Good afternoon, and welcome to the Novavax Third Quarter 2022 Financial Results and Operational Highlights. All participants will be in a listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note that this event is being recorded. I would now like to turn the conference over to Silvia Taylor, Executive Vice President, Chief Communication Officer. Please, go ahead.

Good afternoon, and thank you all for joining us today to discuss our third quarter 2022 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. Before we begin with prepared remarks, I need to remind you that this presentation includes forward-looking statements, including information relating to the future of Novavax, its key strategic priorities, plans and prospects for 2022 and financial guidance, including total revenue, the ongoing development of our vaccine candidates, including anticipated timing of trials and results; the scope, timing and outcome of future regulatory filings and actions; the efficacy, safety and intended utilization of our vaccine candidates, including against COVID-19 variants; the global market opportunities for our vaccine candidates, our manufacturing capacity and the future availability of our vaccine candidates and key upcoming milestones. Each forward-looking statement contained in this presentation is subject to 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 slide deck we issued this afternoon and under the heading Risk Factors in our most recent Form 10-K and our third quarter Form 10-Q filed with the Securities and Exchange Commission and available at sec.gov and on our website at novavax.com, as well as subsequent filings with the SEC. 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. During this call, in order to provide greater transparency regarding our operating performance, we refer to certain non-GAAP financial measures that involve adjustments to GAAP results. Any non-GAAP financial measures presented should not be considered to be an alternative to financial measures required by GAAP, should not be considered measures of liquidity and are unlikely to be comparable to non-GAAP financial measures provided by other companies. Any non-GAAP financial measures referenced on this call are reconciled to the most directly comparable GAAP financial measure within the Investors section of our website at novavax.com. Now please turn to slide four. Joining me today is Stan Erck, President and CEO, who will provide an update on our recent progress in our upcoming strategic priorities. Additionally, Dr. Filip Dubovsky, Chief Medical Officer, will discuss our clinical development across our pipeline, and John Trizzino, Chief Commercial Officer and Chief Business Officer, will provide an update on our commercial progress and our outlook for 2023. Finally, Jim Kelly, our Chief Financial Officer and Treasurer, will provide an update of our financial results. Dr. Greg Glenn, President of Research and Development, will also be available for the Q&A section at the end of today's call. I'd now like to hand the call over to Stan. Please turn to slide five.

Thanks, Silvia. Good afternoon, and thanks for joining our third quarter earnings call. In addition to the financial report that Jim Kelly will give, Filip will provide our update on important clinical data that we are accumulating, which continue to highlight the advantages offered by our adjuvanted protein-based vaccine. And following that, John will discuss our commercialization efforts. But first, let me start with the financials. Jim will provide you more details, but the highlights include; revenue for the quarter was $735 million. This met our target for the quarter and bring us to $1.6 billion in revenue for the first nine months of the year. During the last quarter, we continued to gather data that supports the differentiation of our vaccine. We believe these differences are important and are a predictable consequence of our vaccine technology. When our nanoparticle antigen is formulated with Matrix-M, it generates a very broad and long-lived immune response, which we believe has advantages in the face of the continued emergence of new variants. We believe that these differences will allow us to deploy a vaccine that may not require bivalency. Novavax's vaccine has been granted regulatory authorizations globally. In the third quarter, we received Emergency Use Authorization from the United States, representing the last major market in which we have obtained authorization for use. Throughout the year, we have been developing data with our many clinical trials across the globe that support the advantages of our vaccine. And together, we believe these advantages will be the basis for the continued long-term expansion of our products in markets throughout the world. We now have data supporting Nuvaxovid's durable immune response that achieves levels associated with protection in our Phase 3 trials, With the ever mutating COVID virus, we want a vaccine that can stimulate an…

Thanks, Stan. Since the last call, we have developed a significant amount of new clinical data. Today, I'm going to review data from Study 307, which is our lot to lot consistency study that includes boosting on top of two and three doses of mRNA. Then, I'll describe preliminary findings from 311, our strain change study that evaluated boosted responses to a prototype vaccine, Omicron BA.1 vaccine and bivalent vaccine when given on top of three doses of mRNA vaccine. But first, I want to review some findings we have recently disclosed. Please advance to slide seven. From our UK study, we recently published that our vaccine had 82% efficacy for preventing all infections over six-month observation period. This was despite the majority of cases being caused by the alpha variant. Protection from infection is important, because if you don't get infected, you can't transmit virus, you can't get sequelae for COVID, and you can't get long COVID and you can't be the source of new variants. In our adult US-Mexico Phase 3 study, we achieved a formal regulatory endpoint supporting boosting in the US population, and we demonstrated a durable immune response, as well as a broad immune response that includes cross-reactive antibody levels directed against Omicron variants that were consistent with levels associated with protection in our Phase 3 studies. In our adolescents Phase 3 study, we made the regulatory endpoint for boosting in 12 to 17-year-olds and show the hemologic responses to Omicron variants were comparable to those associated with protection. Okay. Let's go to slide eight and talk about Study 307, which is our lot to lot consistency study. For this study, I'll discuss data supporting the achievement of our lot-to-lot endpoint and the magnitude and breadth of the heterologous boosting response. This is still preliminary…

Thank you, Filip. Thank you. Our doses delivered to date also include over 19 million doses by our strategic partners, Serum Institute of India, SK Bioscience, and Takeda licensed territories. We remain in ongoing discussions with our customers around the world, including the EU, US, Canada, UK, Australia and others, to ensure optimal supply of doses through the remainder of the year and into 2023. Notably, in the UK, we delivered an initial 1 million doses in the third quarter. We are in active discussions with the UK Health Services Agency around supply and continue to provide data to JCVI to support policy recommendations for boosting in adolescents and expect to receive MHRA approval for adult booster imminently. In the EU, we are expanding our presence and strengthening our partnerships for now and well into the future. To support this, we are in the process of finalizing a revised delivery schedule for the remaining 23 million doses committed under our APA. In the US, we remain in ongoing discussions around additional supply of our COVID vaccine now available for boosting of adults 18 and over. Please turn to slide 27. We continue to closely monitor the market landscape and we believe the current global vaccination trends and the upcoming winter respiratory season present an ongoing near-term opportunity to drive uptake of our vaccine. In the US, according to recent CDC data, around 39% of adolescents have yet to complete their primary vaccination series. Additionally, around 47% of vaccinated adults have yet to receive a first booster dose. Additionally, in the UK, Germany, France, Italy, and Spain, around 48% of adolescents have yet to complete their primary vaccination series and around 20% of vaccinated adults, aged 18 to 59, have yet to receive a booster. With authorization now received for primary…

All right. Thank you, John. This afternoon, we announced our financial results for the third quarter of 2022. Details of our results can be found in our press release issued today and our 10-Q filing. I will begin by providing an overview of our third quarter 2022 total revenue performance, net income, and cash position. Then I will discuss our quarterly results in additional detail, as well as provide commentary on our refined full year 2022 revenue guidance. In the third quarter of 2022, we recorded $735 million in total revenue compared to $179 million in the prior year. Total revenue for the third quarter included $626 million in product sales based on 35 million doses sold by Novavax. Grant revenue of $106 million in the third quarter of 2022 includes revenue on the delivery of 3 million doses to the US government and compares to $135 million in the prior year. Additionally, we recorded royalty and other revenue in the third quarter of 2022 of $2 million. Our cost of sales for the third quarter of 2022 were $435 million. I'll discuss this in a bit more detail on the next slide. R&D expense for the third quarter of 2022 were $304 million compared to $408 million for the comparable period in 2021. The decrease was primarily the result of a $98 million benefit from settlement of the manufacturing agreement. Additionally, we recorded selling, general, and administrative expenses of $123 million in the third quarter of 2022 compared to $78 million in the third quarter of 2021. The increase in the period was primarily the result of activities in support of the commercialization of Nuvaxovid. For the third quarter of 2022, we recorded a net loss of $169 million compared to a net loss of $322 million in the…

Thanks, Jim. So you turn the slide, please. With the strong third quarter reported today, we are pleased with the momentum we're generating across our business. Moving into the end of the year, we are focused on executing against our key strategic priorities, and these include, delivering doses globally to achieve our revenue guidance, ongoing expansions to our label and supportive policy recommendations for Nuvaxovid and initiating our Phase 2 trial for our COVID-19 influenza combination vaccine and stand-alone influenza vaccine by the end of this year, which will enable a Phase 3 efficacy trial expected to start in 2023. So as we prepare for the upcoming winter COVID season, as well as 2023 and beyond, we believe we are well positioned to be a leading provider of COVID-19 vaccines. And as you've heard today, through our data generated to date, we are confident in our prototype vaccines competitive profile, including its durability of immune responses, its ability to address a broad range of variants, its protection against infection and storage and handling benefits. We believe these differentiated factors, along with our ongoing label expansion, Global manufacturing and supply network will allow us to capture a meaningful share of the recurring COVID-19 market. So thanks for your attention, and I'll now turn it over to the operator for Q&A.

Thank you. We will now begin the question-and-answer session. [Operator Instructions] And our first question today will come from Roger Song with Jefferies. Please, go ahead.

Great. Thank you and congrats for the quarter. A couple from us. The first one is the variant specific vaccine. So given the data you presented today, seems the bivalent have less immunogenicity against the monovalent? So just curious, what is the plan for the variant-specific vaccine moving forward, monovalent versus bivalent? And what kind of variant you plan to do moving forward, given so we are having new variants almost every once a while? I'll have a couple of follow-ups.

Thanks. This is Filip. I mean, Stan and John both mentioned that we do plan to develop a variant vaccine as well as a bivalent to realized service market as needed. But your observation is right. I mean, what we saw is that our responses against BA.5 were very good. And the transmission or the amount of infections caused that BA.5 is plummeting. So, it's less of a relevant strain for us to pursue. So, we're actually shifting plans a little bit, and we're pushing forward with the BQ.1-1 variant. And we're going to develop that up and take that into the clinic and also formally that is a bivalent product. Whether time will tell whether that's required or whether the customers want such a vaccine. But the timelines will allow us to bring that really to the market in a time when the Southern Hemisphere should be surging in the second quarter of next year.

Great. Thank you. Okay. All right. So, the next question relates to the financials. Just curious what is the -- I know you're reaffirming the guidance for second half to the entire year for $2 billion. Just curious, in 4Q so far, what have you been seeing? And what's the preorder looking like? And how did that compare to the 3Q you just reported?

Yes, John Trizzino. We're confident with our order book at this point through the end of the year. And I think that we're being conservatively cautious about what deliveries we think we'll be able to make toward the end of the year as we get into the holiday season and product being shipped out and received during that period of time. So, I think the guidance is still strong and just adjusting and refining a bit down to the low end of the range.

Awesome. Okay. Maybe just last one from us. Just looking ahead for 2023 and 2024, if I calculate this right, you probably have around like 150-plus APA -- 150-plus doses for APA. So, just curious how should we think about the rest of the APA and when they will start to fulfill in the coming years?

Yes. It's really difficult to predict what 2023 is going to look like and by way, hesitate to even whisper at guidance at the moment. I think with the transition to more of a commercial market, looking at variant strains or bivalent strains as a possibility and then thinking about what those markets will look like in policy recommendations. As I think -- you've even heard from some of the other manufacturers, it's a little bit challenging to assess at the moment. I think what will happen as we come through the next couple of months, look at what our book of business looks like and it still remains strong, I think we'll have a determination about whether it's existing APAs or incremental business coming into 2023. I think we -- the messages that I make should be reinforced, which is that the virus is not going away. We still have variant strains emerging. It looks like we're going to have a Southern Hemisphere boosting season as well as Northern Hemisphere in the fall again. And I think this overall market size is going to be larger than the existing flu market. So, while we would rather not be thinking about the downside of the virus, we have to be prepared and that's what the purpose of the vaccine is. And I think more will come in the next few months.

Okay. Look forward to that. Thank you for taking the question and that’s all for me.

And our next question will come from Georgi Yordanov with Cowen and Company. Please, go ahead.

Hello, everyone. Congratulations on the progress. So a few on our end. The first one, I guess, for Filip, I'm not sure if I missed that, but one of the most crucial pieces of data that we thought was missing from this morning's release, was the full increase in neutralization titers for the three different products that you looked at. This has been basically kind of like the main factor that regulators and the scientific community has been looking at. So we thought that, that would be interesting to have. And then we have a couple of follow-ups. I guess, the question is, can you provide that on the call, or if not, when can we expect to see it?

Yes. We haven't prepared that data for disclosure today, and I'm not sure we have specific plans of when we would disclose that. I mean, the fold increase certainly is interesting. That shows the ability of a product to boost. But in my mind, what's actually more relevant is the absolute titers achieved after you boost, because that's going to translate directly into protection, especially if you think about the breadth that we demonstrated today, I have a lot of confidence that what we have in hand now is relevant to the currently circulating strains, a point that Greg, my boss likes to make is, we're not claiming this as universal vaccine. We're ever vigilant and we test each of the new variants that come up to assure ourselves to immune sponsors that we're inducing are really relevant for that. So I think you're going to have to hold on until we come up with -- until we announce a plan of how to announce additional data on the study.

Got it. I guess, like, the only -- the power issues that basically a lot of our consultants see, the correlative antibody protection is quite problematic in the community and just because we haven't had enough data. So that's why it will be important to see that data from you specifically to fold increase.

Let me just comment on that, because I think you know the following publication, and that wasn't developed by us. That was developed by MH and USG in that publication, they found that the better core protection for our specific vaccine was actually IgG. And it's a different from what they found for other vaccines, where they thought that neutralizing antibody was a better protection. But I showed you data today on pseudonits for BA.5 and those were really comparable among the treatment groups. And that gives us the confidence to believe that our prototype vaccine we have in hand now is relevant to what's circulating.

Got it. And then, maybe specifically on the FDA label. Maybe, can you walk us through the steps of how do you think you can kind of, like, remove that restriction is only being used as a first booster? I guess, you've presented some of the lost consistency data that supports that. So if you can just help us understand the time lines to when could we expect that to happen?

Yes, that's right. I mean, this is what we were asked to develop and we had been developing, is where it looks like when we use our booster, not only is the first boost but it's a second boost. And that's the data I showed you both from study 307 and 311, and that data is being really prepared now for our submission to the FDA. This is kind of a unique position we are in the US. As you know, globally, we don't have a label restrictions on the first versus second or third or subsequent boosts. Be that as it may, the data is being pulled together and is being prepared for submission. I want to perhaps remind you that some of the studies that the FDA does not like to consider like our 101 study did, in fact, have multiple boosts up to four doses, and that has been considered by other regulatory agencies.

Got it. And then finally, a question just on the commercial side. As we kind of start to think about the potential commercial market transition in 2023, maybe, John, can you talk about like when this contracting usually started? Have you had any initial conversations? Some of your competitors have mentioned that that they are in conversations with the EU and other markets? And specifically for the US -- sorry to be too US-centric, but our understanding is in order to be covered by a commercial insurer, you would have to get full approval by the FDA. Can you update us on do you believe you can get there in time for those contract negotiations? And where do you stand with the full BLA submission?

Yes, Georgi, those are great questions. Thank you. So, listen, each one of those contract negotiations is kind of different around the globe. Right now, we're still under EU commission discussions, and it could be that through 2023. That's the basis for the existing APAs and any reordering that would come. Similarly, in other countries like Australia and Canada, we'll have some unique contract, and we likely expect that those countries will stay under the existing kind of APA structure with the opportunity for incremental purchases as well. So, we're in constant communication around the globe where we're already engaged and talking to those procurement authorities about what that's going to look like. In the US, in particular, we will not have any restrictions with the private payers or the government payers with the EUA in place. Those are conversations that we've already had and are confident in our positioning while we're under the EUA. So, the EUA will have some very minor implications to us who ultimately will be filing for the BLA during the course of next year, but not having the BLA fully approved, we'll not restrict us in the fall booster campaign.

Got it. Thank you so much.

And Our next question will come from Mayank Mamtani with B. Riley Securities. Please go ahead.

Good after team. Thanks for taking our questions. So, maybe just following up on that last throw off questions. So John, in context of doses that are remaining as part of, for example, the US APA. Is there an absolute minimum that you have to satisfy before you, kind of, work towards the private commercial payer kind of setting? Is there something that has to happen as part of the APA before you could play out the other vaccines in the private market? And then I have a couple of follow-ups.

I don't think I quite caught all that, Mayank, but are you referring to the ex-US APAs or the EUA in the US?

Excuse me, I was referring to the US APA, the current 110 million doses contract that you have, is there some sort of a minimum you have to satisfy before we can sort of think of a private market in 2023 and beyond?

Yes. No. I mean, while that contract is still in place, I think likely we're going to see a movement to traditional procurement. And again, it's really hard to say when. But if we're keying off of what happened this year, you would think that there would be a full vaccination campaign. We'll learn probably early in the year about what that process is going to look like, what strains are being expected, what vaccine format the US government is going to want. So I think that's why the comments I made earlier are, let's kind of stay tuned through the balance of the year and into Q1 as we see how that unfolds, whether the US government will fund the purchase of additional vaccine or they will rely on the public private market to take that over during the course of 2023. So I think, its stay tuned, but I think likely, you're going to see procurement taking place in the commercial market in 2023.

Okay. Thank you for clarifying that. And then on the fourth quarter, delivery estimates that you have, it looks like you only need, I think, an incremental 15 million doses to get to that $2 billion refined guidance. Can you confirm that what countries you could get that from? Is that basically EU, UK and Australia and New Zealand? Is that essentially the countries and customers that just -- can you just clarify that?

Well, I think, the guidance is kind of clarifying that. I don't think we're going to give specific doses by country. But it will likely be across all of our APAs in varying dose amounts, but we're not going to disclose what those specifics are country by country.

Understood. And then, on the R&D expenses, just quickly, it looks like it did come down quarter-over-quarter, but it was a result of a manufacturing agreement. Can you speak to what leverage you may have going forward? As you think about fourth quarter, but also next year and recognizing that you're being very strategic about investing behind trials and scaling up for the variant-specific vaccine.

Certainly. When you look at our R&D expenses this quarter, you're correct, it was about an $98 million benefit. So of course, that would taking you up to about $400 million. We do expect some continued decrease in R&D as we bring more of our manufacturing capabilities online, capitalize on the inventory, including our CZ plant. So you'll see some trending down there over time. I would say that in this period as well, we had a bit of an offset of some ins and outs of the benefit from capitalizing our CZ plant. And then we also had some, I'm going to call it, R&D-related manufacturing activities that we wrote off that I wouldn't expect in future periods. So you'd be correct to see a trending down R&D in some future periods.

Thanks for taking my questions.

And our next question will come from Eric Joseph with JPMorgan. Please, go ahead.

Hi. Suzzana on for Eric. Thanks for taking the question. Just a few from us. So, first, I was just wondering if you could talk about the impact of COGS that can occur from migrating Nuvaxovid to a single administration sense format? And relatedly, what would you need to do in terms of additional supplemental approvals to getting that strain product out? And then also just on the RSV front, just wondering how your thoughts have evolved as it relates to entering the RSV and given the success of the perfusion competitor?

You're really hard to hear in the first part of that question. Would you mind just kind of repeating, please?

So first part of the question, impact-related COGS from the [indiscernible] product. And then also what would it take in terms of submitting approval for getting that out -- getting that product out?

Yes. So, we would expect for those prefilled syringe impact that we would see that happening later in the second half of the year, specifically in those markets in the Northern Hemisphere. So, I think we would expect to see some reduction in vial size, total amount of doses in vial in Southern Hemisphere, but certainly moving toward prefilled syringe or unit dose vials in the second half of the year.

And then your [Technical Difficulty]

RSV. Yes, well, I think, look, it's something that a particularly key interest to us. As we've mentioned before, that technology platform for our recombinant protein nanoparticle as well as adjuvant is robust and beneficial as we're seeing it in our COVID-19 vaccine. We've learned significant lessons over the course of the last couple of years about how to leverage that technology platform. And while there's good data from competition I think we have an opportunity to have even better data given our technology platform in the context of multiple doses and the use of our adjuvant. So, stay tuned for more details relative to RSV in our pipeline.

Perfect. Thanks for taking the question.

And our next question will come from Alec Stranahan with Bank of America. Go ahead.

Hey guys. Thanks for taking our question. Just a couple from us. First on BA.5, could you help with draw a line between the pseudovirus GMT response that you showed with the prototype Nuvaxovid for BA.5 to what you saw in PREVENT-19? Just wondering if GMT is declining on an absolute basis and how this may correlate with protection? And similarly, I believe there was also a BA.5 specific vaccine and bivalent in the Phase 3 study that you presented today. So any guidance on when you'd update the market on that data would be helpful? And secondly, maybe one for Jim. Looking at your debt commitments to CEPI and the convertible note as well as potential for repayments to the UK and Gavi, which cumulatively is not a significant amount of cash potentially on the line. Could you just speak to your view on the liquidity heading into next year? I know you're roughly at $1.3 billion now. Thanks.

All right, Alec. Listen, thanks for your question. We ended the quarter with $1.3 billion. We are looking forward to February of next year is the time when, of course, our convert, the $325 million, comes due, we feel like we have ample cash flow to either retire that, convert for cash or we'll monitor market conditions, consider what we might do there. When it comes to Gavi, because you mentioned that one, and I think that's an important one for clarification. We received $700 million from Gavi COVAX related initially for an upfront for our commitment, 350 million doses. And then, of course, the other 350 upon approval by the World Health Organization. We do not believe Gavi has any right to a return of that capital. So for that reason, we would put that off to the side. And then, with respect to some of the other puts and take of, call it, potential returns of capitals, we'll continue to provide updates on our cash flow as we guide into next year, but we go into this with great confidence. And our commercial launch in Nuvaxovid and what that means for operating cash flow.

And maybe just a bit of commentary about the pseudonits. I mean, the data I presented you today is preliminary data. That's being confirmed in a validated assay and we'll have those results soon. And then we'll be more able to compare between the series to BA.5 versus the other subvariants in the prototype. It’s a bioassay. And there's a lot of variability in the results that you can get from that. But still, we are quite pleased to see the lows we got. It was within the levels that are thought to be protected, at least by the NIH clause of protection analysis.

And our next question will come from Vernon Bernardino with HC Wainwright. Please go ahead.

Hi, everyone. Thanks for taking the question and congrats on a fantastic revenue quarter. Just perhaps a question for John. You had mentioned one thing that still remains underappreciated, in my opinion, is the advantages that you have for Nuvaxovid as far as storage and distribution. Now thinking down the road, that advantage probably is going to continue to be there. What are you seeing as far as competitors and their storage capabilities and what they're changing and what the market may be thinking as far as down the road in the storage of the mRNA vaccines? And after that, how do you think their capabilities as far as manufacturing, which they had initially been interested in ramping up in these territories that are lower income, might be something that’s helps them up with their commercial viability of mRNA vaccines is changing. Any insight you could provide would be helpful. Thank you.

Yes. Vernon, good question. As I briefly mentioned in the presentation, we indeed still have a significant advantage in the refrigerator stability of our product. And then, of course, we would be moving to a smaller dose presentation and ultimately to prefilled syringes, which is yet a significant advancement. It's unclear where the competition is going and will remain to see what they're doing. But at least for the moment, we know that they're still shipping frozen multi-dose vials that requires storage vial still before it's used, thawing, and then a fairly short durability -- I'm sorry, stability of product after it's thawed. So, we'll continue to see that advantage. We think for some period into the future. And certainly, into -- for our other partners into low and upper middle income markets where freezer capabilities are limited is an advantage for us as well. So, thanks for pointing that out, and we'll have to keep an eye on what happens with whatever they are able or unable to do with mRNA vaccines.

And as far as the market dynamic is concerned, are you seeing any difference or changes in the end user as far as their thinking of and storage and perhaps future needs for mRNA vaccines versus yours?

Yes, I think that's -- our interest in getting to the commercial markets, I think you'll see the health care providers then having some more optionality to access an easier-to-use presentation. And so that's certainly one aspect that we're going to be pursuing in the US and EU markets.

Thank you.

And this will conclude our question-and-answer session. I'd like to turn the conference back over to Stan for any closing remarks.

Thank you, operator. I appreciate the time everybody has spent taking this call. It's been a very big and important quarter for us. We've made a lot of advantages on every front. And I look forward to showing you more of the same in the coming quarters. Thank you.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines at this time.