Good afternoon, everyone. My name is Bo 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 2023 Financial Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer period. [Operator Instructions] And just a reminder, today's call is being recorded. Now at this time, I will turn things over to Mr. Andrew Guggenhime, President and Chief Financial Officer of Vaxcyte. Please go ahead, sir.

Thank you, operator, and good afternoon, everyone. I'd like to welcome you to Vaxcyte's earnings conference call to discuss our 2023 results and to provide a business update. I'm joined today by our Chief Executive Officer, Grant Pickering; and our Executive Vice President and Chief Operating Officer, Jim Wassil. 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 Investor & 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, 2023, and any subsequent reports filed with the SEC. With that, I'll turn the call over to Grant Pickering. Grant?

Thanks, Andrew, and all of you on the call and webcast, thank you for joining us today. 2023 was another remarkable year for Vaxcyte, officially marking our 10th year of thoughtful and methodical research and development by the entire Vaxcyte team and our partners. We are driven by our mission to prevent or treat infections caused by bacterial diseases, including invasive pneumococcal disease for IPD. This past year, we continued to make significant strides in advancing our potentially best-in-class pneumococcal conjugate vaccines for PCVs VAX-24 our lead 24-valent candidate, and VAX-31, our next-generation 31-valent candidate. And we remain focused on providing the broader spectrum of coverage against IPD for both adults and children. Last year was highlighted by the successful completion of our VAX-24 adult Phase 2 program following our stellar initial proof-of-concept data in late 2022 in adults aged 50 and 64, we reported data in April 2023, from a separate Phase 2 study in adults 65 and older. It not only confirms the prior proof-of-concept study results, which showed even greater immune responses, compared to Prevnar 20, on a relative basis. These data further validate the potential of our cell-free platform and carrier-sparing approach to deliver broader spectrum PCVs. The findings from our adult Phase 2 program support 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 done a crucial vaccine class, societally, and financially. Following the VAX-24 adult Phase 2 program completion, we made important progress with regulators. This included a successful end of Phase 2 meeting with the FDA regarding the clinical design of the VAX-24 Phase…

Thanks, Grant. I'd like to start by reiterating my developing broader coverage vaccines to treat pneumococcal disease matters. Despite the 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, the standard of care pediatric and pneumococcal vaccines cover only approximately 30% to 50% of circulating diseases. As a result, the public health community continues to affirm the need for broader spectrum vaccines to prevent IPD. We designed our PCVs to expand coverage and still include all of the serotypes covered by the current marketing vaccine that were most prevalent when these vaccines were originally developed. The ability to both add newly circulating strength and maintain pressure on previously circling strength is critical from a global health perspective. Based on the totality results from the VAX-24 adult Phase 2 program that Grant referred to earlier, we believe we have the opportunity to set a new bar for pneumococcal vaccines by delivering broader coverage and higher immune responses relative to conventional PCVs. Following the completion of the Phase 2 Adult Program, we had a successful end of Phase 2 meeting with the FDA, focused on the VAX-24 adult Phase 3 clinical program. We believe there is agreement with the FDA on the clinical design of this program, including the approximate overall number of subjects, the primary and secondary endpoints for the pivotal non-inferiority study, as well as confirmation that the planned immunogenicity analysis are sufficient to support licensure and an efficacy study is therefore not required. Regardless of whether we advance VAX-24 or VAX-31, we expect either Phase 3 program to include up to five studies to support licensure and the broad label. Additionally, as part of the ongoing safety focus discussions, we received…

Great. Thanks, Jim. On the financials, with respect to the income statement, the details of our fourth-quarter and full-year 2023 results and the reasons for the variances to the comparable 2022 periods are reflected in our 10-K filing and summarized in our press release. The year-over-year increase in R&D expenses was driven primarily by higher manufacturing expenses related to the planned adult Phase 3 clinical trials and potential future commercial launches of our PCV programs. Both R&D and G&A expenses also grew, as we invested in our team to support our recent and anticipated growth. The acquired manufacturing rights expense of $75 million for the fourth quarter and full year 2023 was related to the exercise of the option with Sutro Biopharma, of which $50 million was paid in cash in the fourth quarter. The 2022 expense for the same item was related to the upfront consideration incurred in connection with the original option agreement entered into Sutro. I would also note the contribution of the interest income line as a function of our higher cash and investment balances and the higher interest rate environment. As we look forward, we expect an increase in 2024 R&D and G&A operating expenses over both full-year and Q4 2023 annualized levels, particularly within R&D. This expected increase is primarily a function of our investment to make the required clinical trial materials for a potential VAX-24 or VAX-31 Phase 3 Adult Program, which will consist of multiple trials, and to continue manufacturing activities to support the potential future commercial launches of our PCV programs. While we expect substantial annual growth of our R&D expenses, we do expect the amount to vary by quarter depending on timing of manufacturing activities. For G&A, we expect the expense growth to be generally steady by quarter. At this…

Thanks, Andrew. Before moving to Q&A, I would like to acknowledge the entire team at Vaxcyte and our partners. 2023 was an extraordinary year of validation for VAX-24 and our pipeline. Over the next year we look forward to several upcoming catalysts that will further define the profiles of our PCV franchise and I am confident in our ability to execute and further scale our business in 2024 and beyond. We look forward to sharing further updates as the year progresses and I appreciate your interest by joining us today. With that, let's take some questions. Operator?

Thank you very much, Mr. Pickering. [Operator Instructions] We'll go first this afternoon to Jason Gerberry of Bank of America.

Hi guys. Thanks for taking my questions. I guess, firstly, just as we think about this decision between VAX-31 and VAX-24, you're ultimately measuring yourself against VAX-24. So wondering if you can kind of frame what success looks like? And in the end would showing kind of like a net incremental coverage of three or four strains as measured by statistical NI or good enough point estimates or a fourfold rise collectively across the spectrum. Does that sound like to kind of what a bar for success looks like? And then secondly, have you guys explored ways to reduce protein carrier in the 31-valent approach? And the reason I ask is, for some reason, if this iteration of VAX-31 doesn't make the cut-off, just wondering if there are ways to potentially go back to the drawing board and to optimize. Thanks.

Yes. Jason, thank you for the question. So yes, as we look forward to that data, that we expect to see in the third quarter, I mean, we're quite optimistic. The way we're looking at this program is a combination of the empiric evidence generated to date combined with the circumstances. So from any empirical data perspective, certainly we have not only of course compelling preclinical data with VAX-31, but also the VAX-24 data that's been generated across the Phase 2 program that's readout already with a particular emphasis on that mix dose cohort, where we were able to already test the cumulative amount of protein carrier that we would expect to have put into the clinic with VAX-31. So for us, we're really looking as you pointed out at a couple of different endpoints. So this is a non-inferiority comparison to Prevnar 20 across those 20 conjugates. And then there are the incremental 11 where it said, slightly different endpoint where you're looking at fourfold rise over baseline. So for us the data that we generated with VAX-24 cohort demonstrated even at that mix dose level, really good comparative results across the 20, that are in Prevnar 20, and then the incremental 11, you know, four have already read out, the next seven will come with this study. And so, yes, for us, I think we're feeling good. The data is going to be here in the not-too-distant future. And as you mentioned the idea of adjusting the ratio, that is certainly something that has been at our disposal, historically. We do have a level of precision with our chemistry that permits us to adjust the ratio of sugar to protein in ways that we don't believe anyone else can. We've used that to great effect to date with…

Great. Thanks so much.

Thank you. We'll go next now to Roger Song at Jefferies.

Great. Congrats for the progress. A few questions from us, I limit to two. So the first one is, with this 31 data in 3Q, you probably need another end of Phase 2 meeting with the FDA. The question is how much you can leverage from your VAX-24 end of Phase 2 meeting package for that meeting. Because your timeline is basically, you're going to start a Phase 3 in 2025 and 2024. I think, if you move forward with the 31, particularly around the CMC because that's something since holding you back for the 24 at this moment. Thank you.

Thanks, Roger. This is Jim Wassil. And I'll try and answer that question for you. I think you're very perceptive in your question. We're hoping to leverage a lot of the study designs that we propose to put forward with our end of Phase 2 design for VAX-24 and use the very similar design for VAX-31. Obviously, we'll look at the data from the Phase 1/2 of VAX-31. We'll do a reanalysis from a statistical perspective. We'll power the studies appropriately to ensure that we maximize the probability of success in our non-inferiority study and our other Phase 3 studies. But essentially the proposal that we put forward in VAX-24 will be very similar in terms of the overall study design that we'll see for 30 months.

Got it. And how about the CMC portion of the 31?

Yes, the same thing as well. We're using very similar manufacturing processes, if not exact manufacturing processes, in some cases between the 24 polysaccharides and 31, as well as the drug substance. And of course, the carrier protein is still the same carrier protein. So a lot of similarities between 24 and 31. So whatever we learn from feedback from the FDA or from a CMC perspective, from 24, we believe is applicable to 31 as well.

Excellent. Maybe just a follow-up question for the 31 higher dose you mentioned on the call, the mixed dose from this third 24 is mimicking the middle dose for 31. Maybe just any color you can provide related to the high dose for 31, particularly in terms of the carrier protein, how much higher and what are the key serotypes potentially can be dosed higher, if you can give us some color around that. Thank you.

Yes. Hey, Roger, Grant again. Yes, we've been a little bit more coy with regard to the doses we did provide a bit more detail here just for competitive purposes. But we want to make sure that we come out of this Phase 2 experiment with a clear dose to advance to Phase 3. So here go the bracketing with lower and higher doses. We haven't gotten into explicit detail, but there is a pretty tight window of dosing that's been historically applied in the pneumococcal conjugate vaccine space, so we wouldn't do anything that would be radical there. But we're not going to go into the explicit details of what those are, at least for the time being, and that will be decided at the time we review the data.

Understood. Thank you. Thank you for taking the question.

Of course.

Thank you. We'll go next now to Salim Syed at Mizuho.

Hey guys, this is [Eric Ladington] (ph) on for Salim. Thanks for taking our question. I'm curious what your take on possible outcomes for discussions for V116 of the upcoming ACIP meeting, by read-through to either your decision between VAX-24 and VAX-31. And what if I mean for the comparison on -- in Phase 3s? Thank you.

Thanks, Eric. Jim Wassil here. So I'll answer this by saying I think many of us know already, February 29, ACIP, Merck's V116 will be on the agenda. I think at that meeting we'll get a better idea of the current thinking of the ACIP pneumococcal working group. The pneumococcal working group will most likely present epidemiological data, health economic data, V116 clinical data. And then they'll make a proposal to the ACIP regarding how to recommend V116, assuming they get FDA approval. So I don't think I'd want to speculate on this, especially since we've got -- going to have a much better idea by the end of this week what the ACIP position will be. I will say that I want to highlight V116 is only applicable in the adult population and it takes a different approach than our PCV program, in order for them to reach 21 strains. Due to the limitations of their technology, they had to remove nine strains that have been traditionally included and approved PCVs. So with VAX-31, we do have a potential to further increase coverage to approximately 95% of invasive disease. And we're doing this by adding additional strains and maintaining coverage of previously circulating strains. So we'll wait and see, we'll see what the outcomes are. I think VAX-24 will have a strong position regardless. Obviously, VAX-31, which contains for the most part, all the strains in both vaccines, will be in a strong position to increase coverage and really take a strong position if it gets approved.

Got it. Thank you.

Thank you. We go next now to Dave Risinger at Leerink Partners.

Yes, thanks very much. So, first I wanted to say congrats on the corporate progress. And I appreciate the updates. I guess, I have two questions for Grant and Jim. First, ACIP-preferred recommendations are rare but Vaxcyte to be particularly well-positioned for a potential preferential recommendation for VAX-31. Could you just comment on that notion and provide your perspectives? And then second, could you elaborate more, Jim, on your comment about potential prime boost opportunity in adults? Thanks very much.

Yes, thanks. Thanks for that Dave. Appreciate the acknowledgments and Jim is kind of our ACIP guru. So why don't I hand it to Jim and see if he can respond to that question?

So, well -- I -- let me jump in. So yes, certainly the ACIP has within its purview the right to extend that preferred recommendation. They have been limited in those decisions in the past the most recent course was with Shingrix over Zostavax for the Shigella vaccines. It's been more limited in the pneumococcal conjugate vaccine space, but it does occur and we even see that with Prevnar 20 in certain circumstances. So there are a lot of pundits out there, Dave, speculating on how the ACIP is going to react and the margin of improvement does need to be quite material from an efficacy perspective or coverage perspective. But when you have an opportunity to potentially extend the coverage with a singular vaccine to as high as 95% while continuing to maintain pressure on previously circulating strains. To us, objectively, we think that is the kind of profile that would warrant a preferred recommendation. So we'll have our day, if things stay on track, we'll see how they react to the V116 profile. But certainly, from our perspective, we believe there is that possibility for us, but V116 will be another data point. I think what we had heard was there was hope at Merck that there was going to be an opportunity for a preferred recommendation. We'll find out. I think that's being walked back a bit from what we're reading. But as Jim pointed out, before the week is out, we'll have a leading indicator.

In terms of your question on the prime boost, in previous discussions at the ACIP, when both the 15-day and 20-day got approved, there was a debate over whether we should start immunizing starting at 50 years of age instead of the current recommendation of 65. I think there's a lot of support for that. And the reason is the data says that almost, probably around 28% to 30% of adults right now are in an at-risk category or high-risk category for getting pneumococcal disease, in particularly pneumococcal pneumonia. And these are groups that it's not just, you know, asplenics and malignancies and HIV and severe immunosuppression. These are a lot more common groups. You have severe asthma, COPD, you have diabetes, chronic lung -- chronic liver disease. And the belief is that that population in terms of percentage in that age group, is only going to grow. And historically, at risk recommendations haven't really gotten penetration. So there's been some debate about moving the recommendation down to 50, and then that would mean, most likely that you would need to get a booster at 65. So there could be a prime at 50 and a boost at 65. And we'll also see some of that debate, I think, coming up in the upcoming ACIP.

That's great. And just a follow-up if I may. Could you talk about your Phase 3 plans in adults? And your age strategy?

Well, from a FDA licensure perspective, the adult label is usually extended at age 18 and up. So we'll be looking for the same sort of broad label that's been obtained with other pneumococcal conjugate vaccines. So the next look then is at the ACIP as to how they grant the universal recommendation. But from a licensure perspective, we'll be looking to have an across-the-spectrum sort of indication, but then it's a question of usage. And as Jim said, when it's universally recommended, the uptake is much greater than when it's restricted to at-risk populations.

Yes. And I'd only add that given the interest in these at-risk groups in 50 to 65-year-olds, we'll make sure to have adequate enrolled at-risk groups in our clinical studies so that we can support FDA -- ACIP does want to move down to 50 years of age on clinical data to help with their decision.

That's super helpful. Thanks so much.

Thanks, David.

Thank you. We go next now to Umer Raffat at Evercore.

Hi guys, thanks for taking my question. Among the new serotypes you're adding to VAX-31, there is one in particular, which has a bunch of literature on it suggesting it's very unique and perhaps difficult to manufacture. I'm referring to 35B. Can you speak to your confidence in the manufacturing as well as early immunogenicity data you saw in preclinical models of 35B in particular? And secondly, is it your expectation that Pfizer's broader spectrum program 24, 25-valent is using a second carrier protein beyond CREM-197? Thank you.

Yes, maybe I'll answer the second one first and then Jim will address the 35B question, Umer. Thank you for both of those. So…

Pfizer?

Oh, yes, as it relates to the fourth generation program. Yes, Umer, it's hard to know exactly what they're doing. So from what they've been willing to disclose, they've been considering all number of potential changes to try to extend beyond a 20-valent vaccine. But at the most recent earnings results, they seem to indicate that whatever incremental strains would be layered on top of what would presumably be the 20 strains that are in Prevnar 20. And there it then comes down to -- is it a unique protein carrier, is it different chemistry, is it different linkers or some sort of other formulation? But it's hard to know beyond that. I don't think they've gotten detailed with regard to that. That said, this idea of the notion of using an additional protein carrier, that's something other sponsors have tried, going back to GSK's first foray in pneumococcal conjugate vaccines. And then more recently with Sanofi's approach intermingling diphtheria toxin and tetanus toxoid. And those have turned out to be a bit problematic, as Sanofi has not decided to proceed in the adult indication, so it's unclear at the moment, but other attempts in a similar vein haven't worked out particularly well. But we couldn't say for sure if that's the approach they're trying as of yet. And as to 35B, Jim, do you want to comment?

Yes. Traditionally, we limit our comments on some of this due to proprietary issues, but I'll say 35B is an important serotype. It's one of the more common circulating strains in adults and it's probably the most significant contributor to otitis media in the U.S. today. So we are very keen on making sure that it is manufactured appropriately and that it works well in VAX-31.

Thank you.

Thank you, Umer.

Thank you. We go next now to Seamus Fernandez at Guggenheim.

Great. Thanks for the question. So wanted to just talk a little bit about pediatric and what expectations, how you'd like to kind of set expectations for the three dose data. I know that is something that Merck has sort of pitched as part of the vaccine advanced story. Just interested to know, I know that breadth is likely to dominate. But a three-dose regimen has been quite successful overseas. So interested to just know how you guys are thinking about the opportunity for actually perhaps a superior profile at your third dose versus the Prevnar 20, 23rd dose, just because a number of those serotypes appeared to miss at three doses and then really required the fourth dose to catch up. So just interested to know how you're thinking about that and its importance from a market perspective longer term. And then just the second question is on whether you choose VAX-24 or VAX-31 in the adult vaccination program. Are you confident that you won't be required to study versus V116 or is that something that could be decided after the ACIP recommendation in June? Thanks.

Yes. Thanks for the question, Seamus. So yes, as it relates to the infant indication, obviously a critical part of the market, three-quarters of the sales consistently in that space. And as you referred to a three dose series, I wasn't sure exactly which direction you warranty you were until you expanded a bit. But, yes, to be clear, in the U.S., we have a three-plus-one approach. So three vaccinations within the first six months of life, that's called the primary series, and then the fourth dose comes in the form of a boost the next year. In Europe, they restrict that primary series to only two vaccinations and then the third dose the next year. So it's really a three in Europe versus a four-dose approach. And as you say, less doses create more pressure on lower immune responses. And so when Pfizer studied Prevnar 20 in infants in U.S. and Europe, the impact of the one less dose was quite profound. So in the U.S., there were six of the serotypes that missed the non-inferiority comparison to Prevnar 13 after the primary series. And one can imagine that when you only give two vaccinations with a vaccine that's providing lower immune responses, the impact of that will be felt in a fewer-vaccination approach. And sure enough, the results of their Phase 3 study in Europe had 11 of the common serotypes miss the non-inferiority comparison at the primary series. So that has been a big question mark. Nonetheless, the CHMP in Europe did recently recommend that Prevnar 20 ought to be approved. So that will be interesting to see how that plays out with that many missed non-inferiority comparisons. But to your point, what we've seen, at least in adults with VAX-24 data, is that we are --…

No, I think that is there. I think that if there is a non-preferential recommendation, then I think it will be at up to us to choose which of the competitor we can choose to use in the Phase 3.

Great. Thank you guys. Appreciate it.

Yes. Thanks, Seamus.

Thank you. We'll go next now to Louise Chen at Cantor Fitzgerald.

Hi, thanks for taking my question. Wanted to ask you on your global manufacturing capacity and how this gives you a competitive advantage. And then what kind of capacity will you have once you complete this buildout? And second question I wanted to ask you was, just on the infants. Are you going to also choose either VAX-24 or VAX-31 for infants? What are you thinking here? And what is your VAX -31 adult data are going to give you as you think about the instant opportunity?

Yes, thanks for the questions, Louise. Yes, so as it relates to the manufacturing buildout from a competitive perspective, it's really table stakes, if you will, if you can supply these vaccines at the appropriate capacity then how can you expect the ACIP among others, to make a broad recommendation for your vaccine? So, for us, it's been fundamental to unlocking the full value of these vaccines, is to stay ahead of that sort of capacity so as to have not only the ability to deliver but the sort of profile that would warrant a preferred recommendation ideally. And so that's been absolutely crucial to this whole story. And I think we've been able to stay ahead of that. We're in a position to launch out of existing Lonza infrastructure where we've been making these materials to study clinically. And then late last year, as you all know, we made the strategic decision to invest in a dedicated facility at Lonza. And as you requested, the way we're thinking about that dedicated facility is one that would be able to satisfy the global demand from the developed world for either VAX-24 or VAX-31 in both of the adult and infant indications. So we do really expect that one to really deliver for us to maximize the sort of opportunity that we think is at hand. And then to your question about VAX-24 versus VAX-31 going forward, I think it's really an indication dependent conversation. So for us, we find ourselves in a position where both VAX-24 and VAX-31 have an opportunity to reach the market on the same timeline. So with the right VAX-31 data later this year, naturally, it would make sense for us to move to deliver the most broadly protective vaccine that we can and ideally that would be VAX-31. If not, we know VAX-24, it looks really good as well and so we'll see that data before anointing which one to advance. That said, in the infant market, we're already well ahead with VAX-24. And so for us, we're contemplating either or both of VAX-24 or VAX-31 in the infant indication, just because we know we can bring VAX-24 to market faster based on the path we're on today. So it's a little more nuanced in the infant indication because of that sequencing.

Thank you.

Thank you. We'll go next now to Joseph Stringer at Needham.

Hi, thanks for taking our question. Just a couple of quick ones on the preclinical programs. You briefly mentioned those, but could you just give us a quick sense for which one you think could enter the clinic first? And in particular on Strep A, curious if you'd give us a quick outline of a competitive landscape there and what you think the commercial opportunity in that indication is?

Sure. Thanks, Joe. So, as we stated, we've three other pipeline projects, we've got Group A Strep periodontitis and Shigella, all three are moving forward in early-stage preclinical development. We haven't guided to when they would go in the clinic. But yes, the one that I believe is most advanced at this point is the one that you mentioned, which is Group A Strep. The Group A Strep vaccine, I think has a very important role, I think it's one of the most underappreciated diseases. There are over 500,000 deaths due to Group A Strep that occur every year due to rheumatic heart disease. But it's a ubiquitous disease causing pharyngitis, mainly in school entry kids as well as young toddlers. If not treated aggressively with antibiotics, which means that there's a significant amount of antibiotic prescriptions associated with this disease. And also subsequently, you would expect growing levels of antimicrobial resistance have led to increasing importance of finding a vaccine to prevent against this. And there is recent economic studies that say that medical and indirect costs are around $5 billion a year. So a vaccine that can have some degree of efficacy, a reasonable amount of efficacy, could significantly have direct medical cost to offset. So I think you'll see a commercial opportunity here in school entry kids, potentially toddlers. And then the one area I haven't mentioned is there is high rates of invasive disease in older adults as well. So we could see a very similar type of recommendation, in fact, a little bit more because you're immunizing school entry kids as well, that you see with the PCV. So we're really excited about this program.

And I think from a competitive standpoint, Joe, it's not as active as certainly in the PCV space, as Jim -- we comment on that.

Yes, there's minimal activity. There is only a few academic centers and one pharma company that are currently looking at a Group A Strep vaccine. So minimal competitive environment as well.

Great. Thank you for taking our questions.

Thank you. And ladies and gentlemen, it appears we have no further questions today. So, that will conclude today's Vaxcyte fourth quarter and full-year 2023 earnings conference call. Please disconnect your line at this time and have a wonderful day. Thanks for joining, everyone.