Vaxcyte, Inc. — Q2 2021 Form 10-Q
Reporting period: Three and six months ended June 30, 2021. Financial statements are unaudited. Unless noted otherwise, dollar amounts below are in millions.
Business context
Vaxcyte is a pre-revenue vaccine developer using a cell-free protein synthesis platform. Its lead candidate, VAX-24, is a 24-valent investigational pneumococcal conjugate vaccine (PCV). Other programs include VAX-XP, VAX-A1 for Group A Strep, and VAX-PG for periodontitis. No candidate had entered clinical trials as of the reporting date.
Financial results and liquidity
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Revenue from product sales | None | None | None | None |
| Research and development expense | $17.7 | $18.2 | $34.9 | $42.5 |
| General and administrative expense | $6.1 | $3.0 | $12.0 | $6.3 |
| Total operating expenses | $23.7 | $21.2 | $46.9 | $48.8 |
| Net loss | $23.7 | $20.3 | $44.9 | $47.5 |
| Basic and diluted loss per share | $0.46 | $1.72 | $0.87 | $5.99 |
There is no meaningful revenue margin to assess. The change in loss per share reflects the substantially higher weighted-average share count after the June 2020 IPO, as well as changes in net loss.
- Cash and investments: $151.0 cash and cash equivalents, $190.0 investments, and $0.9 restricted cash at June 30, 2021; management reported $341.0 of cash, cash equivalents and investments. Investments included $141.1 due within one year and $48.8 due in one to five years.
- Cash flow, first half: $41.9 used in operating activities, $193.9 used in investing activities, and $1.4 provided by financing activities. Investing outflow largely reflects purchases of investments, not operating burn.
- Debt and liabilities: The company reported no debt. Total liabilities were $41.0, including $0.9 of operating lease liabilities; current liabilities were $40.7.
- Equity: Accumulated deficit was $243.5; stockholders’ equity was $317.0.
Changes versus prior comparable periods
- Q2 net loss increased $3.4, or 16.5%, year over year, despite R&D expense decreasing 2.9%. G&A nearly doubled, mainly from higher personnel and stock-based compensation, public-company insurance, compliance and technology costs. Lower grant income and a $0.4 foreign-currency transaction loss also weighed on Q2 results.
- First-half net loss improved $2.6 year over year. R&D expense fell 17.8%, principally because 2020 included higher outsourced VAX-24 manufacturing and research campaign costs. Personnel, consumables and facility costs increased as the company expanded its activities. G&A rose 89.1%.
- First-half operating cash use rose to $41.9 from $22.8. The filing attributes the difference partly to working-capital timing: 2020 benefited from accrued manufacturing expenses, while 2021 included higher prepaid expenses and lower accrued manufacturing expenses.
Outlook, risks and notable items
- Management expected to submit the VAX-24 IND to the FDA between January and June 2022, begin a Phase 1/2 adult proof-of-concept study thereafter, and report topline data between late 2022 and early 2023. Management said available cash and investments were expected to fund operations through at least that topline readout and further pipeline advancement; additional capital would be needed before pivotal trials.
- VAX-24 GMP conjugated drug substances had been manufactured and tested, with final release and drug-product formulation, fill and finish steps underway. Manufacturing process adjustments, Lonza scheduling constraints and COVID-related supply-chain and travel disruptions had delayed manufacturing and affected IND timing.
- The company relies on third parties for manufacturing and supply, including Lonza for most manufacturing activities and Sutro Biopharma as the sole source of critical raw materials at the time described. A disruption or need to qualify alternatives could delay development and increase costs.
- In July 2021, Vaxcyte filed an automatically effective shelf registration statement and entered an at-the-market agreement allowing sales of up to $150.0 of common stock, subject to its terms; sales were optional. Jefferies’ commission could be up to 3% of gross sales.
- In June, Vaxcyte issued Lonza 399,680 shares valued at $10.0 to pay part of pre-IND manufacturing obligations. The company also disclosed $8.1 of purchase commitments for VAX-24 manufacturing reservations. Approximately $25.1 of San Carlos office lease payments were excluded from the contractual-obligations table and expected to begin when rent commenced, anticipated by late 2021 or early 2022.
- In August 2021, after quarter-end, Vaxcyte reported a $3.2 CARB-X award for VAX-A1 IND-enabling work and potential total CARB-X funding of up to $29.7 upon future milestones. Grant funding is conditional on eligible expenses and milestone achievement.
- Other key risks include clinical and regulatory uncertainty, the possibility that FDA may require field-efficacy studies rather than surrogate immune endpoints, competition, future financing and dilution, intellectual-property risks, and COVID-19 effects. The company reported no material pending legal proceedings and no material indemnification claims.
Important facts for investors to verify
- Whether VAX-24 manufacturing, IND submission and Phase 1/2 timelines remain on track, and whether the FDA accepts the proposed development and surrogate-endpoint approach.
- Current cash burn and runway against the expected trial readout, including the timing and amount of any ATM sales or other financing.
- Progress on qualifying alternative sources for critical materials and manufacturing, and the status of Lonza-related commitments and deferred payments.
- Whether the reported CARB-X and NIH awards are realized as eligible costs are incurred and future milestones are met.
- The effect of share issuance, including ATM activity and equity compensation, on ownership dilution.