Vaxcyte, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024. Vaxcyte is a clinical-stage vaccine developer with no approved products and no product-sales revenue. Financial figures below are in U.S. dollars; “million” means $1 million.
Financial performance and position
| Metric | Q1 2024 | Q1 2023 / prior date |
|---|---|---|
| Revenue from product sales | None | None |
| Research and development expense | $94.6 million | $58.1 million |
| General and administrative expense | $19.9 million | $13.1 million |
| Total operating expenses / operating loss | $114.5 million | $71.2 million |
| Other income, net | $19.5 million | $10.7 million |
| Net loss | $95.0 million; $0.85 per share | $60.5 million; $0.70 per share |
| Net cash used in operating activities | $159.1 million | $47.7 million |
| Cash, cash equivalents and investments | $1,899.8 million | $1,242.9 million at Dec. 31, 2023 |
At March 31, 2024, cash and cash equivalents were $611.5 million and investments were $1,288.3 million ($875.0 million short-term and $413.2 million long-term). Total current assets were $1,517.1 million versus current liabilities of $87.1 million. Total liabilities were $107.3 million, including $27.4 million of operating lease liabilities. The filing reports no debt outstanding. Accumulated deficit was $1,019.4 million. Gross margins are not applicable because the company has no product revenue.
Q1 cash flows included $451.1 million used in investing activities, largely reflecting purchases of investments, and $818.2 million provided by financing activities, principally the February follow-on offering. Cash, cash equivalents and restricted cash increased by $214.1 million to $612.6 million.
Material changes versus the prior comparable period
- Net loss increased $34.6 million, or 57.2%, year over year; operating expenses rose 60.8%.
- R&D expense increased $36.5 million, primarily from VAX-31 adult study work, VAX-24 infant study activity, Phase 3 and manufacturing readiness, and higher personnel costs. G&A expense increased $6.8 million, mainly due to personnel costs.
- Interest income increased $11.3 million to $21.7 million, reflecting higher cash and investment balances and interest rates; this partly offset higher operating expenses. Foreign-currency transaction losses were $2.4 million, versus $0.3 million in Q1 2023.
- Operating cash use increased $111.4 million, partly due to a $51.8 million reduction in accrued manufacturing expenses. Financing cash inflow increased substantially following the February 2024 offering.
- The February offering generated $862.5 million gross proceeds and $816.5 million net proceeds, excluding exercise of pre-funded warrants. Common shares issued and outstanding rose to 108.8 million from 95.4 million at year-end 2023.
Outlook, developments, risks and contingencies
- Management believes cash, cash equivalents and investments will fund operating expenses and capital expenditures through at least 12 months from the May 8, 2024 filing date. It expects expenses and capital expenditures to increase as clinical development, manufacturing scale-up, facility buildout and staffing advance. The company expects no product revenue for a number of years, if ever, and anticipates continued losses and a need for substantial additional funding.
- VAX-31 adult Phase 1/2 enrollment was completed; topline safety, tolerability and immunogenicity data were expected in Q3 2024. After those data, Vaxcyte expects to decide whether to advance VAX-24 or VAX-31 into an adult Phase 3 program. If VAX-24 advances, the company expected to start its pivotal adult study in H2 2024 and report topline data in H2 2025; remaining adult Phase 3 studies were expected to start in 2025 and 2026. These are forward-looking expectations, not assurances.
- VAX-24 infant Phase 2 enrollment was completed. Topline data from the primary three-dose series were expected by the end of Q1 2025, followed by booster-dose data by the end of 2025. VAX-A1, VAX-PG and VAX-GI remain earlier-stage programs.
- Manufacturing is a significant execution risk. Vaxcyte relies on third parties, particularly Lonza, for key materials and PCV manufacturing; it reports prior process adjustments and manufacturing delays, along with single-source supplier dependencies. The Lonza commercial facility buildout had not yet commenced as a lease at quarter-end. Vaxcyte reported $58.2 million of owned facility/equipment buildout expenditures and $43.6 million of Lonza-controlled buildout expenditures, including the repurposing fee.
- The Lonza commercial supply agreement runs through 2038, subject to renewal, and includes a CHF 27 million repurposing fee credited back over ten years from commercial production. Certain termination circumstances could trigger a penalty of at least CHF 70 million or a higher amount based on assigned FTE fees, and loss of any outstanding repurposing-fee credit.
- Non-cancelable manufacturing and raw-material commitments totaled $269.2 million at March 31, 2024, including $210.9 million for the remainder of 2024. A $25.0 million second Sutro option-exercise installment was accrued; additional regulatory milestone payments could total up to $60.0 million.
- Key uncertainties include clinical safety and immunogenicity results, FDA agreement on regulatory and CMC plans, manufacturing scale-up and quality, competitive PCV development, reimbursement and market acceptance, financing needs, inflation and foreign-exchange exposure. The company does not currently hedge foreign-currency risk. It reported no material pending legal proceeding and no material indemnification liability.
Important facts for investors to verify
- Whether VAX-31 Q3 2024 topline results support advancing it or VAX-24 into adult Phase 3, and whether trial timing or design changes.
- Whether VAX-24 infant data meet safety and immunogenicity objectives and arrive on the stated schedule.
- Progress, cost and timing of Lonza’s facility buildout and commercial readiness, including management of supplier concentration and contractual termination exposure.
- Actual cash burn, manufacturing commitments and financing runway as development and capital spending increase; management’s runway estimate is based on current plans.
- Potential dilution from equity issuance and outstanding pre-funded warrants, options and restricted stock units.