Vaxcyte Inc

Previous wording

•In January 2024, we announced that we received encouraging input from ongoing discussions with the FDA about the VAX-24 adult program to further inform our chemistry, manufacturing and controls (“CMC”) licensure requirements and that we expect to seek additional CMC-focused input from the FDA as we prepare for and potentially conduct our VAX-24 adult Phase 3 program. Following the topline data from the VAX-31 adult Phase 1/2 study, which is expected in the third quarter of 2024, we expect to determine whether to advance VAX-24 or VAX-31 to an adult Phase 3 program. If we move forward with the VAX-24 adult Phase 3 program, we expect to initiate the pivotal, non-inferiority study in adults aged 50 and older in the second half of 2024 and announce topline safety, tolerability and immunogenicity data from this study in the second half of 2025. We would expect to initiate the remaining Phase 3 studies, which are shorter in duration than the non-inferiority study, for VAX-24 in the adult population in 2025 and 2026. If we move forward with the VAX-31 adult Phase 3 program, we expect to initiate the full complement of potential Phase 3 studies in 2025 and 2026. Subject to the results of the adult Phase 3 studies, we would expect to submit a BLA for VAX-24 or VAX-31 shortly following the completion of the last Phase 3 study.

Current wording

•In January 2024, we announced that we received encouraging input from ongoing discussions with the FDA about the VAX-24 adult program to further inform our chemistry, manufacturing and controls (“CMC”) licensure requirements and that we expect to seek additional CMC-focused input from the FDA as we prepare for and potentially conduct our VAX-24 adult Phase 3 program. Following the topline data from the VAX-31 adult Phase 1/2 study, which is expected in September 2024, we expect to determine whether to advance VAX-24 or VAX-31 to an adult Phase 3 program. If we move forward with the VAX-24 adult program, following the initiation of the VAX-24 Phase 3 pivotal, non-inferiority study in adults aged 50 and older, we expect to announce topline safety, tolerability and immunogenicity data in the second half of 2025. We would expect to initiate the remaining Phase 3 studies, which are shorter in duration than the non-inferiority study, for VAX-24 in the adult population in 2025 and 2026. If we move forward with the VAX-31 adult Phase 3 program, we expect to initiate the full complement of potential Phase 3 studies in 2025 and 2026. Subject to the results of the adult Phase 3 studies, we would expect to submit a BLA for VAX-24 or VAX-31 shortly following the completion of the last Phase 3 study.

Previous wording

◦Our second PCV candidate, VAX-31, is the broadest-spectrum PCV to enter the clinic. VAX-31 builds on what has been established with VAX-24 and is designed to expand the breadth of coverage to 31 strains, inclusive of the 24 strains in VAX-24, without compromising immunogenicity due to carrier suppression, and to cover approximately 95% of IPD circulating in the U.S. adult population.

Current wording

◦Our second PCV candidate, VAX-31, is the broadest-spectrum PCV to enter the clinic. VAX-31 builds on what has been established with VAX-24 and is designed to expand the breadth of coverage to 31 strains, inclusive of the 24 strains in VAX-24, without compromising immunogenicity due to carrier suppression, and to cover more than 95% of IPD circulating in the U.S. adult population.

Previous wording

•In January 2024, we announced the completion of enrollment in the Phase 1/2 clinical study evaluating VAX-31 in healthy adults aged 50 and older. We expect to announce topline safety, tolerability and immunogenicity data from the Phase 1/2 study in the third quarter of 2024, following which we expect to determine whether to advance VAX-24 or VAX-31 to an adult Phase 3 program as discussed above.

Current wording

•In January 2024, we announced the completion of enrollment in the Phase 1/2 clinical study evaluating VAX-31 in healthy adults aged 50 and older. We expect to announce topline safety, tolerability and immunogenicity data from the Phase 1/2 study in September 2024, following which we expect to determine whether to advance VAX-24 or VAX-31 to an adult Phase 3 program as discussed above.

Previous wording

•VAX-GI, a novel preclinical vaccine candidate being developed as a preventative treatment for dysentery and shigellosis, which is caused by Shigella bacteria. Shigella, a bacterial illness that affects an estimated 188 million people worldwide each year and results in approximately 164,000 deaths annually, mostly among children under five years of age in low- and middle-income settings. The central antigen in VAX-GI is IpaB, a well-appreciated antigen that other developers have been unable to produce in an amount sufficient to enable a commercial product. With our cell-free technology, we believe we can produce this antigen at substantially improved yields, allowing for commercial-scale production. VAX-GI is being developed in collaboration with the University of Maryland, Baltimore as well as with partial funding from two research grants awarded by the National Institutes of Health (“NIH”).

Current wording

•VAX-GI, a novel preclinical vaccine candidate being developed as a preventative treatment for dysentery and shigellosis, which is caused by Shigella bacteria. Shigella, a bacterial illness that is estimated to cause 80 million to 165 million cases of disease and 600,000 deaths annually, mostly among children. The central antigen in VAX-GI is IpaB, a well-appreciated antigen that other developers have been unable to produce in an amount sufficient to enable a commercial product. With our cell-free technology, we believe we can produce this antigen at substantially improved yields, allowing for commercial-scale production. VAX-GI is being developed in collaboration with the University of Maryland, Baltimore as well as with partial funding from two research grants awarded by the National Institutes of Health (“NIH”).

Previous wording

We have incurred net losses in each year since inception and expect to continue to incur net losses in the foreseeable future. Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year, depending in large part on the timing of our preclinical studies, clinical trials and manufacturing activities, and our expenditures on other research and development activities. Our net loss was $95.0 million for the three months ended March 31, 2024. As of March 31, 2024, we had an accumulated deficit of $1,019.4 million and cash, cash equivalents and investments of $1,899.8 million, which we believe will be sufficient to fund our operating expenses and capital expenditure requirements through at least 12 months from the filing date of this Quarterly Report on Form 10-Q.

Current wording

We have incurred net losses in each year since inception and expect to continue to incur net losses in the foreseeable future. Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year, depending in large part on the timing of our preclinical studies, clinical trials and manufacturing activities, and our expenditures on other research and development activities. Our net loss was $128.7 million and $223.7 million for the three and six months ended June 30, 2024, respectively. As of June 30, 2024, we had an accumulated deficit of $1,148.1 million and cash, cash equivalents and investments of $1,851.9 million, which we believe will be sufficient to fund our operating expenses and capital expenditure requirements through at least 12 months from the filing date of this Quarterly Report on Form 10-Q.

Previous wording

•progress in the scale-up of our manufacturing capabilities, in particular to prepare for our adult Phase 3 program for VAX-24 or VAX-31, as well as the potential commercial launches of VAX-24 and/or VAX-31;

Current wording

•progress in the scale-up of our manufacturing capabilities, in particular to prepare for the potential commercial launches of VAX-24 and/or VAX-31;

Previous wording

•require the manufacture of supplies for our clinical trials, in particular our clinical trials for our PCV candidates, VAX-24 and VAX-31;

Current wording

•require the manufacture of supplies for our clinical trials;

Previous wording

In April 2022, we entered into a non-exclusive development and manufacturing services agreement with Lonza effective as of March 22, 2022, which was subsequently amended on May 12, 2022, November 21, 2022 and October 31, 2023 (as amended, the “2022 Lonza DMSA”). Pursuant to the 2022 Lonza DMSA, Lonza is obligated to perform services, including manufacturing process development and clinical manufacture and supply of our proprietary PCV candidates. Subject to the terms and conditions set forth in the 2022 Lonza DMSA, Lonza has granted to us a non-exclusive, worldwide, fully paid-up, irrevocable, transferable license, including the right to grant sublicenses, under the New General Application Intellectual Property, to research, develop, make, have made, use, sell and import the Product. Unless earlier terminated, the 2022 Lonza DMSA shall remain in place for a period of five years. Either party may terminate the 2022 Lonza DMSA for any reason on prior written notice to the other party, provided that Lonza may not exercise such right until a specified future date. In addition, either party may terminate the 2022 Lonza DMSA (i) within a given time period upon any material breach that is left uncured by the other party, or (ii) immediately if the other party becomes insolvent. We may also terminate the 2022 Lonza DMSA upon an extended force majeure event. Upon expiration and/or termination of the 2022 Lonza DMSA and/or any purchase order, we will pay Lonza for all service rendered, all costs incurred, all unreimbursed capital equipment and any cancellation fees (each term as defined in the 2022 Lonza DMSA).

Current wording

In April 2022, we entered into a non-exclusive development and manufacturing services agreement with Lonza effective as of March 22, 2022, which was subsequently amended on May 12, 2022, November 21, 2022 and October 31, 2023 (as amended, the “2022 Lonza DMSA”). Pursuant to the 2022 Lonza DMSA, Lonza is obligated to perform services, including manufacturing process development and clinical manufacture and supply of our proprietary PCV candidates. Subject to the terms and conditions set forth in the 2022 Lonza DMSA, Lonza has granted to us a non-exclusive, worldwide, fully paid-up, irrevocable, transferable license, including the right to grant sublicenses, under the New General Application Intellectual Property, to research, develop, make, have made, use, sell and import the Product. Unless earlier terminated, the 2022 Lonza DMSA shall remain in place for a period offive years. Either party may terminate the 2022 Lonza DMSA for any reason on prior written notice to the other party, provided that Lonza may not exercise such right until a specified future date. In addition, either party may terminate the 2022 Lonza DMSA (i) within a given time period upon any material breach that is left uncured by the other party, or (ii) immediately if the other party becomes insolvent. We may also terminate the 2022 Lonza DMSA upon an extended force majeure event. Upon expiration and/or termination of the 2022 Lonza DMSA and/or any purchase order, we will pay Lonza for all service rendered, all costs incurred, all unreimbursed capital equipment and any cancellation fees (each term as defined in the 2022 Lonza DMSA).

Previous wording

In February 2023, we entered into another non-exclusive development and manufacturing services agreement with Lonza effective as of March 1, 2023 (the “2023 Lonza DMSA”). Pursuant to the 2023 Lonza DMSA, Lonza will perform manufacturing process development and the manufacture of components for VAX-24 and VAX-31, including the polysaccharide antigens, our proprietary eCRM protein carrier and conjugated drug substances. Subject to the terms and conditions set forth in the 2023 Lonza DMSA, Lonza has granted to us a non-exclusive, worldwide, fully paid-up, transferable license, including the right to grant sublicenses (subject to the prior written consent of Lonza), under the New General Application Intellectual Property, to use, sell and import the Product manufactured under the 2023 Lonza DMSA (but no other products). Unless earlier terminated, the 2023 Lonza DMSA shall remain in place for a period of five years and shall automatically renew for one additional two-year period unless either party provides written notice of non-renewal at least two years prior to the fifth anniversary of the effective date. We may terminate the 2023 Lonza DMSA for any reason on prior written notice to the other party on a Project Plan-by-Project Plan basis. Either party may terminate the 2023 Lonza DMSA (i) within a given time period upon any material breach that is left uncured by the other party, (ii) immediately if the other party becomes insolvent, is dissolved or liquidated, makes a general assignment for the benefit of its creditors, or files or has filed against it, a petition in bankruptcy or has a receiver appointed for a substantial part of its assets, (iii) upon an extended force majeure event, or (iv) if it becomes apparent to either party at any stage in the provision of the Services that it will be impossible to complete the Services for scientific or technical reasons despite exercise of best commercial efforts by both parties. Pursuant to the reason for termination and the party initiating the termination, we will pay Lonza for some combination of services rendered, costs incurred, unreimbursed capital equipment and/or any cancellation fees. Upon an extended force majeure event, neither party shall have any further liability to the other party (each term as defined in the 2023 Lonza DMSA).

Current wording

In February 2023, we entered into another non-exclusive development and manufacturing services agreement with Lonza effective as of March 1, 2023 (the “2023 Lonza DMSA”). Pursuant to the 2023 Lonza DMSA, Lonza will perform manufacturing process development and the manufacture of components for VAX-24 and VAX-31, including the polysaccharide antigens, our proprietary eCRM protein carrier and conjugated drug substances. Subject to the terms and conditions set forth in the 2023 Lonza DMSA, Lonza has granted to us a non-exclusive, worldwide, fully paid-up, transferable license, including the right to grant sublicenses (subject to the prior written consent of Lonza), under the New General Application Intellectual Property, to use, sell and import the Product manufactured under the 2023 Lonza DMSA (but no other products). Unless earlier terminated, the 2023 Lonza DMSA shall remain in place for a period offive years and shall automatically renew for one additional two-year period unless either party provides written notice of non-renewal at least two years prior to the fifth anniversary of the effective date. We may terminate the 2023 Lonza DMSA for any reason on prior written notice to the other party on a Project Plan-by-Project Plan basis. Either party may terminate the 2023 Lonza DMSA (i) within a given time period upon any material breach that is left uncured by the other party, (ii) immediately if the other party becomes insolvent, is dissolved or liquidated, makes a general assignment for the benefit of its creditors, or files or has filed against it, a petition in bankruptcy or has a receiver appointed for a substantial part of its assets, (iii) upon an extended force majeure event, or (iv) if it becomes apparent to either party at any stage in the provision of the Services that it will be impossible to complete the Services for scientific or technical reasons despite exercise of best commercial efforts by both parties. Pursuant to the reason for termination and the party initiating the termination, we will pay Lonza for some combination of services rendered, costs incurred, unreimbursed capital equipment and/or any cancellation fees. Upon an extended force majeure event, neither party shall have any further liability to the other party (each term as defined in the 2023 Lonza DMSA).

Previous wording

Unless earlier terminated, the Commercial Manufacturing and Supply Agreement will remain in effect until December 31, 2038, subject to automatic renewal for up to three additional renewal periods of five years each, unless Vaxcyte GmbH elects not to renew (with 24 months advanced notice to Lonza). Vaxcyte GmbH is permitted to terminate the Commercial Manufacturing and Supply Agreement for convenience or for Lonza’s uncured material breach, in each case subject to certain notice obligations. Lonza is permitted to terminate the Commercial Manufacturing and Supply Agreement in the event that Vaxcyte GmbH commits certain specified material breaches, including uncured failure to pay material and undisputed amounts of money due to Lonza, subject to certain notice obligations. Either party may terminate the Commercial Manufacturing and Supply Agreement in certain circumstances in the event of the other party’s bankruptcy. In the event that Vaxcyte GmbH terminates the agreement for convenience, or Lonza terminates the agreement in the event that Vaxcyte GmbH commits certain specified material breaches, then certain termination consequences may be triggered, including that (i) Vaxcyte GmbH would forfeit any outstanding entitlement to credit from Lonza of the Repurposing Fee (as defined below), and (ii) Vaxcyte GmbH would be obligated to pay Lonza a termination penalty equal to the greater of (a) CHF 70,000,000, or (b) a prespecified number of months’ FTE fees for the actual FTEs assigned to Vaxcyte GmbH as of the date of termination. Within 30 days of the Effective Date, Vaxcyte GmbH paid Lonza a repurposing fee (the “Repurposing Fee”) of CHF 27,000,000 that will be credited back to Vaxcyte GmbH over a 10-year period starting upon commencement of commercial production. In the event of a termination under certain circumstances, Lonza shall be obligated to provide certain wind-down and transition services to Vaxcyte GmbH for up to 12 and 24 months, respectively.

Current wording

Unless earlier terminated, the Commercial Manufacturing and Supply Agreement will remain in effect until December 31, 2038, subject to automatic renewal for up to three additional renewal periods of five years each, unless Vaxcyte GmbH elects not to renew (with 24 months advanced notice to Lonza). Vaxcyte GmbH is permitted to terminate the Commercial Manufacturing and Supply Agreement for convenience or for Lonza’s uncured material breach, in each case subject to certain notice obligations. Lonza is permitted to terminate the Commercial Manufacturing and Supply Agreement in the event that Vaxcyte GmbH commits certain specified material breaches, including uncured failure to pay material and undisputed amounts of money due to Lonza, subject to certain notice obligations. Either party may terminate the Commercial Manufacturing and Supply Agreement in certain circumstances in the event of the other party’s bankruptcy. In the event that Vaxcyte GmbH terminates the agreement for convenience, or Lonza terminates the agreement in the event that Vaxcyte GmbH commits certain specified material breaches, then certain termination consequences may be triggered, including that (i) Vaxcyte GmbH would forfeit any outstanding entitlement to credit from Lonza of the Repurposing Fee (as defined below), and (ii) Vaxcyte GmbH would be obligated to pay Lonza a termination penalty equal to the greater of (a) CHF 70.0 million, or (b) a prespecified number of months’ FTE fees for the actual FTEs assigned to Vaxcyte GmbH as of the date of termination. Within 30 days of the Effective Date, Vaxcyte GmbH paid Lonza a repurposing fee (the “Repurposing Fee”) of CHF 27.0 million that will be credited back to Vaxcyte GmbH over a 10-year period starting upon commencement of commercial production. In the event of a termination under certain circumstances, Lonza shall be obligated to provide certain wind-down and transition services to Vaxcyte GmbH for up to 12 and 24 months, respectively.

Previous wording

In December 2022, we entered into an option grant agreement with Sutro Biopharma (the “Option Agreement”). Pursuant to the Option Agreement, we acquired from Sutro Biopharma (i) authorization to enter into an agreement with an independent alternate contract manufacturing organization (“CMO”) to directly source Sutro Biopharma’s cell-free extract, allowing us to have direct oversight over financial and operational aspects of the relationship with the CMO; and (ii) a right, but not an obligation, to obtain certain exclusive rights to internally manufacture and/or source extract from certain CMOs and the right to independently develop and make improvements to extract (including the right to make improvements to the extract manufacturing process as well as cell lines) for use in connection with the exploitation of certain vaccine compositions (the “Option”). We and Sutro Biopharma agreed to negotiate the terms and conditions of a form definitive agreement to be entered into in the event we exercise the Option, which would include the terms and conditions set forth in an executed term sheet between us (the “Term Sheet”) and such terms that were necessary to give effect to each of the terms and conditions set forth in the Term Sheet (the “Form Definitive Agreement”). The Option period was five years from the date of the Option Agreement, subject to potential acceleration in the event we undergo a change of control.

Current wording

In December 2022, we entered into an option grant agreement with Sutro Biopharma (the “Option Agreement”). Pursuant to the Option Agreement, we acquired from Sutro Biopharma (i) authorization to enter into an agreement with an independent alternate contract manufacturing organization (“CMO”) to directly source Sutro Biopharma’s cell-free extract, allowing us to have direct oversight over financial and operational aspects of the relationship with the CMO; and (ii) a right, but not an obligation, to obtain certain exclusive rights to internally manufacture and/or source extract from certain CMOs and the right to independently develop and make improvements to extract (including the right to make improvements to the extract manufacturing process as well as cell lines) for use in connection with the exploitation of certain vaccine compositions (the “Option”). We and Sutro Biopharma agreed to negotiate the terms and conditions of a form definitive agreement to be entered into in the event we exercise the Option, which would include the terms and conditions set forth in an executed term sheet between us (the “Term Sheet”) and such terms that were necessary to give effect to each of the terms and conditions set forth in the Term Sheet (the “Form Definitive Agreement”).

Previous wording

On November 21, 2023 (the “Option Exercise Date”), we exercised the Option pursuant to the Option Agreement by submitting written notice thereof to Sutro Biopharma and concurrently paid Sutro Biopharma $50.0 million in cash as the first of two installment payments for the Option exercise price. Under the Option Agreement, we are obligated to pay Sutro Biopharma an additional $25.0 million in cash within six months of the Option Exercise Date as the second of two installment payments for the Option exercise price. Upon the occurrence of certain regulatory milestones, we would be obligated to pay Sutro Biopharma certain additional milestone payments totaling up to $60.0 million in cash. In the event that we undergo a change of control, certain rights and payments may be accelerated.

Current wording

On November 21, 2023 (the “Option Exercise Date”), we exercised the Option by submitting written notice thereof to Sutro Biopharma and concurrently paid Sutro Biopharma $50.0 million in cash as the first of two installment payments for the Option exercise price. On May 13, 2024, we paid the second and final installment of $25.0 million in cash for the Option exercise. Upon the occurrence of certain regulatory milestones, we would be obligated to pay Sutro Biopharma certain additional milestone payments totaling up to $60.0 million in cash. In the event that we undergo a change of control, certain rights and payments may be accelerated.

Previous wording

Concurrent with the payment of the first installment of the Option exercise price pursuant to the Option Agreement, on November 21, 2023, the manufacturing rights agreement (in the form of the Form Definitive Agreement) between us and Sutro Biopharma (the “Manufacturing Rights Agreement”) became effective. Under the Manufacturing Rights Agreement, we received an exclusive (except as to Sutro Biopharma), perpetual (subject to termination), worldwide license, for no additional royalty (i.e., royalty-free, other than any royalties due under the Sutro Biopharma License Agreement), under Sutro Biopharma’s relevant patents and know-how, to manufacture or have manufactured extract and improvements to extract (in any form) solely for use in the research, development, use, production, sale, offering for sale, export, import, commercialization or other exploitation of Vaccine Compositions (as defined in the Sutro Biopharma License Agreement) as well as certain rights with respect to certain regulatory matters related to extract and its use in connection with such Vaccine Compositions. We have the right to extend our rights and obligations under the Manufacturing Rights Agreement to our affiliates and to sublicense our rights to manufacture extract and improvements to extract to certain third-party CMOs and other contractors (for our benefit and not for such third party’s independent commercial use). For clarity, we are not permitted to manufacture extract for sale to third parties for the independent use of such third parties. Under the Manufacturing Rights Agreement, we have the obligation to protect the confidentiality of the extract manufacturing technology, and Sutro Biopharma has certain audit rights in connection therewith.

Current wording

Sutro Biopharma (the “Manufacturing Rights Agreement”) became effective. Under the Manufacturing Rights Agreement, we received an exclusive (except as to Sutro Biopharma), perpetual (subject to termination), worldwide license, for no additional royalty (i.e., royalty-free, other than any royalties due under the Sutro Biopharma License Agreement), under Sutro Biopharma’s relevant patents and know-how, to manufacture or have manufactured extract and improvements to extract (in any form) solely for use in the research, development, use, production, sale, offering for sale, export, import, commercialization or other exploitation of Vaccine Compositions (as defined in the Sutro Biopharma License Agreement) as well as certain rights with respect to certain regulatory matters related to extract and its use in connection with such Vaccine Compositions. We have the right to extend our rights and obligations under the Manufacturing Rights Agreement to our affiliates and to sublicense our rights to manufacture extract and improvements to extract to certain third-party CMOs and other contractors (for our benefit and not for such third party’s independent commercial use). For clarity, we are not permitted to manufacture extract for sale to third parties for the independent use of such third parties. Under the Manufacturing Rights Agreement, we have the obligation to protect the confidentiality of the extract manufacturing technology, and Sutro Biopharma has certain audit rights in connection therewith.

Previous wording

The recent trends towards rising inflation may materially adversely affect our business and corresponding financial position and cash flows. Inflationary factors, such as increases in the cost of our clinical trial materials and supplies, interest rates and overhead costs may adversely affect our operating results. Rising interest and inflation rates also present a recent challenge impacting the U.S. economy and could make it more difficult for us to obtain traditional financing on acceptable terms, if at all, in the future.

Current wording

The trends towards rising inflation may materially adversely affect our business and corresponding financial position and cash flows. Inflationary factors, such as increases in the cost of our clinical trial materials and supplies, interest rates and overhead costs may adversely affect our operating results. Rising interest and inflation rates also present a challenge impacting the U.S. economy and could make it more difficult for us to obtain traditional financing on acceptable terms, if at all, in the future.

Previous wording

Advance payments for goods and services to be used in future research and development activities are expensed when the activity has been performed or when the goods have been received. We make significant judgments and estimates in determining accrued research and development liabilities as of each reporting period based on the estimated time period over which services will be performed and the level of effort to be expended. If the actual timing of the performance of services or the level of effort varies from our estimate, we adjust the accrual or prepaid expense accordingly.

Current wording

We accrue for costs related to research and development activities based on our estimates of the services received and efforts expended pursuant to quotes and contracts with vendors, including CMOs and CROs, that conduct research, development and manufacturing activities on our behalf. The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows. There may be instances in which payments made to our vendors exceed the level of services provided and result in a prepayment of the research and development expense. Advance payments for goods and services to be used in future research and development activities are expensed when the activity has been performed or when the goods have been received. We make significant judgments and estimates in determining accrued research and development liabilities as of each reporting period based on the estimated time period over which services will be performed and the level of effort to be expended. If the actual timing of the performance of services or the level of effort varies from our estimate, we adjust the accrual or prepaid expense accordingly.

Previous wording

Our VAX-A1 vaccine development program currently is funded in part by a grant obtained from Combating Antibiotic Resistant Bacteria Biopharmaceutical Accelerator (“CARB-X”), a global non-profit partnership dedicated to accelerating antibacterial innovation to tackle the rising global threat of drug-resistant bacteria. The CARB-X grant provides for total potential funding of up to $14.6 million (including $11.7 million awarded to date since the grant’s inception in 2019) upon the achievement of VAX-A1 development milestones through June 2024.

Current wording

Our vaccine development program for VAX-A1, a novel conjugate vaccine candidate designed to prevent disease caused by Group A Streptococcus, is funded in part by a grant obtained from Combating Antibiotic Resistant Bacteria Biopharmaceutical Accelerator (“CARB-X”), a global non-profit partnership dedicated to accelerating antibacterial innovation to tackle the rising global threat of drug-resistant bacteria. The CARB-X grant provided funding of $11.7 million upon the achievement of VAX-A1 development milestones through June 2024. As of the second quarter of 2024, all of these milestones had been successfully achieved, and no further amounts will be funded under this CARB-X grant.

Previous wording

Our VAX-GI vaccine development program is currently funded in part by two grants obtained from the NIH administered by the University of Maryland, Baltimore. Our first grant from the NIH was awarded in April 2021 and provides for potential funding up to five years totaling approximately $0.5 million. In June 2023, we received another grant from the NIH that provides for potential funding up to five years totaling approximately $4.6 million.

Current wording

Our vaccine development program for VAX-GI, a novel preclinical vaccine candidate being developed as a preventative treatment for dysentery and shigellosis, which is caused by Shigella bacteria, is currently funded in part by two grants obtained from the National Institutes of Health (“NIH”) administered by the University of Maryland, Baltimore. Our first grant from the NIH was awarded in April 2021 and provides for potential funding up to five years totaling approximately $0.5 million. In June 2023, we received another grant from the NIH that provides for potential funding up to five years totaling approximately $4.6 million. We have received and expect to continue to receive funding under each of these grants.

Previous wording

Income from grants is recognized in the period during which the related specified expenses are incurred, provided that the conditions under which the grants were provided have been met. We recognized nil and $0.7 million of grant income and recorded the amounts in Other income (expense), net in the condensed consolidated statement of operations during the three months ended March 31, 2024 and 2023, respectively. A grant receivable of $0.1 million and nil representing unreimbursed, eligible costs incurred under the agreements were recorded and included in Prepaid expenses and other current assets in the condensed consolidated balance sheets as of March 31, 2024 and December 31, 2023, respectively.

Current wording

Income from grants is recognized in the period during which the related specified expenses are incurred, provided that the conditions under which the grants were provided have been met. We recognized $0.4 million and $2.5 million of grant income and recorded the amounts in Other income (expense), net in the condensed consolidated statements of operations during the three months ended June 30, 2024 and 2023, respectively, and $0.5 million and $3.1 million during the six months ended June 30, 2024 and 2023, respectively. A grant receivable of $0.4 million and nil representing unreimbursed, eligible costs incurred under the agreements was recorded and included in Prepaid expenses and other current assets in the condensed consolidated balance sheets as of June 30, 2024 and December 31, 2023, respectively.

Previous wording

Research and development expenses increased by $36.5 million, or 62.9%, during the three months ended March 31, 2024 compared to the corresponding period in 2023. The increases of $19.1 million in product and clinical development expenses and $4.4 million in laboratory supplies and equipment were primarily due to (i) the VAX-31 Phase 1/2 study in adults, (ii) Phase 3 readiness activities for our adult PCV program, primarily related to manufacturing, (iii) manufacturing readiness activities in connection with the potential future commercial launches of our PCV programs and (iv) the VAX-24 Phase 2 study in infants. The increase of $9.6 million in personnel-related expenses was primarily due to growth in the number of employees in our research and development functions and higher compensation costs, including salaries, benefits and stock-based compensation expense.

Current wording

Research and development expenses increased by $58.8 million, or 80.9%, during the three months ended June 30, 2024 compared to the corresponding period in 2023. The increases of $34.6 million in product and clinical development expenses and $2.1 million in laboratory supplies and equipment were primarily due to (i) manufacturing activities related to our adult PCV programs, including in connection with the potential future commercial launches and Phase 3 clinical trials, (ii) the VAX-31 Phase 1/2 study in adults, and (iii) the VAX-24 Phase 2 study in infants. The increases of $11.5 million in personnel-related expenses and $5.1 million in facility related and other allocated costs were primarily due to the growth in the number of employees in our research and development functions and higher compensation costs, including salaries, benefits and stock-based compensation expense.

Previous wording

General and administrative expenses increased by $6.8 million, or 51.7%, during the three months ended March 31, 2024 compared to the corresponding period in 2023. The increase was primarily due to an increase of $6.5 million in personnel-related expenses as a result of the growth in the number of employees in our general and administrative functions and higher compensation costs, including salaries, benefits and stock-based compensation expense.

Current wording

General and administrative expenses increased by $7.0 million, or 48.5%, during the three months ended June 30, 2024 compared to the corresponding period in 2023. The increase was primarily due to increases of (i) $7.3 million in personnel-related expenses as a result of the growth in the number of employees in our general and administrative functions and higher compensation costs, including salaries, benefits and stock-based compensation expense and (ii) $1.8 million in professional and consulting services, adjusted for $2.1 million in higher facility, personnel and other costs allocated to research and development expenses.

Previous wording

Other income (expense), net increased by $8.7 million, during the three months ended March 31, 2024 compared to the corresponding period in 2023. The increase was primarily attributable to greater interest income of $11.3 million as a result of higher cash and investment balances resulting from our follow-on offerings combined with an increase in the interest rates earned by such cash and investments, offset by foreign currency transaction losses of $2.0 million.

Current wording

Other income (expense), net increased by $5.5 million, or 29.1%, during the three months ended June 30, 2024 compared to the corresponding period in 2023. The increase was primarily attributable to greater interest income of $7.4 million as a result of higher cash and investment balances resulting from our follow-on equity and ATM financings combined with an increase in the interest rates earned by such cash and investments, offset by a decrease in grant income of $2.1 million.

Previous wording

From inception through March 31, 2024, we have incurred losses and negative cash flows from operations and have funded our operations primarily through the issuance of common stock, pre-funded warrants to purchase our common stock and, prior to our IPO, redeemable convertible preferred stock, totaling approximately $3.02 billion in aggregate gross proceeds and $2.87 billion net of underwriting discounts, commissions and offering expenses. As of March 31, 2024, we had $612.6 million in cash and cash equivalents, $1,899.8 million in investments and an accumulated deficit of $1,019.4 million.

Current wording

From inception through June 30, 2024, we have incurred losses and negative cash flows from operations and have funded our operations primarily through the issuance of common stock, pre-funded warrants to purchase our common stock and, prior to our IPO, redeemable convertible preferred stock, totaling approximately $3.13 billion in aggregate gross proceeds and $2.97 billion net of underwriting discounts, commissions and offering expenses. As of June 30, 2024, we had $518.7 million in cash and cash equivalents, $1,333.3 million in investments and an accumulated deficit of $1,148.1 million.

Previous wording

On July 2, 2021, we filed a shelf registration statement on Form S-3ASR (the “Shelf Registration Statement”) under which we may, from time to time, sell securities in one or more offerings of our common stock, preferred stock, debt securities or warrants. The Shelf Registration Statement became automatically effective upon the filing of the Form S-3ASR on July 2, 2021.

Current wording

On July 2, 2021, we filed a shelf registration statement on Form S-3ASR (the “2021 Shelf Registration Statement”) under which we could, from time to time, sell securities in one or more offerings of our common stock, preferred stock, debt securities or warrants. The 2021 Shelf Registration Statement became automatically effective upon the filing of the Form S-3ASR on July 2, 2021, and was scheduled to expire on July 2, 2024. In anticipation of such expiration, we filed a new shelf registration statement on Form S-3ASR on May 24, 2024 solely to replace the 2021 Shelf Registration Statement (such replacement registration statement, the “2024 Shelf Registration Statement”). Pursuant to the 2024 Shelf Registration Statement, we may, from time to time, sell securities in one or more offerings of our common stock, preferred stock, debt securities or warrants. The 2024 Shelf Registration Statement became automatically effective upon the filing of the Form S-3ASR on May 24, 2024.

Previous wording

In July 2021, we entered into an Open Market Sales Agreement SM (the “Original ATM Sales Agreement”) with Jefferies LLC (“Jefferies”), which provided that, upon the terms and subject to the conditions and limitations set forth in the Original ATM Sales Agreement, we may elect to issue and sell, from time to time, shares of our common stock having an aggregate offering price of up to $150.0 million through Jefferies acting as our sales agent or principal. As of February 27, 2023, we had sold 4,995,709 shares of our common stock under the Original ATM Sales Agreement at an average price of $27.57 per share for aggregate gross proceeds of $137.8 million. On February 27, 2023, we and Jefferies entered into an amendment to the Original ATM Sales Agreement (as amended, the “Amended ATM Sales Agreement”) pursuant to which we may offer and sell shares of our common stock having an aggregate offering price of up to $400.0 million, which is in addition to the $150.0 million aggregate offering price under the Original ATM Sales Agreement. The material terms and conditions of the Original ATM Sales Agreement otherwise remain unchanged. We will pay Jefferies a commission of up to 3.0% of the gross sales proceeds of any common stock sold through Jefferies under the Amended ATM Sales Agreement; however, we are not obligated to make any sales of common stock. As of March 31, 2024, we have sold 1,588,807 shares of our common stock under the Amended ATM Sales Agreement at an average price of $44.06 per share for aggregate gross proceeds of $70.0 million ($68.6 million net of commissions and offering expenses).

Current wording

In July 2021, we entered into an Open Market Sales Agreement SM (the “Original ATM Sales Agreement”) with Jefferies LLC (“Jefferies”), which provided that, upon the terms and subject to the conditions and limitations set forth in the Original ATM Sales Agreement, we had the right to issue and sell, from time to time, shares of our common stock having an aggregate offering price of up to $150.0 million through Jefferies acting as our sales agent or principal. As of February 27, 2023, we had sold 4,995,709 shares of our common stock under the Original ATM Sales Agreement at a weighted average price of $27.57 per share for aggregate gross proceeds of $137.8 million. On February 27, 2023, we and Jefferies entered into an amendment to the Original ATM Sales Agreement (as amended, the “Amended ATM Sales Agreement”) pursuant to which we may offer and sell shares of our common stock having an aggregate offering price of up to $400.0 million. The material terms and conditions of the Original ATM Sales Agreement otherwise remain unchanged. We will pay Jefferies a commission of up to 3.0% of the gross sales proceeds of any common stock sold through Jefferies under the Amended ATM Sales Agreement; however, we are not obligated to make any sales of common stock. As of June 30, 2024, we have sold 3,091,842 shares of our common stock under the Amended ATM Sales Agreement at a weighted average price of $57.91 per share for aggregate gross proceeds of $179.1 million ($174.7 million net of commissions and offering expenses).

Previous wording

Net cash used in operating activities for the three months ended March 31, 2024 was $159.1 million, which primarily resulted from a net loss of $95.0 million and a net change in our operating assets and liabilities of $73.8 million, partially offset by non-cash charges of $9.7 million. Non-cash charges primarily consisted of $17.6 million in stock-based compensation expense, $2.1 million in amortization of right-of-use (“ROU”) assets and $1.0 million in depreciation and amortization, partially offset by a decrease of $11.0 million in net amortization of premiums on investments. The net change in operating assets and liabilities of $73.8 million was primarily due to decreases in (i) accrued manufacturing expenses of $51.8 million, (ii) accrued compensation of $7.9 million and (iii) operating lease liabilities of $1.8 million and increases in (iv) other assets of $8.6 million mainly attributable to the manufacturing facility buildout and (v) prepaid and other assets of $5.0 million, which were partially offset by an increase in (vi) accounts payable and accrued expenses of $1.3 million.

Current wording

Net cash used in operating activities for the six months ended June 30, 2024 was $280.5 million, which primarily resulted from a net loss of $223.7 million and a net change in our operating assets and liabilities of $81.6 million, partially offset by non-cash charges of $24.8 million. The net change in operating assets and liabilities of $81.6 million was primarily due to decreases in (i) accrued expenses of $35.0 million, (ii) accrued manufacturing expenses of $16.3 million, (iii) accounts payable of $5.0 million, (iv) accrued compensation of $4.6 million and (v) operating lease liabilities of $3.6 million and increases in (vi) other assets of $15.1 million mainly attributable to the manufacturing facility buildout and (vii) prepaid and other assets of $2.0 million. Non-cash charges primarily consisted of $39.2 million in stock-based compensation expense, $4.2 million in amortization of right-of-use (“ROU”) assets and $2.4 million in depreciation and amortization, partially offset by $20.9 million in net accretion of discounts on investments.

Previous wording

Net cash used in operating activities for the three months ended March 31, 2023 was $47.7 million, which primarily resulted from a net loss of $60.5 million, partially offset by non-cash charges of $6.0 million and a net change in operating assets and liabilities of $6.8 million. Non-cash charges primarily consisted of $9.6 million in stock-based compensation expense, $1.6 million in amortization of ROU assets and $0.7 million in depreciation and amortization, partially offset by a decrease of $6.0 million in net amortization of premiums on investments. The net change in operating assets and liabilities of $6.8 million was primarily due to increases (i) in accrued manufacturing expenses of $6.7 million, (ii) in accounts payable and accrued expenses of $4.8 million and (iii) in accrued compensation of $0.7 million. These increases were partially offset by (i) an increase in prepaid and other assets of $4.1 million and (ii) a decrease in operating lease liabilities of $1.4 million.

Current wording

Net cash used in operating activities for the six months ended June 30, 2023 was $110.4 million, which primarily resulted from a net loss of $128.8 million, partially offset by a net change in our operating assets and liabilities of $9.3 million and non-cash charges of $9.1 million. The net change in operating assets and liabilities of $9.3 million was primarily due to increases in (i) accrued manufacturing expenses of $6.1 million resulting from increased outsourced manufacturing activities, (ii) accounts payable and accrued expenses of $6.3 million resulting from the timing of payments and (iii) accrued compensation of $3.2 million related to higher headcount. These changes were partially offset by (i) an increase in prepaid and other assets of $3.6 million related to prepaid insurance and research costs and (ii) a decrease in operating lease liabilities of $2.7 million related to our San Carlos office. Non-cash charges primarily consisted of $22.2 million in stock-based compensation expense, $3.2 million in amortization of ROU assets and $1.5 million in depreciation and amortization, partially offset by $17.8 million in net accretion of discounts on investments.

Previous wording

Cash used in investing activities for the three months ended March 31, 2024 was $451.1 million, which was attributable primarily to $687.7 million in purchases of investments, $6.4 million in manufacturing facility and equipment construction-in-progress and $5.7 million in purchases of lab equipment, partially offset by $242.3 million in maturities of investments and $6.4 million in sales of investments.

Current wording

Cash used in investing activities for the six months ended June 30, 2024 was $531.5 million, which was attributable primarily to $1.04 billion in purchases of investments, $37.6 million in purchases related to our manufacturing facility and equipment construction-in-progress and $13.5 million in purchases of property and equipment, partially offset by $542.0 million in maturities of investments and $15.9 million in sales of investments.

Previous wording

Cash used in investing activities for the three months ended March 31, 2023 was $448.1 million, which was attributable primarily to $483.8 million in purchase of investments and $5.6 million of purchases of lab equipment and leasehold improvements, partially offset by $40.2 million in maturities of investments and $1.1 million in sales of investments.

Current wording

Cash used in investing activities for the six months ended June 30, 2023 was $781.7 million, which was attributable primarily to $916.6 million in purchases of investments and $3.5 million in purchases property and equipment, partially offset by $136.0 million in maturities of investments and $2.4 million in sales of investments.

Previous wording

Cash provided by financing activities for the three months ended March 31, 2024 was $818.2 million, which primarily consisted of net proceeds from our February 2024 follow-on public offering of $816.5 and proceeds from the exercise of stock options of $5.0 million, offset by releases of restricted stock units of $3.3 million.

Current wording

Cash provided by financing activities for the six months ended June 30, 2024 was $928.6 million, which primarily consisted of net proceeds from (i) our February 2024 follow-on public offering of $816.5 million, (ii) our Amended ATM Sales Agreement of $106.5 million, (iii) the exercise of stock options of $7.8 million and (iv) stock issued under our Employee Stock Purchase Plan of $1.7 million, partially offset by releases of restricted stock units of $3.9 million.

Previous wording

Cash provided by financing activities for the three months ended March 31, 2023 was $41.6 million, which primarily consisted of net proceeds from our Amended ATM Sales Agreement of $41.8 million.

Current wording

Cash provided by financing activities for the six months ended June 30, 2023 was $588.5 million, which primarily consisted of net proceeds from (i) our April 2023 follow-on public offering of $545.3 million and (ii) our Original and Amended ATM Sales Agreements of $41.8 million.

Previous wording

We have operating lease agreements for our office spaces. As of March 31, 2024, we had total lease payment obligations of $34.7 million, of which $8.9 million is payable within one year.

Current wording

We have operating lease agreements for our office spaces. As of June 30, 2024, we had total lease payment obligations of $32.3 million, of which $8.9 million is payable within one year.

Previous wording

On November 21, 2023 (the “Option Exercise Date”), we exercised the Option by submitting written notice thereof to Sutro Biopharma and concurrently paid Sutro Biopharma $50.0 million in cash as the first of two installment payments for the Option exercise price. Under the Option Agreement, we are obligated to pay Sutro Biopharma an additional $25.0 million in cash within six months of the Option Exercise Date as the second of two installment payments for the Option exercise price. Upon the occurrence of certain regulatory milestones, we would be obligated to pay Sutro Biopharma certain additional milestone payments totaling up to $60.0 million in cash. In the event that we undergo a change of control, certain rights and payments may be accelerated.

Current wording

On November 21, 2023 (the “Option Exercise Date”), we exercised the Option pursuant to the Option Agreement by submitting written notice thereof to Sutro Biopharma and concurrently paid Sutro Biopharma $50.0 million in cash as the first of two installment payments for the Option exercise price. On May 13, 2024, we paid the second and final installment of $25.0 million in cash for the Option exercise. Upon the occurrence of certain regulatory milestones, we would be obligated to pay Sutro Biopharma certain additional milestone payments totaling up to $60.0 million in cash. In the event that we undergo a change of control, certain rights and payments may be accelerated.