Novavax, Inc. (NASDAQ:NVAX) Q3 2023 Earnings Call Transcript

Novavax, Inc. (NASDAQ:NVAX) Q3 2023 Earnings Call Transcript November 9, 2023

Novavax, Inc. beats earnings expectations. Reported EPS is $-1.26, expectations were $-1.82.

Operator: Ladies and gentlemen, thank you for standing by, and welcome to the Novavax Third Quarter 2023 Financial Results and Operational Highlights Conference Call. At this time, all participant lines are in a listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your speaker today, Erika Schultz. You may begin.

Erika Schultz: Good morning and thank you all for joining us today to discuss our third 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 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, operating plans, objective, and prospects, full year 2023 and first quarter 2024 financial guidance, the amount and impact of Novavax’s cost reduction plans, its future financial or business performance, conditions or strategies, its partnership, anticipated timing and outcome of future regulatory filings and actions, and the ongoing development, marketing opportunities, manufacturing capacity, and the future availability of our vaccine candidates, and key upcoming milestones.

Each forward-looking statement contained in this presentation is subject to risks and uncertainties that could cause actual results to differ materially from those projected in such statements. Additional information regarding these factors appears under the heading Cautionary Note Regarding Forward-Looking Statements in the slide deck we issued this afternoon, and under the heading Risk Factors, and our most recent Form 10-K and subsequent Form 10-Q filed with the Securities and Exchange Commission and available at www.sec.gov and on our website at novavax.com, as well as subsequent filings with the SEC. The forward-looking statements in this presentation speak only as of the original date of this presentation and we undertake no obligation to update or revise any of these statements.

Please turn to Slide 3. 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. Additionally, John Trizzino, Chief Commercial Officer and Chief Business Officer, will provide an update on our commercial activities; and Dr. Filip Dubovsky, President 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. I would now like to hand over the call to John Jacob. Please turn to Slide 4.

John Jacob: Thank you, Erika and thank you everyone for joining us today. I’m pleased to be here today along with the members of our executive team to discuss our third quarter 2023 financial results and operating highlights and the important progress we’ve made across our three priorities. Let’s begin with our first priority, delivering an updated product for the current fall vaccination season. Beginning with our launch in the U.S. and subsequent approval in the EU, we’ve demonstrated our ability to update our COVID-19 vaccine with seasonal strain changes and we are focused on commercial execution to gain market share and to deliver on our APA commitments. In the U.S., we started the season approximately three weeks ago with a shipment of doses to major retail pharmacies.

We achieved our prelaunch goal of securing broad access to our vaccine, the only protein-based non-mRNA option in the country. Having launched several weeks after the competitor vaccines, we have limited preliminary data, and although early, we are seeing indicators of increased awareness and growing interest in our vaccine. In Europe, Nuvaxovid was approved in October. We are also awaiting authorization in Canada, UK, Australia, and New Zealand. In these markets, we have advanced purchase agreements under which we expect to deliver all of the contracted doses for the ‘23-‘24 season. Given the U.S. launch of our vaccine in mid-October, we believe it’s too early to assess the true market uptake at this point in time. Market wide, we have seen lower than expected COVID-19 vaccine demand.

Given the uncertainty in the U.S. market and approval in Europe several weeks behind our competitors, we expect to deliver revenue at the low end of our prior guidance for the season, with some of the revenue expected to shift into the first quarter of 2024. Importantly, we did not originally expect any revenue to occur in Q1 of 2024. Jim Kelly will provide more context on this later in the call. Our management team is leaning into and focusing on our opportunity to create a robust and sustainable business platform for years to come, which includes an optimized and differentiated product presentation in 2024 and 2025, as well as additional restructuring to create a more efficient business model, which will facilitate the late stage development of and a smooth transition to, the anticipated launch of our combination COVID-19 influenza vaccine in 2026.

We believe that a combination COVID-19 influenza vaccine represents a significant opportunity in this market, which is why we are concentrating our portfolio investments to bring forward our unique protein-based combination vaccine, which is likely to be a preferred option for many consumers and healthcare providers. Now, let’s move on to priority number two, which is to reduce our rate of spend, manage our cash flow, and evolve our scale and structure. In the quarter, we continue to make significant progress on our commitment to improve our financial position, while maintaining the capabilities to support long-term value creation. Year-to-date, results include a $950 million reduction to operating expenses versus 2022 and in addition an approximate $1 billion reduction to current liabilities from our December ‘22 baseline.

We are on track to exceed our previously announced global restructuring and cost reduction plan for 2023 by over $100 million for combined R&D and SGA expenses. Well, at the same time, having successfully achieved our objective of updating our vaccine and launching this season, demonstrating that we can significantly reduce costs while maintaining our core capabilities. While this reduction was an important step, there are more efficiencies we can achieve. And we are prepared to further reshape and size the scope of our operations beyond previously announced 2024 targets to align with the emerging COVID market opportunity, while advancing our COVID flu combination vaccine program. Therefore, we are prepared to initiate additional cost reductions to decrease 2024 expenses by over $300 million above and beyond the previously stated targets for 2024.

Jim Kelly will speak further about our 2023 guidance and plan to drive significant improvements to our cost structure later in the call. Finally, let’s discuss priority number three, which is to leverage our technology platform, our capabilities, and our portfolio of assets to drive additional value beyond a Nuvaxovid. Our recombinant protein-based nanoparticle technology platform and Matrix-M adjuvant have the potential to produce a variety of differentiated vaccines. Our priority here is to focus our R&D investment and resources on bringing forward our protein-based COVID influenza combination vaccine product. As Philip will discuss later in the call, contingent upon FDA concurrence on an accelerated approval pathway, we are now planning to move directly into Phase 3 in 2024 and to fund this program independently.

Initiating a Phase 3 program in ‘24 would enable a potential launch in the United States in 2026. Now I would like to hand it over to additional members of the team to discuss our results from the quarter in more detail, beginning with John Trizzino to discuss our commercial updates. John?

John Trizzino: Thank you, John. Please turn to Slide 6. As John outlined, in the U.S., we are approximately three weeks into our season launch. We are pleased that we have secured broad access to our vaccine through contracts with the majority of major retailers, including Costco, CVS, Giant, Publix, Rite Aid, and Stop & Shop, as well as top integrated delivery networks and major medical groups across the country. To date, the retail channel is the largest segment of the market with approximately 90% of COVID-19 vaccinations thus far, an availability of product was prioritized by distributors in the retail setting. Looking at the flu market, we see that the retail to non-retail channel split is currently approximately 65-35, which mirrors prior years.

Therefore, we can reasonably expect that non-retail channel for COVID-19, which includes healthcare provider offices, could grow through the end of the year. Please turn to Slide 7. In the U.S., we have seen a slower season start than 2022 for COVID. At this point last season just over a half of COVID vaccines have been administered, so we expect that a significant market opportunity could remain with the potential to extend the season into the first quarter. However, we believe that multiple factors are leading to slower than anticipated vaccine uptake this fall, including distribution challenges in the U.S. market as it has converted from government purchase to commercial. The availability of multiple vaccines, COVID, flu, RSV, and updated pneumococcal for the first-time in the same season, trailing vaccine fatigue from the pandemic amongst others.

Based upon the data available to date, and without a significant trend break, it is our estimate that the U.S. market could be as low as 30 million doses or as high as 50 million doses should we see a trend break, pick up from other channels, or an elongated vaccination season that goes into the first quarter. We are expecting lower than anticipated sales in the U.S. market due to these and other factors. Jim will provide more information during his section. Importantly, we do not believe that the 2023 market will be representative of the future opportunity, including combination vaccine options in the future, and C, the COVID market providing a growing and sustainable revenue opportunity for Novavax for years to come. Please turn to Slide 8.

We are encouraged that our vaccine is now available in the U.S. alongside mRNA options, offering consumers and healthcare providers a choice this season. While we are currently seeing low-single digit market share, which is consistent with analogs for third to market products in their early stages of their launch, we believe that it is too early to assess our full 2023 potential. We are seeing some early indicators that where we are positioned on a level playing field and fully stocked and available, we can effectively compete. For example, based on recent feedback in a select national retailer, we have achieved up to 10% market share in our first few weeks of launch. We anticipate market share improvement over the course of this season based upon both consumer and HCP demand for our vaccine as the only protein-based non-mRNA COVID-19 vaccine option, its refrigerator-stable product profile and ease of use, and market research showing that around 25% to 30% of consumers and healthcare professionals prefer a protein-based option.

Please turn to Slide 9. Given the high proportion of vaccinations we are seeing in the retail channel, we are currently focused on driving market share in this channel, working with pharmacies to promote the availability of our vaccine both in their online scheduling systems and in store, and will continue to work to stimulate new demand in the non-retail channels. We are also focusing on executing highly targeted, direct-to-consumer education and public relations efforts to drive the Novavax brand name and awareness and drive consumers to locations with availability of Novavax’s vaccine. Just three weeks into our in-season promotional efforts, we have seen substantial lifts in awareness of Novavax. The HCP aided awareness increasing from 46% to 72%.

And we are seeing that within retail, in over half of retail outlets that offer the Novavax vaccine, it is offered as one of only two COVID-19 vaccines available. Please turn to Slide 10. Outside of the U.S., our 2023 product sales continue to be driven by our existing APA’s. In the EU, we received approval and expect to deliver all of the remaining committed doses. In other key markets, including in the UK, Canada, Switzerland, Australia, New Zealand, Singapore, Taiwan, and WHO regions, we are awaiting regulatory authorization. Based on committed dose delivery schedules and subject to those regulatory approvals, we expect to deliver all APA doses for the ‘23-‘24 season. Please turn to Slide 11. I want to reiterate, we believe that this season is a transitional one, both for the size of the market opportunity and our market share potential and that long-term, both the COVID-19 market and our ability to penetrate the market represent a significant ongoing opportunity for our company.

Early feedback from our launch has reinforced our belief that there is a demand for a differentiated vaccine option and that Novavax will play a meaningful role with potential product sales for Nuvaxovid alone between the U.S. and rest of world projected to be greater than $1 billion opportunity annually. This should provide a foundation for us to advance our pipeline leading with our combination influenza COVID vaccine, which when combined with our standalone COVID-19 vaccine has the potential to be a multi-billion dollar respiratory vaccine franchise in the future. And with that, I would now like to hand it over to Filip to discuss updates for R&D.

Filip Dubovsky: Thanks, John. Please turn to Slide 12. Today, I will cover a couple of topics, the progress in our COVID influenza combination program, and how we’re expanding the use of Matrix-M adjuvant. These topics exemplify different approaches to capitalizing on our core technology. I came to Novavax after seeing the original nanoparticle plus Matrix-M publications for influenza and understood the promise of the technology. This has been validated by the development, licensure, and commercialization of our COVID vaccine, the exact same technology is used in our combination vaccine. Please turn to Slide 13 for an update on the COVID influenza combination vaccine. As we previously discussed, the combination vaccine program is a priority because it has the potential to be a preferred product by consumers and healthcare providers.

Previously, we evaluated 11 discrete formulations, and we’ve now selected the formulation to advance into the next study. I’m displaying neutralization responses on this slide. Neutralization responses are important because we believe they most closely predict clinical efficacy. On the left side of the slide are COVID neutralization responses. On the right, influenza neutralization responses for the three strains that will be included in future influenza vaccines. Our selected formulation compares well to Nuvaxovid as well as Fluzone High-Dose and FLUAD. Separately, we compared the geometric mean ratios of the HAI responses to these formulations. They achieved non-inferiority margins previously used in Phase 3 studies, paving the road toward late-stage development.

I also want to remind you, we observed a favorable reactogenic profile with our combination vaccine that was clinically indistinguishable from the licensed influenza vaccine comparators. This appears to be a hallmark of our technology. We can increase the antigen load while maintaining acceptable tolerability. Overall, this points to a favorable product profile, demonstrating both a convenience factor of a two-in-one vaccine, coupled with a reactogenicity profile comparable to licensed influenza vaccines. Formulation development is ongoing, and we are still on track to initiate the next study in 2024. Pending final regulatory concurrence, we’ve designed the study to evaluate endpoints for an accelerated approval pathway while simultaneously building a co-formulated safety database.

Therefore, we’ve updated the next year study designation to a Phase 3 study. Please turn to Slide 14 to talk about Matrix-M. But first, let me remind you about the adjuvants performance characteristics. Matrix-M induces high levels of broadly neutralizing antibody, a long-lived polyfunctional CD4 cellular response, and it is antigen sparing, which may be appealing for companies that have difficulty to manufacture antigens. As a component of our COVID vaccine, it is a large and well-characterized safety database. And as we’ve previously discussed, even large quantities of antigen, it maintains a reactogenicity profile consistent with licensed vaccines. We pursued multiple approaches to increase the adjuvant’s value. It’s included in veterinary vaccines commercialized by MSD Animal Health and Intervacc in Europe with additional vaccines in development.

It’s included in the R21 malaria vaccine that has recently received WHO SAGE Recommendations for use. As we have previously announced, it’s in preclinical evaluation by The Bill & Melinda Gates Medical Research Institute for Targets of Public Health Importance and in addition to its use in our own pipeline products. It is being evaluated as a component in 12 clinical stage candidates by biotech, academic, and government partners. And finally, it’s being evaluated in animal models by a biopharma partner to improve currently authorized vaccines against herpes and respiratory viruses. As these projects mature, it’ll expand the Matrix performance data set, and if these projects are successful, unlock additional value. These external Matrix-M collaborations represent opportunities for long-term future of Novavax and do not distract us from our top focus on the development of the combination COVID influenza vaccine.

Please turn to Slide 15 and I’ll lay out our plan timelines for the combination vaccine program. For the COVID influenza combination vaccine program, we’ve selected our dose and are developing our formulation and finalizing our manufacturing strategy. Pending regulatory concurrence, we are anticipating initiating the accelerated approval Phase 3 study in the second half of 2024. This implies a regulatory filing in 2025, which could allow for us to participate in the fall 2026 season, if development goes smoothly. Okay. Let me hand it over to Jim to discuss our financial results.

James Kelly: Thank you, Filip. Please turn to Slide 17. Before discussing our third quarter financial performance, I would like to first share updates on three important financial themes to drive shareholder value. Today, we are sharing our updated financial guidance that includes our expectation to achieve total revenue for the COVID 2023, ‘24 season of $1.3 billion, reflecting the lower end of our prior guidance range of $1.3 billion to $1.5 billion, which was for the full year 2023. For updated total revenue guidance, we have combined the full year 2023 and the first quarter of 2024 total revenue to reflect the full delivery timing and revenue recognition of sales associated with the 2023-2024 vaccination season. Consistent with 2023, we originally expected no product sales revenue in the first quarter of 2024.

However, due to the delayed start to and expectation for a longer season in the U.S., we expect some portion of revenue recognition will extend into the first quarter of 2024. In addition, outside of the U.S., some portion of the committed APA dose deliveries may extend into the first quarter of 2024. Therefore, our guidance now includes our expectation for approximately $1 billion for the full year 2023 total revenues and approximately $300 million of sales in the first quarter of 2024. This updated total revenue guidance of $1.3 billion reflects a lower U.S. sales estimate based on current market expectations offset by $150 million in favorability in our APAs plus grants and royalties. As noted earlier, our management team is leading into and focusing on our opportunity to create a robust and sustainable business platform for years to come.

While we’re pleased to be over $100 million ahead in our previously announced cost reduction efforts for R&D and SG&A for the full year 2023, we are prepared to initiate additional cost reductions to decrease expenses by over $300 million in 2024 beyond our existing targets. Regarding cash and APAs, we have over $960 million across cash accounts receivable as of the third quarter 2023, plus expected cash from the contingent Canadian payment. In addition, we will have $750 million in APA contract value post the 2023-‘24 season deliveries. As we move forward, our U.S. market opportunity, along with this combination of APA sales, aggressively reducing costs, and managing our cash are key financial levers to drive towards profitability and long-term shareholder value.

Please turn to Slide 18. Turning now to our third quarter 2023 highlights. For the third quarter 2023, we recorded $187 million in total revenue. The $165 million in grant revenue recognized during the quarter puts Novavax on track to realize the full value of the $1.8 billion funding under our U.S. government agreement. The decrease in total revenue quarter-over-quarter compared to the prior year was consistent with our expectations for a later start for the 2023-‘24 COVID vaccination season. Combined R&D and SG&A expenses for the third quarter of 2023 were $213 million. This reflects a $214 million or 50% decrease compared to the third quarter of 2022 and includes a $50 million — $58 million benefit associated with a manufacturing settlement.

Year-to-date results highlight a $950 million or 47% reduction in total expenses and an additional approximate $1 billion reduction to current liabilities. Please turn to Slide 19. A few comments regarding the more detailed review of our third quarter 2023 results. Our operating expenses in the current period include the $79 million favorable impact associated with the previously announced SK Bioscience settlement of certain manufacturing liabilities that is recorded to both cost of goods sold and R&D expense. Our cost of sales for the third quarter of 2023 were $99 million compared to $435 million in the third quarter of 2022. Third quarter 2023 cost of sales included $82 million related to excess, obsolete, or expired inventory and losses on firm purchase commitments, as compared to $249 million in the same period in 2022.

From the third quarter of 2023, we recorded a net loss of $131 million as compared to a net loss of $169 million in the third quarter of 2022. Please turn to Slide 20. As noted, we are prepared to initiate additional cost reductions to decrease expenses by over $300 million and further reshape the size and scope of business operations to align with the COVID market opportunity. We plan to do so by reducing 2024 R&D and SG&A expenses by over $200 million compared to prior targets to reflect $750 million or lower spend in 2024. In addition, we intend to reduce supply network costs by over $100 million as we continue to rationalize our manufacturing footprint. Please turn to Slide 21. Now turning to financial guidance. We’re providing some additional details related to our full year 2023 financial guidance and total revenue guidance for the first quarter of 2024.

Our total updated revenue guidance for the combined full year 2023 and first quarter 2024 of $1.3 billion reflects $850 million for product sales and $450 million related to grants and royalties. Product sales includes over $700 million from committed APA dose deliveries, secured new orders, and U.S. market sales of between $50 million and $150 million. The first quarter of 2024 total revenue guidance of $300 million reflects the balancing amount to achieve our expected combined full year 2023 and first quarter 2024 product sales and total revenue of $1.3 billion. Of note, we previously expected no product sales in the first quarter of 2024. For R&D and SG&A expenses in 2023, we’re on track to exceed our previously announced global restructuring cost reduction plan by over $100 million.

We now expect full year 2023 R&D and SG&A expense to be approximately $1.2 billion (ph) at the midpoint and positions us well as we prepare to further improve our cost structure in 2024. If successful in achieving the guidance outlined today, we believe this will support the funding of our operations in the next 12 months. In our 10-Q filing, you will see that we have provided an update on our going concern disclosure, which we first provided in our 10-K filing in February. Specifically, that this forecast continues to be subject to significant uncertainty related to revenue for the next 12 months and pending arbitration. We look forward to sharing additional updates as we seek to improve Novavax’s financial performance, cost structure, and strength to deliver shareholder value.

With that, I’d like to turn the call back over to John for some closing remarks.

John Jacob: Thank you, Jim. Please turn to Slide 22. I am proud of the significant progress we’ve made against our three priorities year-to-date in 2023, including the launch of our updated vaccine in the United States, being $100 million ahead of our cost reduction targets, paying down over $1 billion in current liabilities and enabling a potential Phase 3 initiation of our combination vaccine program in the coming year. We are excited about our ongoing U.S. commercial launch and the opportunities ahead as we begin to see the long-term shape of the business to come. This includes the potential for a sustainable COVID-19 business to generate annual seasonal revenue, a combination COVID flu program to capture significant future market opportunity, and our Matrix-M adjuvant to further strengthen and diversify our revenue generation opportunities for the company in the future.

As I said earlier in the call, we are leaning into and focusing on our opportunity to create a robust and sustainable business platform for years to come, which includes an optimized and differentiated product presentation in 2024 and ‘25, as well as additional restructuring to create a more efficient business model, which will facilitate the late stage development of and a smooth transition to, the anticipated launch of our combination COVID-19 influenza vaccine in 2026. I remain confident in and grateful for our employees’ dedication to advancing our objectives. We are also appreciative of the ongoing support of our loyal investors as we strive to deliver on our objectives with the intent of driving long-term shareholder value. And with that, we will now take your questions.

Operator: We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Roger Song from Jefferies. Your line is open.

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Q&A Session

Roger Song: Great. Thanks. Great. Thanks for the comprehensive update. So a couple questions from us. Maybe start from the U.S. market. Understanding you’re updating the guidance to $50 million to $150 million sales for this season. I want you to give us a little bit kind of color how confident you about that guidance given based on the third-party database seems you’re still way behind that number so far and just curious about your thinking around the season how Novavax will capture further market share in the — toward the end of the season and also more importantly, how do you think about the next season and the future to come in terms of the potential market share for Novavax protein-based vaccine for COVID. Thank you.

John Jacob: Hi, Roger. Thank you for your question. Appreciate you joining the call. Roger, obviously, it’s very early in the season right now. We’re just a few weeks in with a few weeks of data before us. We’ve seen some very strong sparks that I’ll ask John Trizzino to elucidate here for you on the call of early interest in the vaccine. And it’s still one of the biggest unknowns is how large the market will really be. And that’s something that no one’s really sure about. And so I’ll ask John to comment on a few of those things. But that remains the largest uncertainty is market size in the U.S. as we go through the…

John Trizzino: Yeah. Thanks, John. Hey, Roger. Look, I think we’re learning a lot every day about this current ’23-‘24 season with some number of factors that we talked about during the presentation about the late season start, the dynamics associated with multiple vaccines being in the market, the distribution strategies challenges that have been there. And then I think we’re also dealing with total market size and some fatigue here. But related to us, I think that there’s an opportunity for the balance of November and December as we look at ongoing pharmacy vaccinations. I think we also are going to see some significant growth and change in the non-retail sector based upon how low that that is right now. I wouldn’t expect that there would be consumer behavior significant change of not going to the doctor’s office.

So I think we’ll see that. And then we’ll see it being a little bit elongated into Q1. As far as some of the early metrics that we’re seeing, look, I think overall we said we were seeing low-single digits. In some of the national, in one in particular, national retailer, we’re seeing 10% market share. This is where we’re on a level playing field their product in the pharmacy and we’re having good recommendation coming from the pharmacy, so we know we remain optimistic about the balance of the season. Obviously, that is all a controlled enthusiasm, if you will, understanding that we’re kind of third to market. And we’re also dealing with kind of consumer behavior where I’ll just get the same vaccine that I had before and we’re beginning to see from that ship taking place in the marketplace, so stay tuned.

Roger Song: Got it. Yeah. Thanks, John.

John Jacob: And roger the other part of your question was confident about next year and I think right now it’s too early to tell as we said we got three weeks of data in our hands here, but we’ve seen that spark like John mentioned major retailer up to a 10% share and next year we anticipate having a better presentation unit dose vial right, BLA, a full label including pediatric data et cetera. So right now, we’re much better than we were in years before when it comes to being on a more even playing field with mRNA but next year we’re taking the learning from this year it’s a transition year in the U.S. and really leaning into position ourselves very well for market penetration in 2024.

Roger Song: Yeah. Okay. Great. And then so in terms of the ex-U.S. APA, can you let us know how likely this current $700 million in total, I think around $400 million for the remaining of the year into 1Q, will be further renegotiated or are those APA already set for the delivery upon approval? And also, you already got just recently got approval if that start to deliver based on the order. Thank you.

John Jacob: Jim Kelly you want to handle that?

James Kelly: Hey, certainly. So with our APA’s including our guidance for the fourth quarter and first quarter, these are security APAs. They’re tied to committed delivery schedules, of course, in the case of Europe, we have that approval, it’s about getting the doses in the market. And for important markets like Australia and New Zealand, we’re in the process of completing those regulatory filings to enable us to deliver those doses. Importantly, they’re southern hemisphere, so when those doses arrive, they’re going to have the type of shelf life to be meaningful to them as they enter their season. Now all of these APAs, they do come with stipulations that we have to deliver on time per the agreement, and if not, they can attempt to renegotiate. We currently have the expectation that we’ll get them there on time per the agreement.

Roger Song: Excellent. Great. Thank you. Maybe just one last one from me. Is the — it’s good you can directly move into the COVID flu combination trial, Phase 3 trial next year. Just given the additional operational expense cut for 2024, how do you think that will impact that Phase 3 plan and will you be able to sufficiently fund that trial without a partner? Thank you.

John Jacob: Good question, Roger. Go ahead, Jim.

James Kelly: Yeah. Great question and all I’m first reference back to what is I think a pretty exciting update from Filip today about a very lean approach impact and potentially accelerated path to get our combination product to the market as early as 2026 with a single pivotal study. I mean this is an important game changer. I think many folks heard something very similar from Moderna recently, and we think it enables us a path to market in a highly capital, I’ll call it efficient manner. Okay. So with respect to the update we provided today, where we are going to drive our R&D and SG&A to below $750 million next year. That is inclusive of beginning this study next fall. And so we have contemplated that, that we are both focused on creating not just the competitive COVID product, but also accelerating our combination product while establishing a lean and focused organization to do so.

And if you wouldn’t mind, I’ll talk a little bit about the cash runway that enables that. I described to you three really important components and I’m going to describe these components before factoring in the U.S. market opportunity which I think John did a really nice job highlighting. We can see a path through the end of 2025 to over $2 billion in cash through three critical pieces. I described as of today over $960 million in cash and expected cash combining cash on hand, accounts receivable, plus that $175 million expected contingent payment from Canada. Add to that, the $600 million at midpoint of current season ‘23-‘24 sales in the fourth quarter and first quarter in next year. And then we described over $750 million outstanding APA contract value for ‘24 and ‘25.

You net out some of the up fronts and you’ve got clear visibility of over $200 or excuse me $2 billion in cash. Then as you seek to execute against that, lean and focused organization, reducing our cost structure to ensure we are prepared with financial strength for both next fall and to accelerate and invest in that combination program. So hopefully that’s helpful.

John Jacob: And Jim and Roger also that doesn’t include what Jim just laid out that over $2 billion runway over the next 24 months does not contemplate any, anything else from U.S. from Europe from other markets like South Korea which just placed a new order with us from our R21 vaccine which just received to authorization or from things like UNICEF and low-income countries, all additional opportunities for the company to generate revenue in the coming years and even in the coming quarters potentially. So what Jim laid out is just what’s primarily secured revenues already contemplated through APAs. One other point is on the $600 million Jim talked about between Q4 and Q1, the vast majority that is secured revenue through APAs, which we intend to deliver the full doses for and the minority of that is the first year launch in the United States So just to give you the opportunity we have before us from a revenue standpoint, a cash standpoint to carry us independently forward to our CIC program launch, and then the upside potential beyond for all of those other pieces.