Vaxcyte - Q4 2022

Transcript

Operator (participant)

Good afternoon, my name is Lisa, and I will be your conference operator today. At this time, I would like to welcome everyone to the Vaxcyte fourth quarter and full year 2022 financial results conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star one one on your telephone keypad. If you would like to withdraw your question, please press star one one again. I now would like to turn the call over to Andrew Guggenhime, President and Chief Financial Officer of Vaxcyte. Please go ahead, sir.

Andrew Guggenhime (President and CFO)

Thank you, operator. Good afternoon, everyone. I'd like to welcome you to Vaxcyte's earnings conference call to discuss our 2022 results and to provide a business update. I am joined today by our Chief Executive Officer, Grant Pickering, our EVP and Chief Operating Officer, Jim Wassil, and our VP of Research, Jeff Fairman. Earlier this afternoon, we issued a news release announcing our results. Copies of this and our other news releases, latest corporate presentation, and SEC filings can be found in the Investors and Media section of our website. Before we begin, I'd like to remind you that during this call, we'll be making certain forward-looking statements about Vaxcyte, which are subject to various risks, uncertainties, and other factors that could cause actual results to differ materially from those referred to in any forward-looking statements.

For a discussion of the risks and uncertainties associated with these statements, please see our press release issued today, as well as our most recent filings with the SEC, including the risk factors set forth in our Form 10-K for the year ended December 31, 2022, and any subsequent reports filed with the SEC. With that, I'll turn the call over to Grant Pickering. Grant?

Grant Pickering (CEO)

Thanks, Andrew. All of you on the call and webcast, thanks for joining us today. 2022 was a landmark year for Vaxcyte. We reported positive and unprecedented proof-of-concept top-line clinical data for VAX-24, our lead pneumococcal conjugate vaccine for the prevention of invasive pneumococcal disease in adults. These remarkable data validate our PCV franchise and our carrier-sparing approach for broad-spectrum PCVs, as well as our cell-free platform. They also represent the culmination of nearly a decade of thoughtful and methodical research and development by the entire Vaxcyte team and their partners. The findings of the large phase II study in adults 18 to 64 years of age indicate a potential best-in-class profile for VAX-24 and demonstrate how our novel cell-free technology platform has the capability to overcome the limitations of other conventional approaches.

These results and the foundation we have carefully created have us well-positioned to advance our PCV franchise to potentially disrupt what has consistently been a crucial vaccine class, societally and financially. I'm incredibly proud of the progress this past year. I'm optimistic about our ability to execute and further scale our business in 2023 and beyond. We look ahead, we remain focused on advancing both of our PCV franchise programs, VAX-24 and VAX-31, which we previously referred to as VAX-XP, with several upcoming milestones. VAX-24, our lead PCV candidate, was recently granted Breakthrough Therapy designation for adults, adding to its Fast Track designation. We remain on track to deliver top-line safety, tolerability, and immunogenicity results in subjects 65 and older in the second quarter of this year.

As we've discussed with many of you, for this pending readout, our focus from an immunogenicity perspective is almost exclusively on the point estimates for the OPA geometric mean ratios for GMRs and their comparability to the prior results in our much larger phase II study in younger adults. Given the smaller size of this older adult trial at 50 subjects per cohort, these point estimate GMRs are the most important focal point and not the lower bounds of the confidence intervals. This study was not powered to meet the regulatory non-inferiority standard, and as a result, these confidence intervals will be substantially wider. The combined data from both adult phase II studies will enable us to perform the statistical powering necessary to tee up our pivotal phase III non-inferiority study for VAX-24 in adults.

These data, along with the full six-month safety data from both studies, will facilitate our end of phase II meeting with FDA, which we expect to hold in the second half of this year. To put the U.S. adult PCV market opportunity into context, today it is approximately $2 billion of the $7 billion total annual global market and is expected to be the fastest-growing segment of the market going forward. Key growth drivers include an increase in adult vaccination rates outside the U.S. and in the U.S., the potential shift to universal adult vaccination starting at age 50 instead of age 65, which itself would expand the market and open up the adult regimen to a prime boost schedule, as is the case in the infant market.

The infant cohort represents the largest portion of the global pneumococcal vaccine market, with approximately $5 billion in annual sales. We are thrilled to be launching our first clinical program in infants in the second quarter of this year. This follows FDA clearance of our IND application, which we announced last week. Bringing the broadest PCV to both infants and adults represents an opportunity to significantly reduce invasive disease across the entire population. To maintain a long-term leadership position in this market and to address the serotype replacement phenomenon that we would expect based on the widespread use of the 24-valent PCV, we continue to invest in our 31-valent VAX 31 program.

Similar to VAX-24, we believe our unique carrier-sparing PCV approach gives us the opportunity to expand the spectrum of coverage to address additional pathogenic serotypes without compromising the ability to continue to vaccinate against previously circulating strains. This is critical since previously controlled strains have rebounded in prior instances where vaccine coverage was withdrawn. This puts Vaxcyte in a different position than other sponsors who are applying the conventional PCV approach and are forced to make sacrifices in an attempt to cover newly circulating strains. We have continued to make significant investments in the advancement of VAX-31 and expect to submit the adult IND for this program in the second half of this year and deliver top-line data next year.

Beyond our PCV franchise, we continue to progress and bolster our early-stage pipeline of novel vaccines, including VAX-A1, a conjugate vaccine candidate designed to prevent infections in both adults and children caused by Group A Strep bacteria, and VAX-PG, which is designed to treat periodontal disease. We are also introducing a new program called VAX-GI, a vaccine designed to prevent Shigella, a dangerous bacterial infection with significant fatality rates among infants in low and middle-income settings. Jeff will provide additional details on our earlier stage programs later on today's call. Given the magnitude of the opportunity for our PCV franchise, we continue to invest to further solidify our manufacturing foundation. Our strategic relationship with Lonza remains strong, and we believe we are well-positioned to support a potential adult VAX-24 launch in the U.S. market out of existing Lonza facilities.

Plans to ensure an expanded commercial manufacturing footprint to support the infant indication and ex-US markets are underway. Additionally, we further fortified our Xtract supply chain via our recent expanded agreement with Sutro Biopharma. From a financial perspective, we are in a strong position with over $950 million on the balance sheet as of December 31st, aided by two successful follow-on financings last year totaling $805 million in gross proceeds. This financial strength provides us the capital to fund through several important incremental milestones, which Andrew will highlight later. I'll now turn it over to Jim, who will provide more details on our PCV programs. Jim?

Jim Wassil (EVP and COO)

Thanks, Grant. I'd like to start by reiterating why developing broader coverage vaccines to treat pneumococcal disease matters. Despite widespread administration of effective vaccines, the global impact of disease remains significant and is associated with high case fatality rates, antibiotic resistance, and meningitis. In the U.S. alone, adult and pediatric pneumococcal vaccines only cover approximately 60% and 41% respectively of circulating disease. The public health community continues to affirm the need for broader spectrum vaccines to prevent invasive disease or IPD. We designed VAX-24 to deliver a PCV that includes all of the serotypes covered by the currently marketed vaccine. Confirmed by our strong clinical results from the phase I III proof of concept study, VAX-24 has the potential to provide an additional 10%-28% of protection for adults compared with the standard of care PCVs.

In this study, VAX-24 met the approvable non-inferiority threshold for all 24 serotypes and exceeded the immune response of PCV20 for 16 of the common 20 serotypes. Four of those demonstrated statistically superior responses. Based on these results, we believe we have the opportunity to set a new bar for the pneumococcal vaccine by delivering broader coverage and higher immune responses relative to the conventional PCVs. Looking ahead, we expect top-line data for our second phase II study in adults 65 and older in the second quarter of this year. With the upcoming second quarter data readout, I want to provide a bit more context about our objectives and the expectations for the study.

As a reminder, the study design is identical to the first phase II study, for the age and the number of subjects at 50 subjects per cohort versus nearly 200 in the first phase II study. This smaller study was designed to further inform the powering of the pivotal phase III study while adding to the body of research for VAX-24. As Grant mentioned, it was not powered to demonstrate non-inferiority, it is most important to focus on the point estimates for the OPA geometric mean ratios for each of the serotypes rather than the confidence intervals. That's because you can expect these confidence intervals to be wider, it's very possible that several may cross the 0.5 non-inferiority threshold.

If the GMRs are between 0.6 to 0.75 or higher for each serotype, prior phase III studies have shown that these ratios are adequate to achieve the non-inferiority threshold. We can glean some useful insights when looking at the results of the age stratification analysis of the first phase II study as seen on slide 12. The graph to the left reflects the data we shared in October of last year from the full study population in which the confidence intervals for the OPA GMRs were relatively narrow. The two additional forest plots show the age-stratified OPA GMRs. In the 60 to 64-year-old cohort shown on the far right of this slide, we had approximately 50 subjects. The results show a general improvement in the point estimates, which is encouraging, and as expected, a significant widening of the confidence intervals due to the smaller sample size.

These confidence intervals are relevant because we enrolled approximately the same number of subjects per cohort in the 65 and older study. When we announce our top-line data from the older adult study, given precedent Phase III programs have enrolled subjects both older and younger than 65, we also plan to share pooled data that includes the results from the 60 to 64-year-old cohort in our prior study. Based on well-established development pathways, we anticipate the Phase III study design will include the same validated surrogate immune endpoints that have served as the basis for full approval of multiple prior PCVs. These were also the basis for our positive Phase II study. We expect top-line data from that pivotal Phase III non-inferiority study in 2025, and we will keep you apprised of other milestones following the planned regulatory interactions in the second half of this year.

As our adult program advances, we are also excited to move into the infant population with VAX-24 and plan to initiate a phase II study in the second quarter of this year. This study outlined on slide 13 includes three doses given to healthy infants in the first six months of life. This is referred to as the primary series. Primary series is followed by a dose administered at 12 to 15 months of age, which is referred to as the booster dose. This study will be conducted in two stages. We will compare VAX-24 to the broadest standard of care PCV, which today is PCV15.

The Stage One portion of the study will evaluate the safety and tolerability of a single injection of VAX-24 at three dose levels compared to PCV15 in approximately 48 infants at two months of age in a dose escalation manner. Participants will be randomized on a three to one basis and will be evaluated for safety at seven days after dosing. A Data Safety Monitoring Committee will evaluate these data to which we will remain blinded before making a go, no-go decision to enable us to proceed to a higher dose and ultimately to the second stage of the study. The second stage of the study is significantly larger and will enroll approximately 750 healthy infants. We will evaluate safety, tolerability, and immunogenicity for the same three doses of VAX-24 and compare it to PCV15.

Participants will be randomized equally into four separate arms with serology drawn for immunogenicity evaluations at seven months and before and after the booster dose. The key pre-specified immunogenicity study endpoints will follow convention, which includes an assessment of the percent of participants with IgG titers above predefined levels after the primary series and the IgG geometric mean concentrations after the booster dose, both of it which will be compared to PCV15 for the common serotypes. We expect top-line data from this study following the primary 3-dose immunization series by 2025, with the top-line data from the booster dose to come later. As Grant noted, we also continue to advance VAX-31, our 31-valent PCV candidate designed to provide coverage of approximately 95% of the IPD currently circulating in the U.S. adult population.

We have now identified the additional 7 serotypes included in VAX-31 beyond the 24 serotypes in VAX-24 and believe this breadth of coverage goes beyond any other PCV in development. We are completing IND-enabling activities and intend to submit the adult IND in the second half of this year. With that, I'll turn it over to Jeff to provide an update on our early-stage program. Jeff?

Jeff Fairman (VP of Research)

Thanks, Jim. In addition to our PCV franchise, we also have a robust earlier-stage pipeline for which we continue to leverage our cell-free platform. VAX-A1, our novel conjugate vaccine designed to prevent infections caused by Group A Strep, remains highly relevant given the recent outbreaks that have captured news headlines. Group A Strep is one of the leading infectious disease-related causes of death and disability worldwide and is a significant contributor to the prescription of antibiotics in the very young. IND-enabling activities continue as VAX-A1 advances to the clinic. These include analytical assay method development, immunological assays, and scaling up the processes towards the production of GMP-grade drug substance and drug product. We will give updates as to the anticipated timing of the IND submission as the program advances.

I'm also pleased to share that we have achieved our goal last year to name a final candidate for VAX-PG, our therapeutic vaccine candidate designed to treat periodontal disease. Periodontal disease impacts approximately 65 million adults in the U.S., resulting in productivity losses that are estimated at more than $50 billion per year. As we await the readout of our final preclinical studies, we have begun the scale-up of the production of our candidate vaccine proteins, analytical assay development, and clinical serology assay development necessary to support eventual early-stage clinical studies. VAX-PG leverages a key application of our cell-free platform, which is the ability to make tough-to-make protein antigens. This also has a bearing on the nomination of our new vaccine program, VAX-GI. VAX-GI is designed to prevent dysentery caused by Shigella bacteria, which is commonly referred to as shigellosis.

Shigellosis is a bacterial illness with no available preventative treatment. It affects an estimated 188 million people worldwide each year and results in approximately 164,000 deaths annually, mostly among children under five years of age in low and middle income areas. With the aim of reducing morbidity and mortality due to this disease, the WHO lists Shigella vaccine development as a priority goal. More information can be seen on slide 17. The central antigen in VAX-GI is IpaB. While this is a well-appreciated antigen, others have been unable to produce IpaB at an amount sufficient to enable a commercial product. Yet with our cell-free technology, we believe we can produce this antigen at substantially improved yields, allowing for commercial scale production. More information on this unique application of the cell-free technology is available in the publication section of our website.

We look forward to sharing more updates on our earlier stage pipeline as the year progresses. I would now like to turn the call over to Andrew, who will provide a financial update.

Andrew Guggenhime (President and CFO)

Thanks, Jeff. I'll briefly cover a few financial points before turning it over to Grant for our closing remarks. With respect to the income statement, the details of our fourth quarter and year-end 2022 results and the reasons for the variances to the comparable 2021 periods are reflected in our Form 10-K filing and summarized in our press release. The year-over-year increase in R&D expenses was due primarily to higher manufacturing and clinical development expenses for VAX-24 as we invested to prepare for the planned phase III clinical trials and initiated and had completed enrollment in two phase II clinical studies. Higher manufacturing expenses for VAX-31 as we advanced that program toward our anticipated IND application submission and increased personnel related costs in our R&D organization to support these key initiatives.

The increase in G&A expenses was driven principally by higher personnel related and corporate costs as we invested in our team and infrastructure to support our overall growth. I will note the $23 million charge we incurred in the fourth quarter related to the agreement we entered into with Sutro Biopharma during that period. This amount reflects the upfront cash and stock consideration for the expanded rights we acquired and the option we have to acquire additional rights. The entire upfront consideration was expensed in the fourth quarter. As we look forward, we expect a substantial increase in 2023 expenses over full year and Q4 2022 annualized levels, excluding the $23 million Sutro charge, particularly in R&D.

The expected significant increase in R&D expenses is primarily a function of our investment to make the required clinical trial materials for our planned VAX-24 phase III program, which will consist of multiple trials. To a much lesser degree, expenses related to executing our VAX-24 infant phase II study, preparing for our planned VAX-31 adult phase I, two study, activities to support a future BLA for VAX-24, and an increase in employee headcount to support our anticipated growth. Turning to the balance sheet and cash runway, as Grant noted, we continue to maintain a strong financial position, ending 2022 with $957.9 million in cash equivalents and investments.

Going forward, we expect that our balance sheet will be sufficient to fund our operating expenses and capital expenditure requirements through a number of important milestones over the next few years, including the top-line pivotal VAX-24 phase III non-inferiority study in adults, for which data is expected in 2025. As we've noted before, our cash runway outlook does not reflect the potential costs associated with securing additional manufacturing capacity to support for certain components of our vaccine, expected increased commercial quantities upon the potential approval and launch of VAX-24 in the infant population, and to expand into other markets outside of the United States. We continue to evaluate our alternatives to bring on such additional capacity. I will now turn it over to Grant for closing remarks.

Grant Pickering (CEO)

Thanks, Andrew. It was an extraordinary year of validation for VAX-24 in our pipeline, and we are in a position to maintain our strong momentum in 2023. We expect this to be a milestone-rich year across our pipeline with a focus on VAX-24 and VAX-31. We look forward to sharing further updates as the year progresses and appreciate your interest by joining us today. With that, let's take some questions. Operator?

Operator (participant)

Thank you. As a reminder, if you would like to ask a question, please hit star one one on your telephone keypad. One moment while we compile for the Q&A roster. Please limit yourself to one question and one follow-up. Our first question will be coming from Jason Gerberry of Bank of America. Your line is open.

Jason Gerberry (Managing Director and Equity Research Analyst)

Hey, guys, thanks for taking my questions. My first question is just, you know, as you move VAX-24 into pedes, just your thoughts on the biggest risk to translatability of vaccine efficacy, going to the pediatric population with a higher valency product. My second question, just wanted to get your thoughts regarding the recent ACIP panel and this discussion on Pfizer's PCV20 in pedes. If the FDA ultimately agrees with Pfizer's view on totality of data and coverage at the fourth dose, might that in any way alter how you're thinking about pediatric development of VAX-24? Thanks.

Grant Pickering (CEO)

Yeah. Hey, Jason. Thanks for the question. You know, there's been a long history of PCV development, initially beginning in peds and then graduating to adults, and then more recently starting in adults and then going into peds. There's been, you know, remarkable consistency using the same formulation, whether it was Prevnar or Merck's version Vaxneuvance, where they were able to take the exact same dose and same formulation in both infants and adults. Obviously, a different number of doses, more being administered to kids. There's been very good translatability across the age groups historically. I think what we have seen, shown consistently is bigger drop, as expanded valence, PCVs have gone from adults down to kids.

As you referenced, that was the subject of the discussion at last week's ACIP meeting, where, you know, the conclusion of the working group was, you know, on the one hand you have the improved coverage of PCV20, but on the other hand you have higher immune responses with the 15-valent from Merck. You know, that's the trade-off that's being required with the conventional technology, and that's what has us so excited about the data that we generated last fall, where VAX-24 was able to show broader coverage, but in fact better immune responses against the common strains of the less valent vaccine. You know, that's the existential choice that they're being forced to make.

You know, the working group basically, you know, didn't really indicate how they were gonna act, but that's the trade-off that they're going to have to consider if the April PDUFA date comes and the FDA approves PREVNAR 20.

Jason Gerberry (Managing Director and Equity Research Analyst)

Got it. Thanks, guys.

Grant Pickering (CEO)

Sure.

Operator (participant)

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

Roger Song (Senior Equity Research Analyst)

Great. congrats for the Q and thanks for taking the question. Maybe just quick two question related to the statistics. For the upcoming phase II data readouts, understanding you wanna focus on the point estimate given the smaller size, but maybe can help us to contextualize what is the level of point estimate we need to hit in order to have a reasonable chance in the phase III to hit a non-inferiority for that's number one. Number two is in terms of the sample size for phase III, since you are targeting around 1,000 patients, how should we think about with different data scenario in terms of the non-inferior versus the superior for some serotypes? Thanks.

Grant Pickering (CEO)

Hey, Roger. Thanks for the question. As Jim was touching on in the prepared remarks, you know, what we've seen consistently in the historical phase III studies for the adult space is that you can have as low as a 0.6-point estimate on a relative basis for your vaccine versus the standard of care, which would be PREVNAR 20, that has been about the minimum amount you need to show to make room for the confidence intervals on either side. As we're approaching that 65+ readout, you know, that, those are the sort of point estimates we'll be looking to exceed. You know, as we saw from the larger study that we read out in the fall, we were well in excess of those.

We're feeling reassured as we did the pre-specified stratification, and we're able to look at the 60 and 64-year-old age cohort. Yeah, I think I think we feel like we're tracking. Last week, you know, the pediatrics data for PCV20 was released, and once again, we saw that they could go down as low as 0.6, which they were at for a few strains. I know one in particular, they got to 0.6 and a number that were close. Again, that was adequate to exceed the non-inferiority threshold. I think we're seeing that sort of consistency across adults and pediatrics that has been a bit of a hallmark in this space. Jim Wassil, why don't you take the second part about superiority?

Jim Wassil (EVP and COO)

Sure. I think that you, if what you've seen with our data for the 50 to 64, if that's reproducible in the 65+, we feel comfortable with the phase III size that we can repeat the statistical superiority or in the four that we had seen in the 50 to 64. We could in fact, you know, if we again repeat what we've seen in the 50 to 64 in the phase III, go to as high as maybe eight or nine, depending upon what the FDA says would be the requirement for the lower bound to demonstrate superiority. If it's a lower bound of 1.0 or greater, we think that we can hit, you know, seven or eight of those.

Roger Song (Senior Equity Research Analyst)

That's great. Thanks.

Grant Pickering (CEO)

Thanks, Roger.

Operator (participant)

Thank you. One moment while we prepare for the next question. Our next question will be coming from David Risinger of SVB Securities. Your line is open.

David Risinger (Senior Managing Director)

Thanks very much, thank you for the updates. I have two questions. First, obviously you're planning phase II in infants with VAX-24 as the comparator. Assuming PREVNAR 20 is approved in infants in April, and it's given an equal recommendation to VAX-24 by the ACIP this summer, should we just assume that down the line in a couple of years, you would ultimately run a phase III in infants versus PREVNAR 20? Second, just to follow up on Jim's comment a moment ago, why would the lower bound be different for your phase III in adults? I think you had said, you know, if the lower bound was one point or greater, you might be able to hit seven or seven to eight of those or something.

I just wanted to understand that a little bit better. Thank you.

Grant Pickering (CEO)

Hey, David. Thank you for the question. You know, the ACIP conversation last week would suggest that PCV20 is on a path toward approval. We'll find out soon enough when the FDA decides in April. Looking forward to our own phase II clinical study that we've already guided to beginning in the 2nd quarter of this year, you know, we have two different stages for that study. The 1st stage is a safety look, for which we have been planning to compare to PCV15. As you say, if they give a joint recommendation, you know, starting out against PCV15 will be more than adequate. To your point, there is precedent where the agency has asked to compare to the broadest spectrum standard of care vaccine that's out there.

We will be making preparations in order to potentially switch from PCV15 to PCV20 for that stage two portion of that study, and that would be an accord we'd strike with each of the investigators who'd be participating in the study. Given the interactions that we've had with the FDA, although we could theoretically have the alternative, I think the preference would be that the FDA would want us to compare to the broadest spectrum one, and we'll be doing what we can to potentially alter that original plan. That will be a bit of a work in progress as things, you know, unfold with the FDA and then the ACIP. You had a second question with regard to the lower bound. I hope that wasn't something that I confused the issue around.

The technical lower bound threshold in order to show the non-inferiority standard is still to exceed 0.5, but that's where the lower limit of the 95th confidence interval needs to exceed. What we were saying was the point estimate, if it's at 0.6, that's usually enough for that lower limit to exceed 0.5. But was that more related to the ser-superiority? Okay. Yeah. Jim, why don't you take it from there?

Jim Wassil (EVP and COO)

Yes. For the superiority, what I've seen in the past is that sometimes the FDA wants to take into account some assay variability, because if they're gonna put a statistical superiority claim in your label, they wanna make sure that you're absolutely sure that it's superior. It wouldn't be materially higher than 1.0, but it might be slightly higher to give some degree of leeway in case there's some assay variability. We don't expect it not to be 1.0, but even if it's even higher, I think we can achieve at least four and more.

The last thing I'll say on that is that even if we aren't able to get a superiority claim in the label, that absolute immunogenicity value will then reset the bar for others to demonstrate non-inferiority again. Even if it's not in the label, we'll have raised the bar for others to follow, who want to follow to demonstrate non-inferiority.

David Risinger (Senior Managing Director)

That's very helpful. Thank you very much.

Operator (participant)

Thank you. One moment while we prepare for the next question. One moment, please.

Jim Wassil (EVP and COO)

Operator?

Operator (participant)

Our next question will be coming from Seamus Fernandez of Guggenheim. Please go ahead.

Seamus Fernandez (Senior Managing Director)

All right, thanks. Thanks so much for the question. Really wanted to drill in a little bit to VAX-31. Just hoping you guys could provide us with a little bit of color on what it's gonna take to, you know, get that IND through, expand the manufacturing to the 31 valent targets. Separately, was just hoping you might help us understand where you see the real differentiation opportunity for VAX-31. My impression was that the team was really thinking about some unique opportunities, particularly in otitis media as an opportunity there. Just love to touch on VAX-31. Thanks.

Grant Pickering (CEO)

Thanks for the question, Seamus. So as it relates to the VAX-31 program, we've guided to an IND going into the second half of this year. You know, like we saw with VAX-24 last year, these adult studies accrue and read out quickly. We have guided to being in receipt of the data from that study, top line data next year, in 2024. In order for us to be able to guide to an IND in the second half, it means we're well on our way from a manufacturing perspective. We've said publicly that we made a surplus of the 24 drug substances that are in both VAX-24 and VAX-24. What we've been in the process of doing is manufacturing the incremental seven polysaccharides and then conjugates, and then doing the drug product formulation work.

What we've said in other conversations is that we're well on our way. We've made all the polysaccharides under GMP, we've made the conjugates, and now we're heading toward the drug product formulation stage. You know, so far so good. As per today, we're maintaining that guidance of second half IND filing. Really excited about that, and we believe we'll be able to leverage the same Lonza infrastructure for the production of VAX-31 that we've been budgeting for VAX-24. As a result, as it relates to the differentiation, maybe Jim and I can tag team this one. You know, for starters, in the adult space, once you get up to 31 strains, you're effectively covering the evidenced pathogenic serotypes for pneumococci.

In the U.S., those 31 conjugates would cover 95% of the circulating disease. In Europe, it gets as high as 98%. You really feel like you cover the gamut once you get to these 31 conjugates. What we think we can do with the carrier-sparing technology that we possess is not only, you know, scale to cover those newly circulating strains, but not take the pressure off those strains that have historically been pathogenic but have been brought under control with vaccination, you know, currently. This is the big opportunity that we have, and we don't believe we face the same trade-off that the conventional PCV developers are facing, where to get the kind of coverage of the newly circulating strains, they have to, you know, no longer include those strains that have been taken out of circulation.

You know, as we mentioned in the prepared remarks, you know, there's historical precedent where vaccination that's been withdrawn, for currently covered, controlled strains can result in rebound. You know, it's more than just the coverage advantage, it's also the maintenance of the no longer circulating strains. That is a big opportunity for us in the adult space. Then, your reference to the otitis media is another aspect of the potential advantage as it relates to the infant indication. Jim, maybe you can talk a little bit about that.

Jim Wassil (EVP and COO)

Yeah. I'll say first in the infant, you know, VAX-31 will increase coverage against IPD by about 25% or more from what would be the standard of care, you know, if PCV20 makes it through the ACIP. Even more so if it's referenced against PCV15. There is still a substantial impact on invasive disease. In terms of otitis media, especially, 35B serotype, there's a lot more contribution to otitis media in these incremental strains that are in VAX-31, and you get 48% increase in coverage of otitis media. when you think about it, you know, the incident rate is almost to the point where every kid gets at least one ear infection.

If about 35%-40% of those are Streptococcus pneumoniae, you can see that's a ubiquitous disease. This incremental 48% could have a substantial impact obviously on medical expenses, but also on antimicrobial resistance because it's one of the main drivers for antibiotic scripts in this young age group as well. That's why we're excited about this for otitis media.

Seamus Fernandez (Senior Managing Director)

Thank you.

Operator (participant)

Thank you. One moment while we prepare for the next question. The next question is coming from [Joy] of Evercore. Your line is open.

Jonathan Miller (Equity Research Analyst)

Hi. This is actually Jonathan Miller at Evercore. I'd love to ask about manufacturing space that you're talking about. You know, obviously this is, you've talked about only being able to currently do the U.S.

What would it take to do a much larger manufacturing footprint? Is this something that you could do in-house? Would this be a larger Lonza deal? Maybe if you could put some bookends on how much a full-size manufacturing footprint might cost in various scenarios.

Grant Pickering (CEO)

Yeah. Hey, Jon, thank you for the question. We'll tag team this one as well, having Andrew Guggenhime bring it home. Just in terms of order of magnitude, I think the way people should be thinking about that U.S. adult launch related capacity in the tens of millions of doses, whereas when you ultimately get into the full-fledged adult and infant and sort of global reach capacity, PCV demand does get into the greater than 100 million doses per year sort of territory. We're talking about that sort of line of demarcation. As it relates to the second part of that question, I'm not quite sure how far Andrew Guggenhime will be able to go, but I'll hand it to Andrew Guggenhime.

Andrew Guggenhime (President and CFO)

Yeah, Jon, again, thanks for the question. You know, we are looking at different options in terms of strategy that includes doing it on our own facility, you know, using Lonza with whom we have a great and long-standing partnership, and other CDMO options as well. Obviously, the magnitude kinda will depend on the route we take and when we pull the trigger. I think something over the next 12-18 months we're likely to do, so we can ensure we have the necessary capacity to meet the demand few years subsequent to the launch. Probably premature at this time to kind of range the options, but we're hoping to be in a position to do that in the not too distant future as we get further down this evaluation.

Jonathan Miller (Equity Research Analyst)

Okay. That makes sense. Is this the sort of thing that you expect Lonza would have the capacity to do, already if you ask them tomorrow to do it?

Andrew Guggenhime (President and CFO)

Well, we can. You know, as Grant noted, we can satisfy the expected demand in the adult population in the U.S. out of the existing facilities. As to whether Lonza today, that's one of the evaluations. It's likely, you know, they have basically built custom dedicated space for their clients, so it's likely we would need to work and partner with them to develop, build that capacity. That's something that we're looking into, but it would likely be, you know, an undertaking.

Jonathan Miller (Equity Research Analyst)

understood. Thanks so much.

Andrew Guggenhime (President and CFO)

Thanks, John.

Operator (participant)

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

Louise Chen (Managing Director and Senior Research Analyst)

Hi. Congratulations on the quarter, and thanks for taking my questions here. One question we often get is, since that you've already shown proof of concept for VAX-24, and because the market for PCVs is getting crowded, why not just move forward with VAX-31? Second question I had for you was on the market opportunities for VAX-A1, VAX-PG, and VAX-GI, you know, what do you think of those? You know, how do you think about potential peak sales versus what you might see for your PCV? When do you plan to start studies for these opportunities? Will it be within the next several years or after you kind of move through the pivotal stuff with your PCV? Thank you.

Grant Pickering (CEO)

Thanks for the question, Louise. yeah, I mean, certainly VAX-31 is going to be. I mean, I'm on record for calling it a category killer. The reality is VAX-24 has a best-in-class profile in both the adult and infant market, and it is on the fastest track to introduction to the market. It's our primary focus to deliver that vaccine to the market. We believe that VAX-24 is going to be a tremendous introduction for our carrier-sparing PCVs to the market. We know that upon widespread use of VAX-24, it's only going to enhance the rate of circulating disease for this strains over and above those that are in VAX-24. We know VAX-31 is going to be important, and we have it moving as fast as it can.

With what we know today, this is the right strategy for the company. If there was something to change, either from a competitive dynamics perspective or from an epidemiology perspective, we would be in a position to revisit that. We believe this is the right way to maximize value for Vaxcyte, and we think it's the right thing to do societally as a global health solution. As it relates to the pipeline, we think that what we can do with this cell-free protein synthesis platform is gonna continue to pay dividends. VAX-A1 is our broad-spectrum Group A Strep vaccine. We've all been hearing about increasing rates of the circulation of Group A Strep infections. Like PCVs, Group A Strep afflicts adults and infants.

This is an important and what could be valuable intervention on both ends of the age spectrum. We're moving that program forward aggressively. Because of that widespread usage, we do think it has blockbuster potential given the magnitude of morbidity and mortality that it can address. As it relates to the other programs. You know, VAX-PG, we've nominated the lead candidate that we want to advance to address this therapeutic solution for periodontitis. Likewise, we are very excited about the new VAX-GI program for shigellosis. Just on Friday, the CDC came out with an alert about an alarming rate of antibiotic resistance associated with shigella. We're moving them forward as fast as we can, but in sync with the value equation with PCV as the lead.

We certainly expect to, you know, bring on additional programs, coming out of our pipeline going forward.

Louise Chen (Managing Director and Senior Research Analyst)

Thank you.

Operator (participant)

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

Joseph Stringer (Managing Director of Equity Research)

Hi, thanks for taking our question. Just given that there's a competitor 24-valent pneumococcal vaccine program out there in mid-stage development, can you explain the relative importance of potentially being first to market? Do you think that your current timelines for VAX-24 phase III data readouts put you in a good position relative to that 24-valent competitor?

Grant Pickering (CEO)

Yeah. Thanks for the question, Joe. Indeed, there is another 24-valent vaccine that has reported phase II data in adults. It's the program that GSK is administering to in this moment. The difference is it's, you know, the defining aspect of pneumococcal conjugate vaccines is the covalent bond between the polysaccharide sugar and the protein. That's critically important because it ensures that both the sugar and the protein are co-presented to the immune system simultaneously. Non-covalent approaches haven't been able to assure that. This is a non-covalent bound approach that they're moving forward. You know, what they've said in their own public filings is that they don't expect to be able to launch that program until the back end of this decade.

It does put VAX-24 in a position to find its way to the market potentially significantly earlier than that particular program. You know, as it relates to first-mover advantages, usually that's valuable unless the second or third to market have a material advantage. When we look objectively about what we're doing and the data we've generated, we feel like we've got the more tried and true approach. We think we've got extremely compelling immunogenicity data and a safety profile that looks remarkably similar to the already approved pneumococcal conjugate vaccines. The hallmarks of these covalent bound PCVs is the ability to boost, because that protein carrier and its T-cell epitopes being presented to the immune system simultaneously are what deliver that key boost effect.

That's what is often lost when it's not presented simultaneously, is that ability to deliver a boost. Certainly in the infant market, that's the price of admission, you have to be able to boost in a material way. We think we've built market insulation in that direction also. You know, we're always vigilant about the competition, but we think we're in an extremely enviable position in this moment as it relates to that particular program.

Joseph Stringer (Managing Director of Equity Research)

Great. Thanks so much for taking our question.

Grant Pickering (CEO)

Yep. Thanks, Joe.

Operator (participant)

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

Grant Pickering (CEO)

Thanks, everybody.