Good morning, and welcome to Novavax' Second Quarter 2024 Financial Results and Operational Highlights Conference Call. All participants will be in a listen-only mode. [Operator Instructions]. Please note this event is being recorded. I would now like to turn the call over to Erika Schultz, Senior Director, Investor Relations. Please go ahead.

Good morning, and thank you all for joining us today to discuss our second quarter 2024 financial results and operational highlights. A press release announcing our results is currently available on our website at novavax.com, and an audio archive of this conference call will be available on our website later today. Please turn to Slide 2. Before we begin with prepared remarks, I need to remind you that, this presentation includes forward-looking statements, including information relating to the future of Novavax. Its key strategic priorities, statements related to potential royalties and milestones, operating plans, objectives and prospects, full year 2024 financial guidance, the amount and impact of Novavax' cost reduction plans, its future financial or business performance conditions or strategies, its partnerships, anticipated timing and outcome of future regulatory filings and actions, and the ongoing development, marketing opportunities, manufacturing capacity and 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 morning and under the heading Risk Factors in our most recent Form 10-K and subsequent Form 10-Qs, filed with the Securities and Exchange Commission available at www.sec.gov and on our website at novavax.com. The forward-looking statements in this presentation speak only as of the original date of this presentation, and we undertake no obligation to update or revise any of these statements. Please turn to Slide 3. This presentation also includes references to a non-GAAP financial measure, which is forward looking information for R&D and SG&A expense as adjusted for expense reimbursement from Sanofi under the Sanofi agreement. Please turn to Slide 4. Joining me today is John Jacobs, our President and CEO, who will discuss our progress during the quarter and highlight our forward key value drivers. Additionally, John Trizzino, our President and Chief Operating Officer will provide an update on our operating activities; and Dr. Bob Walker, Chief Medical Officer and Interim Head of Research and Development, will discuss our clinical development and pipeline. Finally, Jim Kelly, Chief Financial Officer and Treasurer will provide an overview of our financial results and implications of the Sanofi partnership. I would now like to hand over the call to John Jacobs.

Thank you, Erika, and thank you, everyone, for joining us today. I'm pleased to be with you today along with the members of our executive team to highlight our recent achievements, progress on our annual priorities and the shaping of a new vision for Novavax. When we spoke with you last quarter, we were taking the first steps on this exciting journey with the announcement of our global partnership with Sanofi. Our collaboration with Sanofi has allowed us to monetize the value of our COVID-19 vaccine and proven technology platform, and frees up resources to develop multiple opportunities in the vaccine space. Since then, we have worked hard to execute on our objectives and are beginning to position the Company back toward its roots as an innovation-driven organization, while remaining a close commercial partner to Sanofi for our COVID-19 vaccine. We are beginning to evolve from a company that independently manufacturing, distributing and commercializing vaccines on a global scale to a much more efficient and focused R&D model. This means that we intend to drive future value from additional business development activities and organic R&D via our proven and validated technology platform, with plans to unveil a new and expanded clinical pipeline by the end of this year and to seek to execute our plans within a much leaner operating model in 2025 and beyond. The potential value drivers of our business are outlined on Slide 5 and include: value driver one, the Sanofi partnership; value driver two, late-stage pipeline; value driver three, leveraging our proven technology platform to drive additional partnerships and deals; and value driver four, a new early-stage pipeline. It is our intention that, these potential value drivers will be supported by an appropriately-scaled infrastructure with significantly reduced expenses versus our 2024 baseline. Jim Kelly will provide…

Thank you, John. Q2 was another quarter of progress for the business as we continue to lay the groundwork for a successful Nuvaxovid co-commercialization effort with Sanofi beginning in 2025. And with the '24-'25 season start less than one month away, we have continued to lay the groundwork for success by updating and filing for authorization of our updated COVID-19 vaccine formulation. Please turn to Slide 8. In the U.S., as John mentioned, we are concentrating our commercial efforts for the remainder of the year on our largest market, the U.S. This should enable us to drive continued cost savings starting this season and continuing into 2025 and beyond, as we wind down our independent commercial presence in markets around the world, in anticipation of Sanofi taking the lead on commercialization of our COVID-19 vaccine, starting in 2025. Turn to Slide 9. For the first time, we expect our product to be available in a pre-filled syringe in the U.S. The product will be arriving in the U.S. this month and will be held in our warehouse, as we await authorization before we can begin distribution. Turn next to Slide 10. We have adopted a highly-targeted commercial approach and will focus on the retail pharmacy channel, where over 90% of administrations occurred last season. We have secured contracts with CVS Pharmacy, Rite Aid, Walgreens, Costco as well as regional grocers and independent pharmacies and thus are tracking towards a significantly increased availability compared to last year. We have already initiated pre-season marketing efforts to build upon last year's campaign to drive increased awareness of Nuvaxovid. Please turn to Slide 11. In Europe, given our upcoming transition of primary commercial responsibilities to Sanofi, we plan to conduct a lean, limited and targeted commercial launch in the region, while still maintaining the…

Please turn to Slide 13. Thank you, John. I'm going to present key updates and highlights from our research and development activities from the last quarter, which support the four key value drivers John outlined earlier. I'll discuss the '24-'25 COVID-19 strain change, our CIC and influenza programs, our efforts to expand potential opportunities for Matrix-M and our internal preclinical pipeline. Please turn to Slide 14. With regard to our COVID-19 vaccine and the '24-'25 strain change, we were pleased that the CDC renewed their recommendation for universal vaccination for everyone six months and older for the upcoming season with the updated vaccine and did not differentiate between among manufacturers or vaccine strains. Our update vaccine, which uses the JN1 strain, often characterized as the trunk of the tree from which the currently circulating variants emerged, is well-positioned to compete with the mRNA vaccines this fall in light of the guidance issued by the leading regulatory and policy bodies. We submitted our regulatory packages for the strain change to both FDA and EMA in June, and we continue to work with the regulators to facilitate a smooth review and approval in the effort to have our vaccine available early in the vaccination season. And as you've already heard from John, our updated vaccine is on track to be in warehouses this month and is expected to be ready for distribution upon authorization. Please turn to Slide 15. We continue to monitor the performance of our JN1 vaccine against new variants in non-clinical studies. Our data indicate that our vaccine targeting JN1 should provide acceptable coverage for the currently-circulating variants. This slide shows neutralizing antibody responses with JN1 vaccine in rhesus macaques. You can see that, the antibody titers are robust across the spectrum of variants, and this includes the KP.3…

Thank you, Bob. Please turn to Slide 22. We're focused on improving the financial health and performance of Novavax to enable long-term value creation. Today, we outlined more detailed plans to deliver on this vision. To begin, I'll share a few of the key themes from the second quarter of 2024 and look towards full year 2024 and beyond. For the second quarter of 2024, Novavax recorded total revenue of $415 million, consisting primarily of $391 million from the GAAP revenue recognition for the $500 million upfront payment from Sanofi received fully in the second quarter. The remaining $119 million from the upfront milestone payment will be allocated over the transition services period through 2026. We estimate full year revenue recognition for this upfront payment to be approximately $400 million for 2024 and the remaining $100 million evenly split across 2025 and 2026. We have incorporated this GAAP revenue recognition into our full year 2024 guidance. As we continue to transform Novavax into a more lean and agile organization, we've reduced our second quarter 2024 combined R&D and SG&A by 34% compared to prior year. When excluding Sanofi transaction costs for the period, we saw a decrease of 43%. As we look forward to the full year 2024, we are reiterating our targeted guidance for combined R&D and SG&A expenses of between $700 million and $750 as we continue to resize our organization. Novavax is prepared to initiate an additional cost reduction program to further reduce combined R&D and SG&A expenses, a portion of which we expect to be reimbursed by Sanofi under the agreement. For 2025, and net of reimbursement, we're targeting non-GAAP combined R&D and SG&A of below $450 million. We ended the second quarter of 2024 with cash and accounts receivable approximately $1.1 billion. We believe the…

Thank you, Jim. Before we take your questions, I'd like to thank you all for joining us today and for your ongoing support, as we work to build a new vision and future growth platform for Novavax. As you have heard, we're working hard to position the Company for future growth with a focus on our new value drivers, including: driver one, the Sanofi partnership, which provides for a multi-billion-dollar potential across upfronts, equity investment, milestones and royalties over time; value driver two, our late stage pipeline; value driver three, leveraging our proven tech platform to drive additional partnerships and deals; And finally, value driver four, our new early stage pipeline. I'd now like to turn the call over to our operator for questions-and-answers. Thank you.

[Operator Instructions] We now have our first question, and this comes from the line of Roger Song from Jefferies. Please go ahead.

Great. Congrats for all the progress and thank you for taking our questions. The first one is regarding the updated 2024 guidance. Understanding nothing really changed for the U.S. expectation mostly driven by the EU and New Zealand. Just curious about, can you give us some of the updates regarding the U.S. contracting, given this timing of the season? How confident you are, you will be able to deliver this guidance in the U.S. particularly?

Good question, Roger. John T, you want to take that one?

Yes, sure.

Operator, can you hear us, okay? Is that better, Roger?

Okay. So, we had a bit of a technical difficulty there for a moment. Maybe let's maybe back up in to address Roger's question. As far as retail pharmacy contracting, execution so far has gone extraordinarily well. As you can see from the slide that we presented, all of the top retail pharmacies are under contract, as well as many of the buying groups for the smaller grocers and independents. We've made great progress over last year, with things like online schedulers and access and stocking orders that will be in each of those. So much better progress from last year. I think that will provide an opportunity for those interested in getting the vaccine to come into the pharmacy. Some of our communication programs at the consumer level and then also at the pharmacist level will open that door to availability to the product. So, I think all that's gone in a very positive direction.

Thank you. We will now take the next question. And this comes from the line of Mayank Mamtani from B. Riley Securities. Please go ahead.

Congrats on many components of your portfolio showing progress today. About your, CIC Phase 3 study, maybe, if you could learn some protocol differences that you have integrated in your program having the advantage of going, third here. If you could maybe highlight that. And then, why do both the flu vaccine and the combination vaccine the same study versus maybe trying to do separately is the other question, because there are control arm differences and you obviously have pretty strong compelling data on strain lead from the previous NanoFlu candidate. So, if you could maybe help clarify your strategy here, that would be helpful. And then I have a follow-up.

Mayank, thank you for your questions. Bob, two questions from Mayank. The first is, have we made any changes to the protocol, based on what we've learned, the fact that we're going third here? And then secondly, his question about one program versus two, if you want to handle that one. Thank you.

Sure. Thanks for that. As I mentioned earlier, we do have alignment with FDA on conducting a single Phase 3 protocol to support both products. And we remain in dialogue with them on some of the details. So, I don't think we're prepared to actually discuss the specifics of the protocol design at this time. But let's say, to answer your second question, we will leverage certain efficiencies by incorporating both products into the same study, by using shared comparator control groups. And we also do know that, the previous experience that you allude to with the influenza vaccine can also be leveraged to support the safety database for the new product.

And then just on the long-term OpEx guidance that you put out there, given that there are some interesting parts of your earlier stage pipe line that you'd look to also advance, and you talked to some of that. Could you just give us a little bit of a mix of R&D, SG&A? And also, when should we start to see some of these candidates get into the clinic from either you or even your partner Sanofi? And thanks again for taking our questions.

Good question, Mayank. Jim Kelly will address the financial question.

Exactly. Mayank, you're right on spot in terms of capturing the dynamic of our cost structure change, while we strategically enable really the unlocking of significant value from our early-stage pipeline. We expect the vast majority and the majority of our cost structure, as we approach that 2026 below $350 million to be invested back in this value-creating early-stage pipeline as we continue to drive to a lean and agile organization.

And then, Mike, I believe the second part of your question was when do we expect to see some new assets emerge in our pipeline and what timing might that be regarding hitting the clinic. I think we're excited to unveil what that new pipeline is, by the end of the year. As you know, we're also deep into a search for our new President of Research & Development. We've had a lot of interest in Novavax, especially post the Sanofi deal with further validation of our Matrix-M and proven technology platform. The fact that around the world people are recognizing, what this technology is capable of and I hope everyone was able to hear some of the examples that Bob Walker shared, where we've added Matrix-M to other products that are established and in market right now that are significant franchises for other companies. We've shown an ability to potentially improve those products and even reduce their cost of production. These are significant, and we believe our technology, we've only just begun to tap into that potential. We're very excited to unveil what our exploration of that technology right now, might be telling us on what else we can do beyond a seasonal vaccine, beyond even respiratory potentially. We know that's where our wheelhouse is right now, but this technology has capabilities well beyond what we've explored with it so far. So, as we get to that unveiling, we will be sharing also mining some timelines on that. We look forward to doing that in the future when we have more context. Importantly, we're deep into the analysis and exploration of what else we could do with the tech and post Sanofi and post the last 18 months of lifting our going concern, putting the Gavi situation behind us, reducing our current liabilities significantly, improving our balance sheet, improving our cash position. We've now put Novavax in the position to focus more on what we do best, which is research and development from this amazing technology platform. So, we're excited to share that with you in the future. We're working diligently on transitioning the Company away from focusing all of our energy on one product every season to now being able to focus on multiple shots on goal for potential future growth, which we laid out as our four drivers. We're in that transition now and it's a period that we ask for a little bit of patience, as we wrap up our last season and we change the direction of the Company toward this. We're excited about what the future holds and we're excited to unveil that pipeline in the coming quarters.

[Operator Instructions] And the next question comes from Alec Stranahan from Bank of America. Please go ahead.

Hi, guys. Thanks for taking our questions. Just a couple from me. One follow-up just on the CIC program. Is your expectation that there could be an approved CIC therapy in the U.S. given you've shifted your Phase 3 enrollment to Australia and New Zealand? And then just curious since the PDUFA for the BLA will be after handing the reins over to Sanofi, whether they had any input into the filing our any of the terms under the collaboration are contingent upon receiving BLA?

Alec, great to hear from you. Thank you for your questions. I think the first question, we just want to make sure, we understand your question correctly. If I heard you clearly, you were asking is, there the chance for a U.S. approval since the recruitment is occurring in Australia? I'll hand that over to Dr. Bob Walker. Go ahead, Bob.

This study is -- our plan is to conduct the study in the Southern Hemisphere, Australia, New Zealand as mentioned. The study would be done under U.S. IND. So those data would apply to a U.S. application.

And I believe, Alec, your second question related to the timing of BLA and the related milestone with Sanofi and the timing of handoff of commercialization. Just to clarify, if you might clarify that, are you seeking to understand timing of the potential receipt of that milestone payment that would be associated with that?

Yes. I guess I was asking more in terms of input from Sanofi on the BLA and whether there's anything contingent milestones or otherwise on that BLA?

Obviously, we're working very closely with our partner, Sanofi and very excited about that partnership and what it could mean in the future, but we have already filed that BLA and that's already under review by FDA.

Yes. Just to add to that a little bit, there's ongoing and constant interaction with Sanofi on all of these necessary steps. The BLA importantly, one for the sake of the milestone, but also as we move forward, and look at each and every next season, the preparation for the season having the BLA in place is an important next step for us.0020And so, yes, there's a significant coordination between our organizations to make sure that we have the value of their inputs and that we are moving forward as quickly as we can.

Thank you and we will now take the next question. And this comes from the line of Eric Joseph from JPMorgan. Please go ahead.

Hi, good morning. Thanks for taking the questions. First on commercial, just with your U.S. sales guidance here. Can you just talk about sort of what that anticipates in terms of dose volume you expect to go into market with and how you should think about sort of gross margins for your COVID vaccine moving to a PFS format? And then secondly, for the Phase 3 study, starting later this year, maybe just sort of by way of backing into the design of that trial. Can you talk a little bit about sort of what activity profile or, yes, comparative activity profile you'd like to be in market with or hope to be in market with a standalone flu vaccine?

Eric, I will hand the first question over to John Trizzino. I don't believe John, we're disclosing specifics of dose volumes et cetera for competitive reasons, but you may want to take an attempt at Eric's first question.

Yes. No, I think what's important to talk about here is our readiness for the season. The guidance is one thing, but our ability to accomplish what we think is aligned with that guidance has multiple factors. Focus on the Pharmacy One, which we've talked about, which is significantly important. Also, what pricing strategy is and we're not going to get into disclosing what our kind of discounting strategy is on this call. But all pulled together to make us well-positioned availability of product near the end of the month and certainly at the start of the season, making sure that, the contracts are in place that we're well-positioned from a discounting strategy to support access into the product, and then availability throughout the whole season. So, I think that's kind of the most important takeaway.

Thank you, John. And then Eric, your second question, if we understood you correctly, you were asking about, I believe, what type of profile we're seeking or hoping to have out of our clinical program that could make our product competitive against others. Bob, did you want to address that?

I'll say that, for the purposes of the Phase 3 trial, the statistical test will be that the combination product performs in a non-inferior way immunologically to each of the individual components. So, to CIC to the influenza component and CIC to the COVID component. So that would be the immunologic test. And the value of the product, I think is the fact that, it's a combination. The design enables a hierarchical statistical analysis that can also evaluate superiority. So, that's built into the design. And so, we'll be able to make conclusions on both of those points.

Thank you, Bob. That was helpful on the design of the study and potential data points we could assess afterwards. John T, any commentary on target product profile?

Commercial viability here is critically important, right. As we look at the viability of our CIC program, primary focus of the trial, we also took the opportunity to look at standalone flu, right. So standalone flu continues to be an important product and public health vaccine profile. But we also believe we've got a very strong candidate that could demonstrate improved efficacy in the market. We also want to establish a seasonal influenza vaccine, as a foundation for possible pandemic. In the future, H5N1 continues to be important, and isn't being observed around the globe. So having the opportunity to have data coming out of our standalone flu vaccine, knowing what some of those other dynamics are and knowing the profile of our flu vaccine and the significant improvements over existing flu vaccines, I think position us well for future value creation.

Thank you, Bob and John. And Eric, one last comment there is that, certainly we believe that, our technology can afford the development of vaccines with a very good tolerability profile. And as the market moves toward combination, which our research indicates it should, with multiple seasonal diseases out there that people are trying to protect themselves against that having a product where you can combine multiple antigens in with a very nice tolerability profile potentially versus competitors is very important in the marketplace for consumers, as they make a decision on which combination vaccine they may want. Again, when we get the data, we'll assess the data, we'll steer the strategy and tell us how competitive it is, but we have confidence in our tech platform that it has a good chance to really produce a nice profile that will be competitive. Thank you.

Thank you. We don't have any further questions at this time. This concludes our Q&A session as of the moment. Over to your speaker, John Jacobs, for any closing remarks. Please go ahead, sir.

Thank you, operator. Appreciate it. And thank you everyone to join us today. We appreciate your support. We appreciate your patience as we work through the future strategy for Novavax and start to deliver opportunities for long term growth in four different categories that we highlighted today. We're excited about what the future holds as we continue to reduce our cost basis, move toward a more-lean operating structure and prepare for the next chapter in the Company's history. Thank you so much for joining us, everyone.

Thank you. This concludes our conference for today. Thank you for your attendance. You may now disconnect.