway and flexibility to create incredible value for our investors.

Thank you, and now let me turn it over to John.

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John Joseph Trizzino, Novavax, Inc. - Senior VP, Chief Business Officer, CFO & Treasurer [4]

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Thanks, Stan. Today, we announced financial results for the fourth quarter and the full year 2019. For the call today, we will focus on the key results for the quarter. 12-month financial results can be found in today's press release.

For the fourth quarter, we reported a net loss of $31.8 million or $1.13 per share compared to a net loss of $49.3 million or $2.57 per share in the fourth quarter of 2018. The reduction of net loss was mainly due to reduced R&D expenses that I'll discuss more later. Revenue in the quarter increased 44% to $8.8 million from $6.1 million for the same period in 2018. The increase was driven by $7.5 million in revenue for the recovery of additional costs under the closeout of the HHS BARDA contract partially offset by lower revenue from the completion of enrollment in participants in the Prepare trial in the second quarter of 2018.

R&D expenses decreased 32% to $29.3 million in the fourth quarter of 2019 compared to $43.4 million in the same period in 2018. And this decrease was primarily due to decreased development activities of ResVax, lower employee-related costs and other cost savings due to the Catalent transaction that were partially offset by NanoFlu Phase III clinical trial and development activities. G&A expenses decreased slightly, coming in at $8.2 million as compared to $9.2 million for the same period in 2018. As of December 31, 2019, Novavax had $82.2 million in cash, cash equivalents and restricted cash. Net cash used in operating activities for the full year 2019 was $136.6 million compared to $184.8 million for the full year of 2018.

As Stan mentioned, our financial position is strong. In Q4, we raised $30 million in net proceeds and from January 1 through March 6, we have raised $156 million in net proceeds for a total of $186 million since the end of Q3 through our ATM offerings. Novavax's cash position as of March 6 is now in excess of $200 million.

Our future cash needs, as you would expect, are directly variable to NanoFlu data and development and preparedness activities associated with the COVID-19 pandemic. We do expect additional funding from CEPI to support activities through Phase I clinical trial results. With this in mind, cash used for G&A is expected to remain flat and cash used for R&D activities is expected to decrease in 2020 as compared to 2019 due to the Catalent transaction, which included a reduction in head count and assignment of facility leases and with the Prepare trial expenses concluded at year-end. We look forward to NanoFlu data announcement before the end of this month and are excited by the opportunity we have to develop a vaccine for COVID-19. We are financially in solid position as we move into 2020.

Thank you. This concludes my financial review, and I'll turn the call back to Stan.

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Stanley Charles Erck, Novavax, Inc. - President, CEO & Director [5]

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Thanks, John. So as we near the end of the quarter, we're looking forward to unblinding our Phase III flu data, and we'll be talking to you once we get those data.

With that, I will turn it back to the operator for questions and answers, and we'll give answers. Thank you.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from the line of Kevin DeGeeter from Oppenheimer.

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Kevin Michael DeGeeter, Oppenheimer & Co. Inc. - MD & Senior Analyst [2]

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Congrats, guys. One housekeeping question at the top, and then maybe we'll get some more fundamental questions. John, what was the average price at which you pulled down money off of the ATM? Or put more simply, how many shares were issued so far through March 6?

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John Joseph Trizzino, Novavax, Inc. - Senior VP, Chief Business Officer, CFO & Treasurer [3]

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So we have -- 19.2 million shares have been issued since March 6, leaving us with a total of 51.5 million shares outstanding.

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Kevin Michael DeGeeter, Oppenheimer & Co. Inc. - MD & Senior Analyst [4]

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Great. And a few things. I think you mentioned towards the end of your comment that you're confident that there'll be funding from CEPI to fund the Phase I development. Can you just elaborate on that. It's a little bit different language that was used, I guess, earlier in the week with regard to the initial $4 million funding?

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John Joseph Trizzino, Novavax, Inc. - Senior VP, Chief Business Officer, CFO & Treasurer [5]

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Yes. So I think in the press release, we made reference to some of the expected additional funding. So keep in mind, this is a very dynamic process, Kevin, and so we're moving very quickly. CEPI and others are moving very quickly. And so we weren't able to get definition around the first stage of funding which is the $4 million. We are in constant communication with CEPI and fully expect that we'll receive additional funding.

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Kevin Michael DeGeeter, Oppenheimer & Co. Inc. - MD & Senior Analyst [6]

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Great. And then...

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Stanley Charles Erck, Novavax, Inc. - President, CEO & Director [7]

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Kevin. I'll make one comment. So I think CEPI to its credit, knew that everybody was moving fast, and there are big companies and little companies and some -- they were worried that some would not -- would hold back on spending money if they didn't get reimbursed. So CEPI stepped up and provided money virtually immediately for a portion of what the total ask was and with the expectation that they would have time to then evaluate the rest of the grant. So it's a partial payment.

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Kevin Michael DeGeeter, Oppenheimer & Co. Inc. - MD & Senior Analyst [8]

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That makes a lot of sense. And then I just want to clarify the comments with regard to path forward with RSV. I mean is it correct to take away from your comments that with the additional balance sheet flexibility that you explicitly intend to explore options, including future clinical studies for your RSV program to support potential regulatory approval.

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Stanley Charles Erck, Novavax, Inc. - President, CEO & Director [9]

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For all the reasons I stated, I think the RSV vaccine works really well. And I think we have opportunities to get a licensed product, and we intend to design trials to address the areas where it work best and take it to licensure. And I think that you'll see that it will take time to restart those. But maybe by the end of this year and into next year, we'll be talking about that.

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Kevin Michael DeGeeter, Oppenheimer & Co. Inc. - MD & Senior Analyst [10]

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Got it. And just to put a final point of clarification on that. John's comments with regard to R&D trends for 2020. I assume that does not include any material, at least pre-clinical trial manufacturing or other RSV-related spend? Or is that a variable that is to be worked out throughout the course of the year?

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Stanley Charles Erck, Novavax, Inc. - President, CEO & Director [11]

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Well, I think there's a bit to be worked out, but it should be noted that we have material that's frozen and stable for RSV. So I don't think we'll have to do any manufacturing. So on our P&L this year, RSV will not have a significant impact.

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Operator [12]

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Our next question comes from the line of Eric Joseph from JP Morgan.

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Eric William Joseph, JP Morgan Chase & Co, Research Division - VP & Senior Analyst [13]

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I guess just in framing expectations for the NanoFlu data that we'll see at the end of the month. Understanding that the endpoint is non-inferior on immunogenicity, can you talk about whether there are any -- what expectations there are in seeing superiority in hemagglutination? And I'm also curious to know as to what extent the clinicians are interested in kind of making contracts with either of the high-dose Fluzone options, either the trivalent or the quadrivalent?

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Gregory M. Glenn, Novavax, Inc. - President of Research & Development [14]

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Eric, this is Greg. A couple of things. So we -- well we do expect to look for, as you know, in Phase I and Phase II, we've demonstrated statistical superiority with respect to the H3N2 HAI responses, and we're expecting to replicate that as well. So that's important. And I think in our Phase II, especially we did line that up with the, as you noted, the high-dose trivalent flu and the recombinant quadrivalent flu, and I think our results are quite good. We have very good ATIs comparative. And then also we have T cell responses, which, as Stan noted, are expected to be important for protection.

So we're feeling very good about that data as the Phase II data, especially as something we can point to in terms of how the vaccines work relatively, and we'd be very gratified if our Phase III trial does demonstrate non-inferiority and we have statistical superiority for the H3N2 strains. It is another bad year of flu, as you probably have seen. Even though with all the coronavirus in the background, I think there's been about 40 million flu hospitalizations and about 40,000 deaths according to the CDC this week. And so it's still -- and there's been some interesting shifts in what strains are out there, but we can still see a very important niche -- important role for this adjuvanted influenza vaccine that we're developing.

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Operator [15]

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Our next question comes from the line of Charles Duncan from Cantor Fitzgerald.

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Charles Cliff Duncan, Cantor Fitzgerald & Co., Research Division - Senior Analyst [16]

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Stan and team, congratulations on good quarter and progress, particularly the latest use of the ATM. I had a quick question regarding NanoFlu in terms of next steps. I'm assuming that you'd deliver good data here coming up and that you'll be pursuing a BLA shortly. I think you mentioned that you need to finish a CMC? And can you provide any additional color or clarification on what that might involve and when you may be able to complete the filing of a BLA?

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Stanley Charles Erck, Novavax, Inc. - President, CEO & Director [17]

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Yes. I know that's a big question, and we're not answering the question until we see our Phase III data. That will give us guidance on how -- what we do to file the BLA. So I'm just -- let me keep quiet on the time line for that yet because we don't have one until we see our data, but the specifics on the manufacturing is that we began the process of process characterization starting the summer of last year. We're expecting to do and finish what they call PPQ lots to make material that can be used in clinical trial that -- where you do consists 3 lots of product in 3 groups of trial vaccines and show that the vaccine would behave the same. And so we -- it's something we have to do and something everybody has to do. And the timing of the BLA will depend upon how fast we can do those trials.

The good news is -- I'm sorry not to give you a date right now. But the good news is, is that we not only have breakthrough, but the accelerated approval so that these data are licensable, but also fast track, which gives us very active meetings and time lines with the FDA. So we'll use that process.

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Charles Cliff Duncan, Cantor Fitzgerald & Co., Research Division - Senior Analyst [18]

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Yes. So that's helpful. That actually starts to address my real question, which is given those designations, could you imagine -- and, of course, favorable data, could you imagine that NanoFlu could be in the North American or in the market by time of the North American flu season in '21, '22. So not this coming one, but the next one.

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Stanley Charles Erck, Novavax, Inc. - President, CEO & Director [19]

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Yes. Give me a quarter or give me post data to give you some of those projections.

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Charles Cliff Duncan, Cantor Fitzgerald & Co., Research Division - Senior Analyst [20]

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Okay. Okay, sounds good. And then last question, just moving on to COVID-19. I appreciate all the effort that you are doing and other companies are doing to move rapidly. I'm wondering if you could provide additional information on the target. I think you mentioned -- but well, you didn't actually mention, but could it be the spike protein as being the target? And when would you be in a position to commence a clinical study with that candidate?

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Gregory M. Glenn, Novavax, Inc. - President of Research & Development [21]

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Yes, it's Greg Glenn here again. So yes, it is a spike protein. We make a full-length recombinant spike protein nanoparticle. We're using our adjuvant Matrix-M, very similar to what you're seeing. You'll see with the influenza vaccine that we've done before with some of the other emerging diseases. We're thinking late spring for FSI. We're working hard to make that data as soon -- as early as possible.

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Charles Cliff Duncan, Cantor Fitzgerald & Co., Research Division - Senior Analyst [22]

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And then, Greg, could you imagine broader utility given the target is important for other coronaviruses. It seems like the experience that you have with MERS and SARS that perhaps this could have broader utility if something else could evolve or could emerge over from the corona today over the course of the next few years?

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Gregory M. Glenn, Novavax, Inc. - President of Research & Development [23]

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Yes, I think coming back to flu, that's precisely what we have. We have a single recombinant glycoprotein in the nanoparticle, when we immunize with that -- with Matrix-M, we see broadly cross-reacting antibodies to where there's been evolution and drift. So we're going to be very interested in exploring that topic with our coronavirus vaccine. I think that's a relevant question. And we're -- I think we're optimistic that we could have some really good important cross protection.

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Operator [24]

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Our next question comes from the line of Mayank Mamtani from B. Riley FBR.

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Mayank Mamtani, B. Riley FBR, Inc., Research Division - Research Analyst [25]

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And again, my good wishes too for a busy 2020 ahead for you. If I can stay with COVID-19 for a minute. Could you maybe help contrast your platform approach, recombinant nanoparticle versus some of the other approaches that are being taken, again, staying with the prophylactic vaccine approaches, not the antivirals? And then the second part of that question was, just could you talk about the different strains MERS and SARS and what specifically the sequence differences are with SARS-CoV-2?

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Gregory M. Glenn, Novavax, Inc. - President of Research & Development [26]

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Yes, so let's go backwards and start with MERS, SARS and CoV-2. So MERS is in a different genus. That is, it's quite a different spike protein, but it's still a coronavirus. It's a different [corona], I should say, and then the SARS and CoV-2 are both beta coronaviruses, they have about 70% homology so they're fairly closely related. A lot of the mutations that happened around the site, around receptor-binding domain, but those 2 viruses have the same target on the human cell called the ACE2 receptor. So they both bind to that. SARS does not bind as tightly as MERS -- as the coronavirus. So the coronavirus seems to be very infectious. And we think it has to do with a very high affinity of the spike protein for a receptor, and so that's one of the tests that we have employed in evaluating our vaccine to show that the structure is correct. So I think with that we -- go back to the first question, just remind me.

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Mayank Mamtani, B. Riley FBR, Inc., Research Division - Research Analyst [27]

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Yes, so on a platform approach that you had with...

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Gregory M. Glenn, Novavax, Inc. - President of Research & Development [28]

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Oh the other platform, sure.

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Mayank Mamtani, B. Riley FBR, Inc., Research Division - Research Analyst [29]

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Yes, versus the mRNA or other approaches here?

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Gregory M. Glenn, Novavax, Inc. - President of Research & Development [30]

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Well, without -- so first of all, as you know, we have a platform technology. It's made of insect cells. It's an insect cell produced recombinant protein with Matrix-M. So that platform technology has been used a lot. It's been in Phase III now several times. And it's the basis of our NanoFlu vaccine. So as Stan mentioned earlier, we use a platform technology to make a MERS and SARS vaccine. We didn't advance it into humans, but they look very good. They had both -- we're highly protective in animal challenge models. So I think the fact that we can scale up. We know that we can get a very large, very big, robust, I should say, immune response and functional immunity, there's lots of reasons. They have confidence that our vaccine could work. Some of the other platforms include a genetic immunization. So one is the DNA immunization.

And I think for infectious disease, that's kind of a new application for it. That did -- they have some Phase I data in MERS with that platform from Inovio. I'd say the other maybe more important technology is the use of mRNA as an immunogen. They make it into a lipid nanoparticle. So that is a genetic approach. So like the Inovio, you'll inject the genetic material. The spike protein is produced in the human cell that you develop an immune response to that. So again, that's also a promising technology. They have not been out -- with respect to vaccine, prophylactic vaccines, they've not been out of Phase I.

There are other -- some other vectors that are being developed that is you make an adenovirus, then you put a gene in of interest. So I think they are using the spike protein gene, so you put a gene expressing the spike protein on the adenovirus and you use the vector itself as a vaccine. There is a precedent for that. The only licensed Ebola vaccine was a vector-based VZV vaccine and that was licensed in December of 2019. So I think that's promising for everyone developing the vaccine for this that there has been a vaccine for an emerging infectious disease. So I do think we have a very appropriate technology. It's been late stage. We know we can make it efficiently with high yields. So our Matrix-M is really key. We've had a number of places where we've been able to demonstrate the importance of using an adjuvant. We know it has a good safety profile. So we're very confident we can address the pandemic here that we're seeing with a good vaccine and we're working very hard to get that into the clinic in the first case, and try to develop the product in parallel for a larger deployment.

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Mayank Mamtani, B. Riley FBR, Inc., Research Division - Research Analyst [31]

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And maybe a follow-up to that on this Phase I in the summer study read out that you're thinking about. Like what are sort of the subjects? I understand these are healthy, but are you targeting older adults? And what specifically would you be looking for in that data readout?

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Stanley Charles Erck, Novavax, Inc. - President, CEO & Director [32]

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Yes. So usually, you start a Phase I trial in healthy adults, which is what our plan is. We -- in terms of readouts, it will be very important to demonstrate that the immunogenicity is strong. So we look for the role of the adjuvant. So we have no adjuvant arm. And we have arms of the adjuvant and the antigens. We haven't really gone over the study design, but in principle, we need to demonstrate the importance of the adjuvant. We will then measure the antispike IGG we induce. We then have a number of functional assays where we show that the assay could demonstrate that we block receptor binding. That will be important and then we make neutralizing antibodies. And I think those are going to be -- you'll see generally accepted types of immune measures in the subjects.

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Mayank Mamtani, B. Riley FBR, Inc., Research Division - Research Analyst [33]

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Okay, sounds great. And just one final financial question. For the R&D guidance, I mean, the 2 studies kind of close to finishing up. Like what are sort of the assumptions as you think about 2020, I mean, there's a lot comparison study, but what else is baked in that guidance for 2020?

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John Joseph Trizzino, Novavax, Inc. - Senior VP, Chief Business Officer, CFO & Treasurer [34]

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So we don't give specific guidance here. But in my remarks, I mentioned the fact that we do have some important activities that will affect R&D expenses. The guidance right now is, I think, the R&D expenses will be decreasing. We've been able to keep all of our G&A expenses under control. You have whatever we're doing for coronavirus at the moment is expectation that, that will be funded, a funded program, and then any other spending is completely dependent and variable on flu data. So we'll update as we get into the year. But the guidance in my remarks is kind of what we'll stand by at the moment.

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Operator [35]

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Our next question comes from the line of Michael Higgins from Ladenburg Thalmann.

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Michael John Higgins, Ladenburg Thalmann & Co. Inc., Research Division - MD & Senior Biopharmaceuticals Equity Research Analyst [36]

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Congrats on the continued successes. A question or 2 on the COVID vaccine that you're working on, assuming this is successful in animal studies and then moving on to some safety shown in the Phase I. We have some history here with your platform. What we don't have are great templates to look to assess your quantity produced over time. So assuming there's some success, can you give us some kind of insight as to how much you can produce over what kind of a time period?

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Stanley Charles Erck, Novavax, Inc. - President, CEO & Director [37]

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Understand, and we're actively looking at that. In fact, with both flu and RSV, we explored large scale manufacturing. And we spent a lot of time developing a manufacturing process for our products that would allow us to commercialize products with our platform process. And we're there. We have good yields. In fact, we have great yields on our products. We don't know what we have on COVID-19 yet, but our expectation is that it will bear what we've done before, which gives us both product and this can produce at high scale and at reasonable cost. And that's our expectation. So we can -- it's all scalable. And we've identified -- we are identifying sites and talking to people about doing much larger scale vaccination. You, of course, recognize that COVID-19 presents a challenge to the world about how you can get production to vaccinate the world, and that's the order of magnitude that we're looking at scale. So we'll report on progress on that. But there's nothing rate-limiting to our manufacturing process to get large scale.

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Michael John Higgins, Ladenburg Thalmann & Co. Inc., Research Division - MD & Senior Biopharmaceuticals Equity Research Analyst [38]

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Right, right. I appreciate that. You said that there's been a great deal in other products and you expect to mirror that here with the others. When might you know what the yield will be like here in the COVID vaccine?

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Stanley Charles Erck, Novavax, Inc. - President, CEO & Director [39]

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I think soon. I think we'll know it at sort of the small, medium scale within a couple of months and we'll be able to make projections about our capacity at that time.

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Operator [40]

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Thank you. At this time, I'm showing no further questions. I would like to turn the call back over to Stan Erck, President and CEO, for closing remarks.

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Stanley Charles Erck, Novavax, Inc. - President, CEO & Director [41]

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Yes. Thanks very much. We're -- it's hard to project the enthusiasm we have here for all of our programs now. And I think the addition of yet another program, which is the malaria Matrix program is making the company very exciting place to be in, and we look forward to reporting on our progress over the next quarter.

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Operator [42]

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Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.