Vaxcyte, Inc. — Q3 2021 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2021. Vaxcyte is a preclinical-stage vaccine developer with no approved products and no product-sale revenue.
Financial performance and position
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Research and development expense | $20.4 million | $16.4 million | $55.3 million | $58.9 million |
| General and administrative expense | $6.5 million | $4.9 million | $18.5 million | $11.2 million |
| Total operating expenses | $27.0 million | $21.3 million | $73.8 million | $70.1 million |
| Net loss | $26.6 million | $21.0 million | $71.5 million | $68.5 million |
| Net loss per share, basic and diluted | $0.51 | $0.41 | $1.39 | $3.06 |
| Cash used in operating activities | Not reported quarterly | Not reported quarterly | $70.3 million | $35.9 million |
- At September 30, cash and cash equivalents were $112.0 million, investments were $206.3 million, and total cash, cash equivalents and investments were $318.3 million. Management said these funds were expected to support operations through at least VAX-24 Phase 1/2 topline data, expected between late 2022 and early 2023.
- Total assets were $354.1 million, total liabilities $48.1 million, and stockholders’ equity $306.0 million. The filing reports no debt.
- Current assets were $302.9 million and current liabilities $47.5 million. No revenue or gross margin was reported; operating and profit margins are not meaningful for this pre-revenue company.
- Investing activities used $212.4 million in the first nine months, primarily reflecting investment purchases, partly offset by maturities and sales. Financing activities provided $9.0 million, including $7.1 million of net ATM proceeds.
Changes versus comparable periods
- Q3 operating expenses rose 26.5% and net loss widened 26.6% year over year. R&D increased 24.5%, mainly due to personnel, consumables for VAX-24 scale-up and VAX-XP, and facility costs; G&A increased 33.2%, including personnel and public-company compliance costs.
- For the nine-month period, operating expenses rose 5.3% and net loss widened 4.4%. R&D declined 6.1%, principally because 2020 included higher outsourced manufacturing and research costs; G&A rose 64.7% as staffing, insurance and public-company expenses increased.
- Operating cash use nearly doubled year over year for the nine months. The 2021 period included substantial prepaid and other asset increases and lower accrued manufacturing expenses; the 2020 comparison benefited from higher accrued manufacturing costs and deferred Lonza payments.
- Cash and cash equivalents fell from $386.2 million at year-end 2020, while the company established a $206.3 million investment portfolio. The decline in cash therefore should be considered alongside investments and operating cash use.
Outlook, developments and risks
- Vaxcyte anticipated submitting the VAX-24 IND to the FDA in Q1 2022, after remaining drug-product testing, release and stability documentation, with an adult Phase 1/2 proof-of-concept study to follow. Topline data were expected between late 2022 and early 2023.
- The company reported completion of formal release of 24 GMP-conjugated drug substances, a GLP nonclinical toxicology study, and manufacture of GMP drug product. It also reported preclinical rabbit data for VAX-XP across 31 serotypes; these are not human clinical results.
- VAX-A1 IND-enabling activities began in the second half of 2021. CARB-X committed an additional $3.2 million for these activities and potential total funding of up to $29.7 million, contingent on future milestones. An NIH award provides potential funding of approximately $0.5 million for Shigella vaccine work.
- The company had an ATM agreement permitting up to $150 million in common-stock sales. By September 30 it had sold 498,502 shares for $12.5 million gross and $12.2 million net; approximately $5.0 million of net proceeds remained receivable at quarter-end.
- Vaxcyte said additional capital would be needed before pivotal trials. Future financing may dilute shareholders or be unavailable on acceptable terms. The company relied on third parties, including Lonza for much of manufacturing and Sutro Biopharma for critical raw materials; disruptions or capacity constraints could delay development.
- Key development risks include VAX-24’s early stage and dependence on its success, potential manufacturing delays, COVID-19-related supply and operational disruption, and uncertainty over whether regulators will accept surrogate immune endpoints or require field-efficacy studies. The filing also notes competition from established vaccine developers.
- Operating lease liabilities were $1.2 million, but the contractual-obligations table excluded approximately $25.1 million of San Carlos office lease payments expected over four years once rent commences. Management reported no material pending legal matter and no material indemnification claims.
Important facts for investors to verify
- Whether the VAX-24 IND, clinical-study start and topline-data timeline remain achievable, and whether manufacturing and stability requirements are satisfied.
- Whether cash, cash equivalents and investments remain sufficient as development spending rises, and the timing and terms of any additional financing.
- Progress and capacity at Lonza and other suppliers, including any second-source arrangements and the effects of COVID-19 or manufacturing constraints.
- Whether FDA discussions support the planned non-inferiority/surrogate-endpoint pathway or require additional, potentially costly field-efficacy studies.
- The amount and timing of San Carlos lease costs, ATM share issuance and other potential sources of dilution.