Vaxcyte, Inc. — Q3 2023 Form 10-Q
Reporting period: Quarter ended September 30, 2023; filed November 6, 2023. Financial statements are unaudited. Vaxcyte is a clinical-stage vaccine developer with no approved products and no product-sales revenue.
Financial results and liquidity
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue from product sales | $0 | $0 | $0 | $0 |
| Research and development expense | $97.4M | $47.7M | $228.2M | $117.8M |
| General and administrative expense | $15.6M | $10.9M | $43.2M | $27.9M |
| Total operating expenses | $113.0M | $58.6M | $271.4M | $145.7M |
| Net loss | $92.7M | $57.9M | $221.5M | $145.4M |
| Net loss per share, basic and diluted | $0.91 | $0.93 | $2.32 | $2.42 |
Cash flow: Net cash used in operations was $168.0M for the first nine months of 2023, versus $105.4M in 2022. Investing activities used $759.4M, primarily reflecting purchases of investments, while financing provided $637.1M, including $545.3M net proceeds from the April follow-on offering and $90.8M from ATM sales.
Liquidity and debt: At September 30, 2023, cash and cash equivalents were $545.1M and investments were $889.1M, totaling $1.434B. Current assets were $1.295B and total liabilities were $93.3M; the filing reports no borrowings. Lease liabilities totaled $13.8M. Management believes existing cash, cash equivalents and investments will fund operating expenses and capital requirements for at least 12 months from the filing date.
Changes versus the prior comparable period
- Q3 operating expenses increased 93% year over year, driven chiefly by product development and manufacturing costs, including VAX-24 Phase 3 readiness, infant study costs, and preparation for potential commercial manufacturing of VAX-24 and VAX-31.
- Q3 net loss increased 60% year over year. Higher interest income—$18.5M versus $1.2M—partly offset higher expenses; the increase reflects larger cash and investment balances and higher interest rates.
- For the first nine months, operating cash use increased to $168.0M from $105.4M. Accrued manufacturing expenses rose to $41.9M at quarter-end from $8.3M at December 2022.
- Common shares issued and outstanding increased to 95.1M from 79.5M at December 31, 2022, including shares issued through the April offering and ATM program.
Outlook, developments and key risks
- VAX-24: Management reported a successful FDA End-of-Phase 2 meeting in late October 2023 and believes there is agreement on the adult Phase 3 clinical design. The company expected to provide further detail after CMC discussions anticipated through Q1 2024 and projected adult pivotal-study topline data in 2025. Infant Phase 2 topline data from the primary series are expected by 2025, with booster data approximately nine months later.
- VAX-31: FDA cleared the adult IND in October 2023. The company expected to begin a Phase 1/2 adult study in Q4 2023 and report topline results in the second half of 2024.
- Manufacturing: In October 2023, Vaxcyte’s subsidiary entered a long-term Lonza agreement for a dedicated manufacturing suite in Switzerland. A CHF 27M repurposing fee is creditable over 10 years after commercial production begins; specified terminations could trigger a penalty of at least CHF 70M or a formula-based amount. The agreement runs through 2038, subject to renewal. The filing does not quantify the total expected cost of the arrangement.
- At September 30, 2023, non-cancelable manufacturing and raw-material commitments totaled $126.7M, including $46.3M due in the remainder of 2023 and $77.5M in 2024. A new office lease commenced October 1, 2023 and was not recorded as a lease asset or liability at quarter-end.
- Vaxcyte remains loss-making and expects significant expense growth. It will need substantial additional capital to complete development and commercialization, despite its stated near-term runway; future financing may dilute shareholders or be unavailable on acceptable terms.
- Development, regulatory and execution risks include clinical-trial failure or delay, FDA disagreement or a requirement for efficacy studies, manufacturing scale-up and CMC challenges, and dependence on Lonza and other suppliers, including single-source suppliers. Competition, reimbursement, inflation, interest rates and foreign-currency movements are also risks.
- No material litigation was reported. The company said its disclosure controls and procedures were effective as of September 30, 2023.
Investor verification points
- Confirm subsequent progress against the VAX-24 Phase 3, infant-study and VAX-31 timelines, and review final rather than preliminary clinical data.
- Track cash burn, investment liquidity and whether management’s stated runway remains supported as development and manufacturing spending rises.
- Assess the full cost, capital contributions, milestone incentives and termination exposure under the Lonza commercial manufacturing agreement, alongside the $126.7M disclosed commitments.
- Monitor any exercise of the Sutro option, which could require $75M in exercise payments and up to $60M in regulatory milestone payments.
- Evaluate continued share issuance and potential dilution, including ATM sales, equity compensation and outstanding pre-funded warrants.