Vaxcyte, Inc. — Q2 2022 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2022; unaudited interim results. Vaxcyte is a clinical-stage vaccine company with no approved products and no product revenue.
Financial performance and liquidity
| Metric | Three months ended June 30, 2022 | Six months ended June 30, 2022 | Prior-year comparison |
|---|---|---|---|
| Revenue | No product revenue | No product revenue | No product revenue reported |
| Research and development expense | $38.5 million | $70.1 million | $17.7 million and $34.9 million, respectively |
| General and administrative expense | $9.4 million | $17.0 million | $6.1 million and $12.0 million, respectively |
| Net loss | $48.5 million; $0.80 per share | $87.5 million; $1.48 per share | $23.7 million and $44.9 million, respectively |
| Operating cash used | Not presented separately for the quarter | $66.8 million | $41.9 million for the prior-year six-month period |
Margins are not meaningful because the company reported no product revenue. At June 30, Vaxcyte had cash and cash equivalents of $238.2 million and investments of $123.2 million, or $361.4 million combined; total current assets were $363.7 million and current liabilities were $30.5 million. It reported no debt, but had $21.2 million of operating lease liabilities. Accumulated deficit was $386.2 million.
Six-month investing cash inflow was $75.8 million, primarily reflecting investment maturities and sales; financing cash inflow was $160.9 million, mainly from the January follow-on offering and ATM sales. The company stated its cash, cash equivalents and investments would fund operating and capital requirements for at least 12 months from the filing date, but expected to need additional capital before pivotal trials.
Material changes versus the prior comparable period
- Q2 operating expenses rose 101.8% year over year; six-month expenses rose 85.8%. Management attributed the increase primarily to VAX-24 clinical and manufacturing-readiness work, VAX-XP development, increased consumables, staffing and facility costs.
- Q2 net loss more than doubled year over year. Six-month net loss increased 94.9%.
- Foreign-currency transaction losses were $1.7 million in Q2 and $1.8 million for the six months, compared with a $1.4 million gain in the prior-year six-month period. Management attributed the losses primarily to Swiss-franc balances and exchange-rate movements.
- In January and February, Vaxcyte completed a public offering of common stock and pre-funded warrants, raising approximately $107.6 million net. By June 30, it had also raised $52.1 million net through its ATM program. From July 1 through August 5, it sold additional ATM shares for $17.8 million net.
Outlook, developments and risks
- VAX-24: The FDA cleared the adult IND in January 2022; the Phase 1/2 study in adults 18–64 began in February, and its Phase 2 portion advanced after a Data Monitoring Committee review. Enrollment in that portion was completed in July. The company expected topline Phase 1 safety and tolerability and Phase 2 safety, tolerability and immunogenicity results in October or November 2022.
- A separate Phase 2 study in adults 65 and older began in July, with results expected in the first half of 2023. Subject to satisfactory results from the 18–64 study, Vaxcyte anticipated a pediatric IND submission in the first half of 2023. The FDA granted VAX-24 Fast Track designation in early August and provided positive written feedback on a proposed pediatric development approach, contingent on adult study results.
- Other programs include VAX-XP, a proposed greater-than-30-strain pneumococcal vaccine, VAX-A1 for Group A Strep and VAX-PG for periodontal disease. CARB-X reduced potential VAX-A1 funding through Phase 1 from $29.7 million to $13.9 million, inclusive of amounts awarded to date.
- Management expects research and development and general and administrative expenses to increase as programs advance and manufacturing scales. Vaxcyte has no internal manufacturing capability and relies on third parties; it identifies Sutro Biopharma as a sole-source supplier of critical raw materials and Lonza as its principal manufacturing partner. Manufacturing process adjustments, capacity constraints and COVID-related supply-chain and equipment qualification delays have affected timelines.
- Non-cancelable manufacturing and raw-material purchase commitments totaled $79.8 million, including $51.5 million due in the remainder of 2022. Additional development, regulatory and sales milestones under licenses are contingent on future events and were not recorded as liabilities.
- Key risks include clinical safety, efficacy and regulatory uncertainty; the possibility that regulators require field-efficacy trials rather than surrogate immune endpoints; manufacturing and supplier concentration; competition; and the need for future financing, which could dilute shareholders. The company reported no material pending litigation and said disclosure controls were effective as of June 30, 2022.
Investor verification priorities
- Check subsequent VAX-24 trial disclosures against the stated safety, immunogenicity and development timelines, including the pediatric program’s dependency on adult results.
- Track cash burn, the stated 12-month runway, future financing needs and dilution from ATM sales, offerings and outstanding pre-funded warrants.
- Monitor execution of the $79.8 million manufacturing commitments, Lonza capacity and process readiness, and continuity of critical raw-material supply from Sutro Biopharma.
- Assess whether surrogate immune endpoints will satisfy regulators or whether additional, larger and costlier efficacy studies will be required.
- Review the drivers and potential recurrence of Swiss-franc losses and the exposure associated with foreign-currency balances.