Vaxcyte, Inc. — Q3 2022 Form 10-Q
Reporting period: Quarter ended September 30, 2022; financial statements are unaudited. Vaxcyte is a clinical-stage vaccine company with no approved products and no product-sales revenue. Its lead candidate is VAX-24, an investigational 24-valent pneumococcal conjugate vaccine.
Financial position and results
| Metric | Q3 2022 / September 30, 2022 | Comparable period / December 31, 2021 |
|---|---|---|
| Revenue | No product revenue | No product revenue |
| Research and development expense | $47.7 million for Q3; $117.8 million for nine months | $20.4 million for Q3 2021; $55.3 million for nine months 2021 |
| General and administrative expense | $10.9 million for Q3; $27.9 million for nine months | $6.5 million for Q3 2021; $18.5 million for nine months 2021 |
| Total operating expenses | $58.6 million for Q3; $145.7 million for nine months | $27.0 million for Q3 2021; $73.8 million for nine months 2021 |
| Net loss | $57.9 million for Q3; $145.4 million for nine months | $26.6 million for Q3 2021; $71.5 million for nine months 2021 |
| Net loss per share | $0.93 for Q3; $2.42 for nine months | $0.51 for Q3 2021; $1.39 for nine months 2021 |
| Cash, cash equivalents and investments | $366.2 million | $273.1 million at December 31, 2021 |
| Current assets / current liabilities | $369.8 million / $39.3 million | $256.3 million / $28.7 million at December 31, 2021 |
| Total liabilities | $52.8 million, including $19.8 million in operating lease liabilities | $40.3 million at December 31, 2021 |
Gross margin is not meaningful because the company had no product sales. The filing states that Vaxcyte had no debt. For the nine months ended September 30, 2022, operating cash use was $105.4 million, investing activities provided $110.5 million, and financing activities provided $204.9 million. Cash, cash equivalents and restricted cash rose by $209.4 million to $279.3 million; this cash-flow measure excludes investments.
Material changes and financing
- Q3 operating expenses increased 117% year over year; nine-month operating expenses increased 97%. R&D growth reflected VAX-24 clinical and Phase 3 readiness work, VAX-XP development, manufacturing materials, and increased staffing and facility costs. G&A rose primarily with personnel and professional-service costs.
- Q3 net loss more than doubled year over year. For the nine months, net loss increased 103%. Interest income rose, but nine-month other income declined overall, principally because of foreign-currency losses.
- During the first nine months, the company raised $107.6 million net from a January/February follow-on offering and $95.2 million net through its at-the-market program. As of September 30, it had sold $112.0 million gross under the ATM agreement, with up to $150.0 million authorized.
- After quarter-end, Vaxcyte reported positive topline VAX-24 Phase 1/2 results in adults aged 18–64 and completed an October public offering that generated approximately $650.7 million net, excluding any pre-funded warrant exercises. These post-quarter events are not reflected in the September 30 balance sheet.
- Shares outstanding were 60.6 million at September 30 and 78,980,196 as of November 3, 2022. The October offering and outstanding pre-funded warrants are relevant to dilution.
Outlook, risks and contingencies
- Management said cash, cash equivalents and investments at September 30 were expected to fund operations and capital expenditures for at least 12 months from the filing date. The October offering subsequently strengthened liquidity, but the company expects substantial future spending and may require additional capital to complete development and commercialization.
- VAX-24 adult 18–64 topline results, announced October 24, met primary safety and tolerability objectives; at the 2.2 mcg dose, it met immunogenicity standards across 24 serotypes and non-inferiority criteria for 20 serotypes common with Prevnar 20. The company plans to advance this dose toward Phase 3. These are topline findings, not evidence of regulatory approval or commercial success.
- Management anticipated topline results from the VAX-24 study in adults 65 and older in the first half of 2023, final six-month safety data from the adult Phase 2 studies in the first half of 2023, and regulatory interactions on Phase 3 in the second half of 2023. Adult Phase 3 topline data were expected in 2025.
- Other stated targets included a VAX-24 infant IND submission and Phase 2 start in the first half of 2023, with primary-series topline data expected by 2025; a VAX-XP adult IND submission in the second half of 2023 and Phase 1/2 data in 2024; and VAX-PG candidate nomination by year-end 2022. Timelines are forward-looking and subject to change.
- Key risks include clinical and regulatory uncertainty, including whether regulators will accept immune surrogate endpoints or require field-efficacy studies; manufacturing scale-up and prior process delays; reliance on Lonza and a sole-source supplier for critical raw materials; and COVID-19-related supply, trial, and operational disruptions.
- At September 30, non-cancelable purchase commitments to key manufacturing partners totaled $81.0 million, including $40.2 million due in the remainder of 2022 and $40.8 million in 2023. Operating lease payments totaled $22.2 million undiscounted. The company reported no material pending litigation and no material indemnification claims.
- Investments had $657,000 of unrealized losses at September 30; management attributed declines primarily to market conditions and did not consider the securities other-than-temporarily impaired. The company also reported $2.5 million in foreign-currency transaction losses for the nine-month period and does not have a formal currency-hedging program.
Important facts for investors to verify
- Review final, audited VAX-24 adult data and subsequent results for the 65-and-older study; assess whether topline findings hold in later trials and support regulatory requirements.
- Track FDA feedback on VAX-24’s proposed endpoint and Phase 3 design, as well as the planned pediatric program and stated timelines.
- Monitor manufacturing progress, capacity and supplier diversification, particularly reliance on Lonza and Sutro Biopharma, and execution against the $81.0 million purchase commitments.
- Reconcile cash runway and expected spending using the September 30 balances together with the October offering proceeds, subsequent share count, and ongoing clinical and manufacturing costs.
- Assess dilution from the October equity offering, pre-funded warrants, ATM capacity, stock-based compensation and equity awards.