Vaxcyte, Inc. annual report, FY2022

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Vaxcyte, Inc. — 2022 Form 10-K

Business context and reporting period. This annual report covers the fiscal year ended December 31, 2022; it is not a standalone fourth-quarter report. Vaxcyte is a clinical-stage vaccine developer with no approved products and no product revenue. Its lead program is VAX-24, an investigational 24-valent pneumococcal conjugate vaccine; the pipeline also includes VAX-31, VAX-A1, VAX-PG and discovery-stage VAX-GI.

Financial results and liquidity

  • Revenue and margins: No product revenue was generated. Operating margins are not meaningful for this pre-commercial company.
  • Net loss: $223.5 million in 2022, versus $100.1 million in 2021; basic and diluted loss per share was $3.44, versus $1.93.
  • Operating expenses: $232.3 million, up 124% from $103.7 million. Research and development was $169.5 million, up 116%; general and administrative was $39.8 million, up 58%. The 2022 total also included $23.0 million of acquired manufacturing rights related to the Sutro option agreement.
  • Cash flow: Operating activities used $170.6 million, compared with $121.4 million used in 2021. Investing activities provided $74.6 million, largely reflecting investment maturities and sales; financing activities provided $861.5 million.
  • Cash and liquidity: At year-end, cash and cash equivalents were $834.7 million and investments were $123.3 million, totaling $957.9 million. Current assets were $942.6 million and current liabilities $40.5 million. Management said available cash, cash equivalents and investments were expected to fund the operating plan for at least 12 months from the filing date.
  • Debt and obligations: The filing reports no debt. Total liabilities were $52.6 million. Contractual lease payments totaled $20.6 million, and non-cancelable manufacturing and raw-material purchase commitments totaled $125.6 million, including $123.1 million due in 2023.

Material changes versus the prior year

  • Net loss more than doubled, primarily as the company advanced VAX-24 and VAX-31 clinical and manufacturing work and expanded personnel and operations.
  • Cash and investments increased from approximately $273.1 million at year-end 2021 to $957.9 million at year-end 2022, principally following 2022 equity offerings and ATM sales.
  • Vaxcyte raised $759.2 million net from 2022 follow-on offerings and $97.3 million net through its ATM program. These financings increased the common shares issued and outstanding from 53.0 million to 79.5 million during 2022; additional pre-funded warrants were also issued.
  • The company recorded $23.0 million in acquired manufacturing rights under its December 2022 Sutro agreement, including $5.0 million accrued at year-end.

Outlook, commentary and key risks

  • VAX-24’s Phase 1/2 study in adults aged 18–64 reported positive topline results: safety and tolerability were described as similar to PCV20, and the 2.2 mcg dose met the stated immunogenicity standards for all 24 serotypes. These are company-reported topline results; final data and pivotal testing remain outstanding.
  • Management planned to announce results from the separate Phase 2 study in adults aged 65 and older in the second quarter of 2023, complete six-month safety follow-up in the first half of 2023, and hold FDA discussions to inform Phase 3 in the second half of 2023. Adult Phase 3 topline results were expected in 2025.
  • The FDA cleared VAX-24’s infant IND in February 2023. The company planned to start an infant Phase 2 study in the second quarter of 2023, with topline data after the primary three-dose series expected by 2025. VAX-31 IND submission in adults was anticipated in the second half of 2023, with Phase 1/2 data expected in 2024.
  • VAX-24 received FDA Fast Track and Breakthrough Therapy designations for adults. These designations do not assure approval or a faster development timeline. The FDA has not confirmed that the company’s proposed immune-response endpoints will be sufficient; field efficacy or additional studies may be required.
  • Key risks include clinical failure or delays, regulatory uncertainty, manufacturing scale-up and dependence on third parties (particularly Lonza and Sutro), competition from larger vaccine companies, and the need for substantial additional funding. The company also noted past VAX-24 manufacturing adjustments and delays, supply-chain effects from COVID-19, and exposure to inflation and foreign-currency movements.
  • The Sutro option could require an additional $75.0 million exercise payment and up to $60.0 million in milestone payments if exercised and milestones are achieved. The company had not exercised the option as of year-end.
  • The financial statements received an unqualified audit opinion, and the auditor reported effective internal control over financial reporting. Accrued manufacturing expenses were identified as a critical audit matter because estimating uninvoiced contract-manufacturing work requires judgment.

Important facts for investors to verify

  • Review final VAX-24 safety and immunogenicity data, including results in adults 65 and older and infants, and compare them with the reported topline findings.
  • Track FDA feedback on VAX-24 Phase 3 design, comparator, endpoints and any requirement for field efficacy or additional studies.
  • Monitor VAX-24 and VAX-31 manufacturing readiness, supplier capacity, quality, costs and the timing of the $125.6 million purchase commitments.
  • Assess cash consumption against the stated runway, future clinical and manufacturing spending, and any additional financing or dilution.
  • Confirm the status and potential cost of the Sutro option, including the outstanding $5.0 million payment and possible exercise and milestone payments.