Vaxcyte, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022. Financial statements are unaudited. Vaxcyte is a clinical-stage vaccine company with no approved products and no product-sale revenue; it is developing bacterial vaccines using its licensed XpressCF cell-free protein synthesis platform.
Financial performance and position
| Metric | Q1 2022 | Q1 2021 / comparison |
|---|---|---|
| Revenue | No product revenue | No product revenue |
| Research and development expense | $31.7 million | $17.3 million; up 83.6% |
| General and administrative expense | $7.5 million | $5.9 million; up 28.2% |
| Total operating expenses | $39.2 million | $23.1 million; up 69.5% |
| Net loss | $39.0 million; $0.68 per share | $21.2 million; $0.41 per share |
| Net cash used in operating activities | $27.7 million | $13.2 million |
| Cash, cash equivalents and investments | $352.3 million at March 31, 2022 | $276.0 million at December 31, 2021 |
Expenses increased primarily with product and clinical development, manufacturing and Phase 3-readiness work, research consumables, facilities and personnel. Other income fell to $0.2 million from $1.9 million, mainly because foreign-currency gains were much lower than in Q1 2021. The quarter included $0.6 million of unrealized investment losses in other comprehensive loss and a $0.1 million realized loss on marketable securities. Profit margins are not meaningful because the company has no product revenue.
At March 31, current assets were $342.2 million and current liabilities were $27.2 million. Total liabilities were $43.2 million, including $22.4 million of operating lease liabilities; the filing reports no debt. Operating lease payment obligations totaled $25.6 million. Management said available cash, cash equivalents and investments were expected to fund operating expenses and capital expenditures for at least 12 months from the May 9, 2022 filing date. The company expects to need additional financing before pivotal trials.
Material changes and financing
- Net loss increased 83.7% year over year, while operating cash use more than doubled.
- A January 2022 underwritten offering, including the underwriters’ option exercise, raised approximately $107.6 million net. It included common shares and 2.5 million pre-funded warrants; none of those warrants had been exercised by March 31.
- ATM sales generated $3.1 million net in Q1. After quarter-end through May 6, the company sold additional shares for $43.6 million net under the ATM program.
- Common shares outstanding were 56.5 million at March 31 and 58.3 million as of May 5, 2022. Further equity financing may dilute shareholders.
- CARB-X reduced potential VAX-A1 funding through Phase 1 from $29.7 million to $13.9 million, inclusive of $5.9 million awarded to date.
Outlook, developments and risks
- The FDA cleared the VAX-24 adult IND in January 2022. The Phase 1/2 study began in February; Phase 2 enrollment for adults aged 50–64 began in April after an independent Data Monitoring Committee recommended proceeding following its Phase 1 safety and tolerability review.
- Management expected topline safety, tolerability and immunogenicity results for the 18–64 study by year-end 2022; results were prospective, not reported in this filing. It planned a separate Phase 2 study in adults 65 and older, with topline results targeted for the first half of 2023, and a conditional pediatric IND submission in the first half of 2023.
- VAX-24 is the lead program and a major dependency for the business. Development and regulatory approval remain uncertain; regulators may require field-efficacy or additional studies rather than accepting the proposed surrogate immune endpoints.
- Manufacturing is outsourced. Sutro Biopharma is a sole-source supplier of critical raw materials, and Lonza handles most manufacturing. The filing describes prior VAX-24 process adjustments, scheduling and capacity constraints, and COVID-19-related supply-chain and manufacturing impacts.
- COVID-19 could continue to affect supply, clinical enrollment, manufacturing oversight and development timelines. The company also faces competition, clinical and regulatory risks, and the need for substantial additional capital.
- Management reported disclosure controls and procedures were effective at a reasonable-assurance level as of March 31, 2022, with no material change in internal control over financial reporting during the quarter. No material litigation was identified.
Key facts for investors to verify
- Whether VAX-24 clinical safety, tolerability and immunogenicity results meet the company’s expectations and support later-stage development.
- Whether the stated cash runway remains adequate as R&D spending and clinical and manufacturing costs rise, and what additional financing will be required.
- Whether Lonza and alternative suppliers can deliver reliable, scalable clinical and future commercial manufacturing, and whether Sutro supply arrangements are extended.
- The consequences of the CARB-X funding reduction for VAX-A1 development and funding needs.
- Potential dilution from ATM sales, pre-funded warrants, equity awards and future capital raises.