Vaxcyte, Inc. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021; financial statements are unaudited. Vaxcyte is a preclinical vaccine developer with no approved products and no product revenue.
Financial performance and position
| Metric | Q1 2021 | Q1 2020 |
|---|---|---|
| Revenue | No product revenue | No product revenue |
| Research and development expense | $17.3 million | $24.3 million |
| General and administrative expense | $5.9 million | $3.3 million |
| Total operating expenses | $23.1 million | $27.6 million |
| Net loss | $21.2 million | $27.1 million |
| Net loss per share, basic and diluted | $0.41 | $6.70 |
| Net cash used in operating activities | $13.2 million | $13.6 million |
At March 31, 2021, cash and cash equivalents were $198.9 million, investments were $171.9 million, and total cash, cash equivalents and investments were $370.9 million. Total assets were $382.4 million and total liabilities were $55.4 million. The company reported no debt. Accumulated deficit was $219.8 million. Profit margins are not applicable given the absence of revenue.
Cash used in investing activities was $173.4 million, principally reflecting $172.1 million of investment purchases and $1.2 million of property and equipment purchases. Financing activities provided $0.5 million, mainly from stock option exercises. The resulting decrease in cash, cash equivalents and restricted cash largely reflects reallocating cash into investments, not operating burn alone.
Changes versus the prior comparable period
- Net loss narrowed by $5.9 million, or 21.8%. Operating expenses declined 16.1%.
- R&D expense fell 29.0%, primarily because 2020 included completed eCRM and polysaccharide GMP manufacturing campaigns; this was partly offset by higher personnel, consumables and VAX-24/VAX-XP activity.
- G&A expense rose 79.4%, reflecting higher personnel and stock-based compensation costs and public-company insurance expenses.
- Other income rose to $1.9 million, including a $1.9 million foreign-currency transaction gain, compared with $0.5 million in the prior year. Grant income was nil versus $0.3 million.
- Per-share loss improved substantially, but the comparison is heavily affected by the increase in weighted-average shares following the 2020 IPO.
Outlook, commentary, risks and unusual items
- Management expected to submit the VAX-24 IND application between January and June 2022, begin an adult Phase 1/2 study thereafter, and report topline data between late 2022 and early 2023. Management said available cash, cash equivalents and investments should fund operations through at least that topline readout and continued advancement of other candidates; additional funding will be needed before pivotal trials.
- VAX-24 is the lead 24-valent pneumococcal conjugate vaccine candidate. VAX-XP is intended to cover at least 30 strains; VAX-A1 targets Group A Strep, and VAX-PG targets periodontitis. All candidates remained preclinical.
- Key risks include clinical and regulatory uncertainty, the possibility the FDA requires field-efficacy or additional studies, manufacturing delays or process changes, and reliance on single-source suppliers: Lonza for most manufacturing and Sutro Biopharma for critical raw materials. COVID-19 had slowed supply chains and affected manufacturing oversight and equipment qualification.
- Lonza had deferred certain completion payments. In April 2021, after quarter-end, Vaxcyte reached the contractual cash cap and notified Lonza it would issue approximately $10 million of common stock for part of pre-IND payments; Lonza also agreed to defer 50% of completion payments until the earlier of completion of IND-enabling work or December 31, 2021.
- Contractual lease obligations exclude approximately $25.1 million of future payments allocated to the San Carlos headquarters lease, which were expected to begin after rent commencement, anticipated by year-end 2021 or early 2022.
- The company reported no material pending litigation and no material indemnification claims. Management concluded disclosure controls were effective at a reasonable-assurance level and reported no material quarter-to-quarter change in internal control over financial reporting.
Important facts for investors to verify
- Whether VAX-24 manufacturing and IND-enabling activities remain on schedule, and whether the stated IND and Phase 1/2 milestones are achieved.
- Whether the $370.9 million of cash, cash equivalents and investments continues to support the planned runway as R&D and clinical costs increase.
- The timing, share count and dilution associated with the approximately $10 million Lonza stock payment, along with the remaining manufacturing payment obligations.
- How much additional capital will be needed before pivotal trials and whether financing is available on acceptable terms.
- Whether the Lonza and Sutro supply arrangements, including efforts to establish alternative supply, can support timely and scalable clinical manufacturing.