Vaxcyte(PCVX) - 2022 Q4 - Annual Report

Part I Item 1. Business Vaxcyte is a clinical-stage vaccine company developing bacterial vaccines with lead candidate VAX-24 advancing to Phase 3 - Vaxcyte is a clinical-stage vaccine company focused on developing broad-spectrum conjugate and novel protein vaccines for bacterial infectious diseases using its XpressCF™ cell-free protein synthesis platform[16] - The company's strategy is to target diseases with significant unmet medical need, established commercial landscapes, and clear clinical pathways, leveraging its platform's advantages in site-specific conjugation and rapid development[18][24][26] Vaxcyte's Vaccine Pipeline Overview | Vaccine Candidate | Target Disease | Development Stage | Key Highlights | | :--- | :--- | :--- | :--- | | VAX-24 | Pneumococcal Disease (IPD) | Clinical (Adults & Pediatrics) | Lead 24-valent PCV; Positive Phase 1/2 adult data; FDA Fast Track & Breakthrough designations | | VAX-31 | Pneumococcal Disease (IPD) | Preclinical | Next-gen 31-valent PCV; IND submission planned for H2 2023 | | VAX-A1 | Group A Strep | IND-enabling | Novel conjugate vaccine; Preclinical proof-of-concept established | | VAX-PG | Periodontitis | Preclinical | Novel protein vaccine; Final candidate nominated in Q4 2022 | | VAX-GI | Shigella | Discovery | New program targeting Shigella bacterial illness | Pneumococcal Conjugate Vaccine (PCV) Franchise Vaxcyte's PCV franchise, led by VAX-24 and VAX-31, aims to provide broader protection against pneumococcal disease - VAX-24, the lead 24-valent PCV candidate, is designed to improve upon the standard of care by covering an additional 10-28% of strains causing Invasive Pneumococcal Disease (IPD) in adults compared to current PCVs[88] VAX-24 Adult Program Key Milestones & Results | Milestone | Status / Result | | :--- | :--- | | Phase 1/2 Topline Results (Adults 18-64) | Announced Oct 2022; similar safety profile to PCV20 | | Immunogenicity (2.2mcg dose) | Met non-inferiority vs. PCV20 for all 20 common serotypes; Met superiority for all 4 unique serotypes | | Phase 2 Study (Adults 65+) | Enrollment complete; Topline results expected Q2 2023 | | Phase 3 Program | Regulatory interactions planned for H2 2023; Topline data expected in 2025 | | FDA Designations | Granted Fast Track and Breakthrough Therapy designations for adults | - The VAX-24 pediatric program received FDA clearance for its IND application in February 2023[21][103][121] - A Phase 2 study in infants is planned to start in Q2 2023, with topline data from the primary three-dose series expected by 2025[21][103][121] - VAX-31, a 31-valent PCV candidate, is designed to cover approximately 95% of circulating IPD in the U.S. adult population[21][127] - An IND application for VAX-31 is anticipated in the second half of 2023, with Phase 1/2 data expected in 2024[21][127] Novel Vaccine Candidates Vaxcyte is developing novel vaccines for Group A Strep (VAX-A1), periodontitis (VAX-PG), and Shigella (VAX-GI) - VAX-A1 is a novel conjugate vaccine candidate designed to provide broad protection against all subtypes of Group A Strep[21][133][138] - The final candidate for VAX-A1 was nominated in Q1 2021, and IND-enabling activities began in H2 2021[21][133][138] - VAX-PG is a novel protein vaccine candidate targeting the keystone pathogen responsible for periodontitis[21][144][151] - A final vaccine candidate for VAX-PG was nominated in Q4 2022, with an initial goal of developing a therapeutic vaccine to slow or stop disease progression[21][144][151] - VAX-GI is a new vaccine program designed to prevent Shigella, a bacterial illness that affects an estimated 188 million people worldwide each year and causes approximately 164,000 deaths, primarily in children under five[21][152] Manufacturing, Supply, and Key Partnerships Vaxcyte relies on strategic CMO partnerships, primarily Lonza and Sutro Biopharma, for manufacturing and technology - The company relies on contract manufacturing organizations (CMOs), with Lonza being a key partner for manufacturing eCRM, polysaccharides, and drug substance for the VAX-24 and VAX-31 programs[165][166] - Vaxcyte has an exclusive license from Sutro Biopharma for its XpressCF™ cell-free protein synthesis platform for infectious disease vaccines and a related agreement for the supply of critical reagents[173][174] - In December 2022, Vaxcyte entered into an option agreement with Sutro Biopharma for $22.5 million upfront, securing the potential right to internally manufacture or source the cell-free extract from other CMOs[179][180][181] - Exercising the option would cost an additional $75.0 million plus potential milestones[179][180][181] Competition, IP, and Regulation Vaxcyte faces intense competition, relies on robust IP, and is subject to extensive regulatory oversight - The pneumococcal vaccine market is highly competitive, dominated by Pfizer (PCV13, PCV20), Merck (PPSV23, PCV15), and GSK (Synflorix)[189][190][191] - Competitors are also developing higher-valent PCVs, such as Merck's 21-valent V116 and GSK's 24-valent candidate[189][190][191] - The company's success depends on protecting its proprietary technology through a combination of patents, trade secrets, and trademarks[196][198] - Its patent portfolio covers vaccine formulations, conjugates, and manufacturing processes, with patents expected to expire between 2037 and 2042[196][198] - Vaxcyte's vaccine candidates are subject to extensive regulation by the FDA and other government authorities, requiring a Biologics License Application (BLA) for marketing in the U.S., which involves comprehensive preclinical and clinical data to establish safety, purity, and potency[204][205] Item 1A. Risk Factors The company faces significant risks including limited operating history, net losses, funding needs, and reliance on VAX-24 - The company is in the clinical/preclinical stage with a limited operating history, no approved products, and has incurred significant net losses since inception ($223.5 million in 2022), with substantial future losses anticipated[268][270] - Vaxcyte's business is highly dependent on the success of VAX-24[288] - Failure to obtain regulatory approval and effectively commercialize VAX-24 would significantly harm the business[288] - The company relies on third-party manufacturers, including Lonza and Sutro Biopharma[312] - Any inability to procure raw materials or have sufficient quantities of vaccine candidates manufactured could materially and adversely affect the business[312] - The FDA regulatory approval process is lengthy and time-consuming[281][402][408] - The FDA may disagree with the company's regulatory plan, such as the use of surrogate immune endpoints instead of field efficacy studies, which could cause significant delays or prevent approval[281][402][408] - Vaxcyte faces intense competition from major pharmaceutical companies like Pfizer, Merck, and GSK, which have significantly greater resources, experience, and existing market presence in the pneumococcal vaccine space[293][294] Item 2. Properties Vaxcyte's corporate headquarters is a 77,734 sq ft leased facility in San Carlos, California - The company's corporate headquarters is located in San Carlos, California, where it leases 77,734 square feet of lab and office space under a lease that expires on December 31, 2025[525] Item 3. Legal Proceedings Vaxcyte is not currently a party to any legal proceedings with a material adverse effect on its business - The company is not currently a party to any legal proceedings that would have a material adverse effect on its business or financial condition[526] Part II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Vaxcyte's common stock trades on Nasdaq under "PCVX" since 2020, with no cash dividends paid - The company's common stock began trading on the Nasdaq Global Select Market under the symbol "PCVX" on June 12, 2020[530] - Vaxcyte has never declared or paid a cash dividend and intends to retain future earnings for business development, with no plans for dividends in the foreseeable future[532] - On December 22, 2022, the company issued 167,780 unregistered shares of common stock to Sutro Biopharma as partial consideration for an option agreement[539] Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Vaxcyte's net loss increased significantly in 2022 due to higher R&D expenses, with strong cash reserves Financial Results Comparison (2022 vs. 2021) | Metric (in thousands) | 2022 | 2021 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Research and development | $169,451 | $78,411 | $91,040 | 116.1% | | Acquired manufacturing rights | $22,995 | $0 | $22,995 | 100.0% | | General and administrative | $39,810 | $25,259 | $14,551 | 57.6% | | Total operating expenses | $232,256 | $103,670 | $128,586 | 124.0% | | Net loss | ($223,485) | ($100,077) | ($123,408) | 123.3% | - The increase in R&D expenses was primarily due to increased activities for VAX-31 IND readiness, VAX-24 Phase 3 readiness, and the initiation of two VAX-24 adult clinical studies[591] - As of December 31, 2022, the company had cash, cash equivalents, and investments of $957.9 million and an accumulated deficit of $522.1 million[556] - The current cash position is expected to fund operations for at least the next 12 months[556] Cash Flow Summary (in thousands) | Cash Flow Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | ($170,597) | ($121,393) | | Net cash provided by (used in) investing activities | $74,585 | ($212,308) | | Net cash provided by financing activities | $861,547 | $17,796 | Item 7A. Quantitative and Qualitative Disclosures About Market Risk Vaxcyte's primary market risks are interest rate and foreign currency fluctuations, mainly Swiss Franc exposure - The company's primary market risk is interest rate sensitivity on its cash and investment portfolio, but a 10% movement in rates is not expected to have a significant impact[647] - Vaxcyte is exposed to foreign currency risk, primarily from its contract with Lonza denominated in Swiss Francs (CHF)[648] - As of Dec 31, 2022, the company held $21.8 million in CHF cash and equivalents[648] - The company does not currently have a formal hedging program for foreign currency risk but may implement one in the future as exposure grows[648][649] Item 8. Financial Statements and Supplementary Data This section presents Vaxcyte's audited financial statements for 2022, including key financial statements Key Balance Sheet Data (as of Dec 31, 2022) | Account (in thousands) | Amount | | :--- | :--- | | Assets | | | Cash and cash equivalents | $834,657 | | Total current assets | $942,555 | | Total assets | $1,006,178 | | Liabilities & Equity | | | Total current liabilities | $40,525 | | Total liabilities | $52,565 | | Total stockholders' equity | $953,613 | Key Statement of Operations Data (Year ended Dec 31, 2022) | Account (in thousands) | Amount | | :--- | :--- | | Research and development | $169,451 | | Acquired manufacturing rights | $22,995 | | General and administrative | $39,810 | | Loss from operations | ($232,256) | | Net loss | ($223,485) | | Net loss per share | ($3.44) | - The independent auditor's report from Deloitte & Touche LLP identified Accrued Manufacturing Expenses as a critical audit matter due to the significant judgments required by management to estimate the cost of services provided but not yet invoiced[662][663] Item 9A. Controls and Procedures Management and auditors concluded Vaxcyte's disclosure and internal controls were effective as of Dec 31, 2022 - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of December 31, 2022[806] - Management assessed the effectiveness of internal control over financial reporting and concluded that it was effective as of December 31, 2022, based on the COSO 2013 framework[809] - The independent registered public accounting firm issued an unqualified opinion on the company's internal control over financial reporting as of December 31, 2022[813] Part III Items 10-14 This section incorporates information by reference from the company's 2023 proxy statement - Information required for Part III (Items 10-14) is incorporated by reference from the company's definitive proxy statement for its 2023 Annual Meeting of Stockholders, to be filed within 120 days of the fiscal year-end[825] Part IV Item 15. Exhibits, Financial Statement Schedules This section lists all financial statements and exhibits filed with the Form 10-K, including key contracts - This section lists all financial statements and exhibits filed with the Annual Report on Form 10-K[834] - The Exhibit Index includes key material contracts such as development and manufacturing agreements with Lonza and the license and option agreements with Sutro Biopharma[837][838][839]