Good morning, and welcome to Novavax First Quarter 2023 Financial Results and Operational Highlights Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Erika Schultz, Senior Director, Investor Relations. Please go ahead.

Good afternoon, and thank you all for joining us today to discuss our first quarter 2023 operational highlights and financial results. A press release announcing our results is currently available on our website at novavax.com, and an audio archive of this conference call will be available on our website later today. Please turn to slid 2. 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, operating plans, objective and prospects. Its future financial or business performance, conditions or strategies, including projections on revenue and reductions in expenses, and as global restructuring and cost reduction initiative, key commercial goals, including transitioning to our traditional commercial model, future product demand trends, the ongoing development of our vaccine candidates, including advancing multiple variants strain, strain selection, anticipating 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 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 those 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, and our most recent form 10-K and subsequent form 10-Q filed with the Securities and Exchange Commission and available@www.sec.gov and on our website at www.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. Please turn to slide 3. This presentation also includes references to non-GAAP financial measure, which is forward-looking information from R&D and SG&A expense as adjusted to exclude onetime restructuring costs as described on this slide. Please turn to slide 4. Joining me today is John Jacob, our President and CEO, who will provide an update on our progress during the quarter for a three key priorities. Dr. Filip Dubovsky, President of Research and Development will discuss our various strategy and clinical development and pipeline, and John Trizzino, Chief Commercial officer and Chief Business Officer, will provide an update on our commercial activities. Finally, Jim Kelly, Chief Financial Officer and Treasurer will provide an overview of our financial results. Rick Crowley, Chief Operations Officer will also be available for the Q&A section at the end of today's call. I would now like to hand over the call to John Jacob. Please turn to slide five.

Thank you, Erika, and thank you, everyone, for joining us today to discuss our first quarter 2023 financial results and operational highlights. We have an especially eventful call today, because in addition to our first quarter results, we will also be discussing significant measures we have taken to reduce our costs and restructure our organization, and we look forward to sharing some encouraging top line Phase II results for our combination flu COVID program. The last time we worked together was in February for the Q4 earnings call, when I was only a few weeks on the job as the new CEO of Novavax. At that time, I shared with you why I was excited to join the company, my early observations and what our near term top priorities are based on those early observations. First, delivering a competitive product for the upcoming fall season; second, reducing our rate of spend, managing our cash flow and evolving our scale and structure, and finally, driving additional value from our technology platform and portfolio. Now as I join you for the second time with a full quarter of listening and learning behind me, I must say that this recent experience has further strengthened my resolve and confirmed for me the strong potential that our company has to make a positive difference in global public health. As we continue to execute on our priorities, if successful, I believe we will place Novavax in a stronger position for future growth and value creation. I'm encouraged by the progress we've made to date. And while we know there are still significant challenges ahead of us before we can claim success, the leadership team and I will remain completely focused. During the quarter, we have taken decisive actions and made progress on each of our three…

Thanks, John. Please turn to slide 6. Our research and development program remains focused on our COVID vaccine. While we have multiple ongoing studies to generate additional data needed to expand our label today I will update you on our variant strategy in preparation for the 2023 fall vaccination season, which as John discussed is our numer one priority. We also continue to advance our standalone influenza and COVID influenza combination vaccine candidates and I'll show you some preliminary top-line data from our Phase 2 study. Development of our other pipeline assets including RSV remains paused allowing us to focus our resources on the programs that are critical to our near-term success. Okay let's turn to slide 7 and discuss our variant strategy. On our last earnings call we described our approach to developing and evaluating vaccines for different variants. We have executed that strategy and continue to refine variant strain development based on evolving epidemiologic data and ongoing dialogue with the global regulators. Despite in this table are the recent variants we have progressed into our variant development platform. Whenever a new variant emerges we manufacture the variants spike protein conduct preclinical studies to understand the variant's ability to cross neutralize or escape immune responses from other strains. The variants that continue to be of concern are advanced into production of GMP master virus seed and then into large-scale manufacturer if warranted. This manufactured vaccine can be used for clinical studies or for commercial release. Based on regulatory input, our currently candidate is XBB.1.5, which we have progressed into manufacturing of multiple 6,000 liter batches. XBB.1.6 is also of interest. And although there's only a single immunoacid difference the receptor buying domain from XBB.1.5 we're making a master virus seed to be prepared for the vaccine composition announcement. Based…

Thanks, Filip. Please turn to Slide 19 and then Slide 20. As key markets transition to more traditional commercial models, we are gaining more visibility into the expected size of the long-term COVID vaccine market. We remain confident in an ongoing need for annual seasonal vaccination with likely demand in the US in 2023 of approximately 100 million doses. We believe it is reasonable to think this is approximately $7 billion US market with a total global demand greater than $15 billion. Please turn to Slide 21. I I'd like to discuss our recent progress and commercial readiness efforts to prepare for the 2023 fall vaccination season in the US and rest of world. Beginning with the US, we delivered doses during the first quarter under our modified agreement with the US government for up to 1.5 million doses, which importantly maintains access to our protein-based option in advance of the fall season. This included initial delivery of our product in a five-dose vial presentation in March 2023. In parallel, we are preparing for the transition to a commercial market in the US, utilizing the existing flu vaccine logistics and go-to-market infrastructure. Today, we have a fully deployed commercial team across the US Canada, EU and UK that have established relationships with key commercial stakeholders and vaccine providers across all distribution channels who are actively working towards ensuring our vaccine is available to consumers at key points of service for the full season. This includes ongoing discussions with all major retail pharmacies nationwide educating healthcare providers and pharmacists about our COVID vaccine across the country engagement with distributors physician-buying groups doctors' offices and integrated delivery networks coordinating with the US government to provide vaccines through various national public health programs and we are finalizing our participation in the CDC, VFC…

Thank you, John. Please turn to Slide 22. This morning, we announced our financial results for the first quarter of 2023. Details of our results can be found in our press release issued today and our 10-Q filing. I'll begin by providing an overview of our first quarter 2023 results and progress to date on our liability management. Then I'll provide more details regarding the global restructuring and cost-reduction initiative announced today. Finally, I will share financial guidance for the full year 2023. Please turn to Slide 23. For the first quarter of 2023, we recorded combined R&D and SG&A expenses of $360 million. This reflects a $120 million, or a 25% decrease compared to the first quarter of 2022 and a $60 million, or 14% increase compared to the fourth quarter of 2022. This improvement represents the initial impact of our cost-reduction initiative, putting us on a path towards a significantly lower-cost structure as we transition Novavax' size and scope to align with the COVID opportunity. We recorded $81 million in total revenue for the first quarter of 2023, which is consistent with an emerging seasonal demand pattern for COVID vaccines. Importantly, we reduced our outstanding current liabilities by $541 million, including funding the maturity of the $325 million convertible debt. And finally, we ended the quarter with $637 million in cash, compared to $1.3 billion at the end of 2022. Please turn to slide 24. Beginning with revenue we recorded $81 million in total revenue for the first quarter of 2023, compared to $704 million in the first quarter of 2022. Of note, you will see we recorded a net $7 million reversal of product sales in the first quarter of 2023. This relates, to a $65 million credit that resulted from a single lot sold to the…

Thank you, Jim. Please turn to slide 28. I'd like to underscore that as I've learned more about our organization and our people in recent months that I've seen a passion across our company to advance our mission and deliver innovative vaccines to improve global public health. As the team demonstrated today, we've taken decisive actions on the priorities we outlined in our February call, including our intent to advance our updated vaccine for the fall campaign, strategically manage our investments and dramatically reduce our spend and work to drive additional value from our pipeline and technology platforms. We continue to operate with this focus on fiscal responsibility in parallel with making the investments needed to achieve our three key priorities. The reductions to our workforce that we announced today were difficult decision, but we felt they were a necessary one to put the company on a better pathway towards financial strength and sustainability. Let me say that we deeply appreciate the contributions made by those employees, who have been adversely impacted today and we will appropriately support them as they make the transition to new opportunities. The positive Phase 2 data we announced today further reinforces our belief in the value of our recombinant protein nanoparticle plus Matrix-M adjuvanted technology platform at Novavax. Our prior positive Phase 3 results for both our COVID and flu vaccines plus this new Phase 2 data, provide additional confidence for us to move towards Phase 3 for one or more of these products potentially in the future. It is our intention to leverage this technology to build a robust portfolio of vaccines to further support our mission of positively impacting global health. As we continue to execute on our strategy and key priorities, we're confident that we're taking the right steps with the goal of positioning Novavax for success and delivering positive results for our stakeholders in 2023 and over the long-term. And with that, we will now take your questions.

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

Thank you. Thanks for the update and taking our questions. A couple from us. First one is regarding this -- the revenue guidance, since you provide this revenue guidance in ex-US $800 million APA. I just want to get some additional comments related to how confident you are about this APA given the recent EU they have some proposed deal with your competitor? And in terms of the breakdown within the $800 million, can you provide additional color around the timing, geography, maybe last portion -- last part of the question is the -- related to the remaining APA. Last quarter, you said you have $2.1 billion in total since you are doing some renegotiation, just curious, what's left for your APA to be delivered in 2024 and 2025? Thanks a lot.

Thank you, Roger. Appreciate the question. John Trizzino, would you like to take that one?

Sure. Hey Roger. There's a couple of components to your question. Let me try to parse them out. First of all, the $2.1 billion is still a true kind of adherence to the original value of all those contracts and we expect that and to date still have confidence in that value. Now, that's going to be -- some of that is going to fall into '24 and '25, the $800 million for '23 are locked in orders, committed orders, allocated to be shipped during various quarters of the balance of this year, so confident in the $800 million. That settlement that's happening in Europe with Pfizer, I think there are still some details to be determined there, but that will not affect revenue generation during the APA period. There are possible implications to that in the future, when we go to tender and private market selling, but have already had multiple conversations with the European Commission Director General and his staff about the need for a protein-based vaccine in a vaccine portfolio. So, critical there's an awareness and a need to make sure that our vaccine is available. The contracts and APAs support the $2.1 billion and the $800 million is locked in delivery schedules for 2023.

And Roger, you had a question about the allocation of that $2.1 billion relative to 2023 versus future periods. So, the items we discussed today were the $800 million secured APAs for delivery. And I also mentioned a $100 million payment, which came from a renegotiated APA that has been secured for the second quarter. So that gets you to $900 million total of the $2.1 billion. That leaves an additional $1.2 billion outstanding. And as I mentioned in our remarks, that these are available for delivery. They're of course committed and we are going to actively seek to renegotiate some of these APAs as a mechanism for nondilutive financing and certainly more on that in future calls as we move forward.

Excellent. That's very helpful. Thank you for the comment. And then, so moving on to the US market, understanding you're doing the inventory review for the strain change and you will have the midyear data to potentially support a strain change. Just curious, what additional data you needed once the VRBPAC meeting June 15 decided which strain change to select what additional data you need to be able to deliver in the US market for the fall? And related to that is, for the US market, it seems that's also part of the revenue guidance outside of the $800 million, how much you are building for the US market or it's kind of upside and you have a range of the revenue guidance is maybe towards the upside of the revenue guidance? Thank you.

Filip would you like to take the first part of Roger's question?

Sure. I'll at least take the first part or the first part of Roger's question and that's really the main thing we're waiting for is the strain composition selection, right? The study that we're conducting will read out as you mentioned and we've done this before and we're successful with that study. So, we don't see why it should be any different. The additional details that need to be part of that file are in fact manufacturing details and it includes stability of the strain that’s selected, et cetera. And that's all part of the regulatory timeline that we've developed and we've discussed multiple times with the global regulatory agencies. So, they understand the kinds of barriers we have to put in the vaccine in the market and we're pretty confident about that right now.

Thank you Filip. And Jim maybe you could take the second part of Roger's question.

Hey certainly and thanks for asking because gives me the opportunity to walk you through in a little more detail our revenue guidance. So, we've guided to total revenue of $1.4 billion to $1.6 billion, of course, midpoint at $1.5 billion. And that guidance is inclusive of both our product sales and grants and I'll begin with grants. Grants at the midpoint is $350 million range of $340 million to $360 million. As folks know we've been operating with the US government under Operation Warp Speed to fund much of our clinical activity and that continues through this year and is the basis for grants revenue. For product sales, our guidance is $1.06 billion to $1.24 billion and that's inclusive of both the $800 million we spoke of just a moment ago, which is for secured APA delivery. And if you subtract that, it results in US at $260 million to $440 million or $350 million at the midpoint. So, hopefully that's helpful.

Thank you, Jim.

No, that's helpful. Okay. I understand basically the balance of the $800 million outside of your product sales that's the US market. Got you. Okay. Great. Bear me for the last one question. So, related to your the COVID flu combination therapy, data looks pretty robust. But noticing I think John you mentioned, you are moving towards a partnership maybe some strategic collaboration for -- to move forward this program. Just maybe elaborate on your plan there. What will be the next immediate next step for the combo and some other kind of stand-alone vaccine a little bit different from what you already, have do you need a Phase 2b efficacy study before you move into the Phase 3? Just a little bit more detail that would be appreciated. Thank you.

Thank you for your question Roger. Let me answer it this way and I can let Filip address the Phase 2b question, et cetera. As we noted in our call and in our prepared comments our focus this year is on our three priorities; our top priority at Novavax is launching our updated Nuvaxovid in line with regulatory authority requirements for this fall season and a competitive product profile and on time for our customers as the fall season emerges. That's our number one goal. In parallel with that is reducing our cost and resizing the company and addressing our near-term and current liabilities aggressively. I think we've demonstrated some decisive actions that the leadership team and I have taken with the support of our Board in that direction very clearly now in the first quarter. We're excited and encouraged about the data. This is a Phase 2 top line results. And if we continue to execute on our plan successfully this year, we should be able to position Novavax in a stronger place, from a financial perspective. So we can have options next year, on how to bring forward these unique and interesting assets that are in development right now. And we'll continue to learn from the data in the coming months, and have discussions with regulatory authorities and how to best bring these forward. Filip, would you like to add additional commentary on Roger's question around, what type of study may be next for these assets?

Yes. I mean a lot of that really depends on regulatory guidance. We would clearly not go into pivotal study, without very firm regulatory guidance. And that may well depend on what we see in the rest of the data. Additionally, if we do move forward with a strategic partner that ultimate design and timeline will be determined in collaboration with such a partner. Now, what we are planning on doing right now is, doing a Phase 2 study with our high-dose COVID product. And that's going to be done with the XBB 1.5. format. I mentioned that earlier. And the idea there is going to be to really explore the optimal formulation, including the antigen as well as adjuvant dose levels, to optimize immune response. You followed us for a long time. So you know that we did our initial dose ranging in naïves at the very beginning of the pandemic, and we saw there was no difference when you changed the antigen dose level. But we're in a different place now, where people are heavily primed and we are seeing evidence that as we increase the dose level in these primed individuals, we do get a better immune response. So we're looking to develop a high-dose formulation, to be for annual vaccination primarily in the elderly market similar to what has been done in influenza.

Thank you for questions, Roger.

Your next question comes from Eric Joseph with JPMorgan. Please go ahead.

Hi, guys. Very good morning for taking the questions. So I just wanted to come back on launch preparedness for the fall season and just -- and kind of get a sense of where your confidence comes from being able to launch ahead of a BLA approval? And I guess, it's currently planned proceeding under EUA. Can you talk about whether there are any amendments or expansions of the existing EUA, that are necessary to facilitate a commercial launch in the US?

John Trizzino, would you like to take that question from Eric, please?

Yes. So we have been in constant coordination with the FDA, on where we are today under emergency use authorization, as well as submission of the BLA and the timing of the BLA submission, and where that leaves us under emergency use authorization. So we have emergency use authorization for the product that is today approved and labeled by the FDA and around the globe. We will need an additional emergency use authorization, similar to all of the other manufacturers for the new strain and the new format, which is yet to be decided. Based upon those conversations with the FDA, it is our expectation and specifically based upon conversations we've had with them, that we will be operating under an emergency use authorization without restriction. So I think that really says all that we need to know, at this point. And that means that all of the activities that I talked about, during our planned remarks, with access to pharmacies, access to all healthcare providers, access to distributors will be unrestricted.

Okay. And maybe just a follow-up on the manufacturing side. Can you just talk about sort of the manufacturing lead time, after appropriate strain selection, it sounds like in June I guess what -- ultimately what those quantities, do you think could be supplied or market-ready at launch? And also a little more detail on sort of where supply is being sourced from whether it's from serum or other facilities? Thanks.

Thank you, Eric. Right now, we're not disclosing specific quantities of our production plan in the public domain, but that's a very good question. And we've -- as we said on our prior call, we've changed the way we're working with FDA and the way we're working internally with our project teams to do everything we can to appropriately minimize the time it takes to be ready for the fall season, and that includes quite a nice shift in the dynamic with FDA. We've seen an excellent partnership from both FDA and global regulatory authorities who have expressed to us that they value a protein-based option in the marketplace for consumers around the globe. And we've made significant progress, as we said before, in bringing multiple strains forward and that's key because we're able to get the data, assess the data on which strains are becoming predominant and bring several streams forward. And Filip discussed that during his prepared remarks earlier, and we have some slides on that. So we feel that we're currently on track to be ready despite potentially taking protein-based vaccines a little bit longer from the very beginning of go to get finished. We've been taking steps right now already to prime that pump and to be ready to bring the vaccine forward. John Trizzino, would you like to add any color or comment to that? And Rick Crowley as well, who leads our manufacturing.

No, I think, John, that pretty well captures it. Of course, Eric, you can imagine that as we're anticipating revenue generation and product availability, we're thinking through exactly all of those time lines. And it's manufacturing time lines, fill finish, getting product to the right distribution centers making sure that the regulatory approvals are impacted. So end to end, those time lines have been examined and scrutinized to make sure that we have product available at the start of the fall season.

Okay. Great. Thanks for taking the questions.

Thank you, Eric.

Our next question comes from Mayank Mamtani with B. Riley. Please go ahead.

Good morning team. Thanks for taking the question. Appreciate the level of detail this morning. Including the progress on balance sheet and OpEx resizing, are you able to provide any granularity on how fiscal year 2023 reductions will be split between R&D and SG&A? And in terms of workforce restructuring also 2023 versus 2024, any level of granularity there would be helpful. And then I have a couple of follow-ups.

Thank you, Mayank. Jim Kelly, would you like to take Mayank's question?

Hey, certainly. And good morning Mayank, as we announced this morning, I mean, we have a significant global restructuring and cost-saving initiatives that touches each corner of our organization, both functionally and geographically. That means that we will, among other things, focus on our core priority of delivering our vaccines fall, you're watching a sharpening of our investment on our COVID program. The cost structure that we're describing today is the COVID stand-alone cost structure. I described in more detail that it did not include at this time, advancement of pipeline, including based on some of the great flu kick results we saw today. So when we look back to these reductions, again, it's a sharpening of our focus on the COVID business. It is a pausing of our pipeline. It includes a continued rationalization of our manufacturing network as we size it for the endemic opportunity. It also includes a 25% reduction in our total workforce, inclusive approximately of 80% of those impacted our full-time employees and then also a consolidation of facilities and infrastructure. When you look at where this from 2022 to 2024 will hit in different aspects of R&D plus SG&A, it is primarily going to be in the R&D realm. And this is because as we continue to make investments in our commercial footprint to ensure success in the marketplace in our priority markets of the US, Europe and select APAC what we're seeking to do is further reduce our G&A and infrastructure to enable that investment. So watch us seek to hold steady as best possible SG&A. And then when you look at the reductions from 2022 to 2024 a significant amount will be reflective of those steps I just described. So hopefully that's helpful.

Yes, very helpful. Since we are on that topic if you could comment also on the liabilities reduction program? Obviously, great updates on the par and UK government payment, but there are a number of other things in the works like Gavi, if you could provide any update on that that would be helpful?

Yes. Jim, do you want to just cover the liabilities question first?

Hey, certainly.

Yes.

Beginning with the liabilities, we made significant progress this quarter reducing our current liabilities by over $541 million. And you will see that one of the key components of that was funding the maturity of our convertible notes for $325 million, but also you saw a significant reduction in our payables approximately $190 million. So that's a part of a really important step for us to address in some cases onetime liabilities as we better put this company on a strong financial footing. So hopefully that covers at least through 3/31 your question, but we also make sure we make folks aware of that. We addressed another $140 million in liabilities in April including resolution of the par arbitration for $27 million. And then also we did make that payment to the UK per our APA of $113 million and that related to the terms of the agreement that had previously been discussed. Now one of the things that is helpful here is I announced that we had secured a $100 million payment under a renegotiated APA. So that's incredibly helpful to help fund those liabilities. And I also described in our remarks that during Q2 and Q3, we expect inflows of cash flow of over $500 million. So it is the combination of liability management progress to-date, our expectations around future cash flow into Q2 and Q3 that we find important to put us on the right footing towards being prepared for the fall vaccination season.

And then Mayank you did ask about Gavi. So look there's obviously not much I can say related to the legal matters that the company is addressing. But what I can do is confirm that we're currently in the arbitration process with Gavi regarding this matter and to restate Novavax's position that we do not believe we owe the money that's in question. And obviously we cannot predict the outcome of any arbitration. But what I can say is we'd like to put the matter behind us as soon as possible and that frankly were frustrated by the situation. And that's because we believe we share the same mission as Gavi to help improve global public health and to provide high-quality vaccines to people in low-income countries. And we're frustrated that the current matter is not yet resolved and has the potential of impeding our ability to fulfill this mission to the best of our capabilities. Thank you for your question, Mayank.

This concludes our question-and-answer session. I would like to turn the conference back over to John Jacobs for any closing remarks.

Just like to thank everyone for joining us today. We appreciate your time and your confidence in us. Thank you very much. Appreciate it.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.