Vaxcyte Inc

Previous wording

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes and other financial information included elsewhere in this Annual Report on Form 10-K. This discussion and analysis contain forward-looking statements based upon our current beliefs, plans and expectations that involve risks, uncertainties and assumptions, such as statements regarding our plans, objectives, expectations, intentions and beliefs. Our actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under the section titled “Risk Factors” and elsewhere in this Annual Report on Form 10-K. You should carefully read the “Risk Factors” section of this Annual Report on Form 10-K to gain an understanding of the important factors that could cause actual results to differ materially from our forward-looking statements. Please also see the section titled “Special Note Regarding Forward-Looking Statements.”

Current wording

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes and other financial information included elsewhere in this Annual Report on Form 10-K. For discussion and analysis related to our financial condition and results of operations comparing the year ended December 31, 2023 ("2023") to the year ended December 31, 2022, refer to Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for 2023, which was filed with the Securities and Exchange Commission on February 27, 2024. This discussion and analysis contain forward-looking statements based upon our current beliefs, plans and expectations that involve risks, uncertainties and assumptions, such as statements regarding our plans, objectives, expectations, intentions and beliefs. Our actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under the section titled “Risk Factors” and elsewhere in this Annual Report on Form 10-K. You should carefully read the “Risk Factors” section of this Annual Report on Form 10-K to gain an understanding of the important factors that could cause actual results to differ materially from our forward-looking statements. Please also see the section titled “Special Note Regarding Forward-Looking Statements.”

Previous wording

Pneumococcal conjugate vaccine (“PCV”) candidates that we believe are among the most broad-spectrum PCV candidates currently in development, targeting the approximately $8 billion global pneumococcal vaccine market. Pneumococcal disease is an infection caused by Streptococcus pneumoniae (“pneumococcus”) bacteria. It can result in invasive pneumococcal disease (“IPD”), including meningitis and bacteremia, and non-invasive pneumococcal disease, including pneumonia, otitis media and sinusitis. Our broad-spectrum, carrier-sparing PCV candidates, VAX-24 and VAX-31, are designed to improve upon the standard-of-care PCVs for both children and adults by covering the serotypes that are responsible for a significant portion of IPD in circulation and are associated with high case-fatality rates, antibiotic resistance and meningitis, while maintaining coverage of previously circulating strains that are currently contained through continued vaccination practice.

Current wording

•Pneumococcal conjugate vaccine (“PCV”) candidates that we believe are among the broadest-spectrum PCV candidates currently in development, targeting the approximately $8 billion global pneumococcal vaccine market. Pneumococcal disease is an infection caused by Streptococcus pneumoniae bacteria. It can result in invasive pneumococcal disease (“IPD”), including meningitis and bacteremia, and non-invasive pneumococcal disease, including pneumonia, otitis media and sinusitis. Our broad-spectrum, carrier-sparing PCV candidates, VAX-31 and VAX-24, are designed to improve upon the standard-of-care PCVs for both adults and children by covering the serotypes that are responsible for a significant portion of IPD in circulation and are associated with high case-fatality rates, antibiotic resistance and meningitis, while maintaining coverage of previously circulating strains that are currently contained through continued vaccination practice.

Previous wording

In October 2023, we announced the FDA clearance of the investigational new drug (“IND”) application for VAX-31 for the prevention of IPD in adults. In November 2023, we announced that the first participants were dosed in a Phase 1/2 clinical study for VAX-31 in adults. The VAX-31 Phase 1/2 clinical study is a randomized, observer-blind, active-controlled, dose-finding clinical study designed to evaluate the safety, tolerability and immunogenicity of VAX-31 at three dose levels (low, middle and high) and compared to PCV20 in 1,015 healthy adults aged 50 and older. The Phase 1 portion of the study evaluated the safety and tolerability of a single injection of VAX-31 at three dose levels and compared to PCV20 in 64 healthy adults 50 to 64 years of age. An independent Data Monitoring Committee conducted an assessment of the Phase 1 safety and tolerability results and recommended that the study proceed as planned to Phase 2. Phase 1 participants will also be evaluated for immunogenicity, and the Phase 1 safety, tolerability and immunogenicity data will be pooled with the participants in the Phase 2 portion of the study. The Phase 2 portion of the study will evaluate the safety, tolerability and immunogenicity of a single injection of VAX-31 at the same three dose levels and compared to PCV20 in 951 healthy adults 50 years of age and older. Participants were randomized equally in four separate arms and, 30 days after dosing, serology samples will be collected to assess immunogenicity. The immunogenicity objectives of the study include an assessment of the induction of antibody responses, using OPA and immunoglobulin G (“IgG”), at each of the three VAX-31 doses and compared to PCV20 for the 20 serotypes in common, as well as for the additional 11 serotypes contained in VAX-31, but not in PCV20. Participants in the study are being evaluated for safety through six months after vaccination. The study is being conducted at approximately 25 sites in the United States.

Current wording

•In September 2024, we announced positive topline results from a Phase 1/2 study of VAX-31 in adults. The VAX-31 Phase 1/2 clinical study was a randomized, observer-blind, active-controlled, dose-finding clinical study designed to evaluate the safety, tolerability and immunogenicity of a single injection of VAX-31 at three dose levels (low, middle and high) and compared to Prevnar 20®("PCV20") in 1,015 healthy adults aged 50 and older. In the low, middle and high doses, all serotypes were dosed at 1.1mcg, 2.2mcg and 3.3mcg, respectively, except serotypes 1, 5 and 22F, which were dosed at 1.65mcg, 3.3mcg, and 4.4mcg, respectively. The Phase 1 portion of the study included 64 healthy adults 50 to 64 years of age and the Phase 2 portion included 951 healthy adults 50 years of age and older. The immunogenicity objectives of the study included an assessment of the induction of antibody responses at Month 1, based on opsonophagocytic activity (“OPA”) and immunoglobulin G ("IgG"), at each of the three VAX-31 doses and compared to PCV20 for the 20 serotypes in common, as well as for the additional 11 serotypes contained in VAX-31, but not in PCV20.

Previous wording

Our lead vaccine candidate, VAX-24, is a 24-valent, broad-spectrum, carrier-sparing investigational PCV being developed for the prevention of IPD.

Current wording

▪VAX-24 is a 24-valent, broad-spectrum, carrier-sparing investigational PCV being developed for the prevention of IPD in infants, and it covers more serotypes than any pneumococcal infant vaccine on the market today.

Previous wording

In July 2023, we announced that the ongoing Phase 2 study of VAX-24 in healthy infants had advanced to the second and final stage of the study in which we continue to enroll participants. The independent Data Safety Monitoring Board approved advancing to the second stage of the study following the review of the safety and tolerability results from the first stage. Additionally, in agreement with the FDA, we amended the study protocol for Stage 2 of the study, changing the study comparator to PCV20, which became the broadest-spectrum PCV recommended by the Advisory Committee on Immunization Practices in June 2023. This Phase 2 study is evaluating the safety, tolerability and immunogenicity of VAX-24 in healthy infants at the same three dose levels, 1.1mcg, 2.2mcg and 2.2mcg/4.4mcg, that were evaluated in Stage 1. We expect to share topline data from the primary three-dose immunization series of the study by the end of the first quarter of 2025, followed by topline data from the booster dose by the end of 2025.

Current wording

•In July 2023, we announced that the Phase 2 study of VAX-24 in healthy infants had advanced to the second and final stage of the study. An independent data safety monitoring board ("DSMB") approved advancing to the second stage of the study following the review of the safety and tolerability results from the first stage. Additionally, in agreement with the FDA, we amended the study protocol for Stage 2 of the study, changing the study comparator to PCV20, which became the broadest-spectrum PCV recommended by the Advisory Committee on Immunization Practices (“ACIP”) in June 2023. This Phase 2 study is evaluating the safety, tolerability and immunogenicity of VAX-24 in healthy infants at the same three dose levels, 1.1mcg, 2.2mcg and 2.2mcg/4.4mcg, that were evaluated in Stage 1. Per ACIP guidelines, the primary immunization series includes three doses given at two months, four months and six months of age, followed by a booster dose at 12-15 months of age.

Previous wording

VAX-A1, a novel conjugate vaccine candidate designed to prevent disease caused by Group A Streptococcus (“Group A Strep”). Group A Strep is pervasive globally and causes an estimated 800 million cases of illness annually, including pharyngitis, or strep throat, and certain severe invasive infections and sequelae. There is currently no vaccine against Group A Strep, which is one of the leading infectious disease-related causes of death and disability worldwide and a significant contributor to the prescription of antibiotics in the very young. We believe we have demonstrated preclinical proof of concept for VAX-A1, the data for which were published in December 2020. We nominated the final vaccine candidate for VAX-A1 in the first quarter of 2021 and initiated IND-enabling activities in the second half of 2021. We continue to advance the development of VAX-A1 and we intend to provide further information about the anticipated timing of an IND application as the program progresses.

Current wording

•VAX-A1, a novel conjugate vaccine candidate designed to prevent disease caused by Group A Streptococcus (“Group A Strep”). Group A Strep is pervasive globally and causes an estimated 800 million cases of illness annually, including pharyngitis, or strep throat, and certain severe invasive infections and sequelae. There is currently no vaccine against Group A Strep, which is one of the leading infectious disease-related causes of death and disability worldwide and a significant contributor to the prescription of antibiotics in children. We believe we have demonstrated preclinical proof of concept for VAX-A1, the data for which were published in December 2020. We nominated the final vaccine candidate for VAX-A1 in the first quarter of 2021 and initiated Investigational New Drug ("IND")-enabling activities in the second half of 2021. We continue to advance the development of VAX-A1 and we intend to provide further information about the anticipated timing of an IND application as the program progresses.

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.

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 is a bacterial illness 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

VAX-24 Granted Breakthrough Therapy Designation from the FDA for the Prevention of IPD in Adults Aged 18 and Older: In January 2023, we announced that the FDA granted Breakthrough Therapy designation for VAX-24 for the prevention of IPD in adults. With Breakthrough Therapy designation, we have access to all of the elements of the FDA’s Fast Track program, as well as the ability to receive guidance and support from the FDA on an efficient drug development program and an organizational commitment from senior managers within the FDA. The Breakthrough Therapy designation process is designed to expedite the development and review of drugs and biologics that are intended to treat a serious or life-threatening condition, where preliminary clinical evidence indicates that the drug or biologic may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints.

Current wording

•VAX-31 Granted Breakthrough Therapy Designation from the FDA for the Prevention of IPD in Adults: In November 2024, we announced that the FDA granted Breakthrough Therapy designation ("BTD") for VAX-31 for the prevention of IPD in adults. With BTD, Vaxcyte has access to all the elements of the FDA’s Fast Track program, as well as the ability to receive guidance and support from the FDA on an efficient drug development program and an organizational commitment from senior managers within the FDA.

Previous wording

Completed Enrollment of Phase 1/2 Study Evaluating VAX-31 for the Prevention of IPD in Adults Aged 50 and Older: 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. The VAX-31 Phase 1/2 clinical study is a randomized, observer-blind, active-controlled, dose-finding study designed to evaluate the safety, tolerability and immunogenicity of VAX-31 at three dose levels (low, middle and high) compared to PCV20 in 1,015 healthy adults aged 50 and older.

Current wording

•Completed Enrollment of Phase 2 Study Evaluating VAX-24 for the Prevention of IPD in Infants: In March 2024, we announced the completion of enrollment in the Phase 2 clinical study evaluating VAX-24 in healthy infants.

Previous wording

Completed Successful $863 Million Follow-On Financing: In February 2024, we completed an underwritten public offering of 12,695,312 shares of our common stock, which included the full exercise of the underwriters’ option to purchase an additional 1,757,812 shares, at a public offering price of $64.00 per share and pre-funded warrants to purchase 781,250 shares of our common stock at a public offering price of $63.999 per underlying share. The aggregate gross proceeds to us from the offering were approximately $862.5 million, before deducting underwriting discounts and commissions and other estimated offering expenses payable by us, and excluding the exercise of any pre-funded warrants.

Current wording

•In February 2024, we completed an underwritten public offering of 12,695,312 shares of our common stock, which included the full exercise of the underwriters’ option to purchase an additional 1,757,812 shares, at a public offering price of $64.00 per share and pre-funded warrants to purchase 781,250 shares of our common stock at a public offering price of $63.999 per underlying share. The aggregate gross proceeds to us from the offering were $862.5 million, before deducting underwriting discounts and commissions and other estimated offering expenses payable by us, and excluding the exercise of any pre-funded warrants.

Previous wording

Completed Successful $575 Million Follow-On Financing: In April 2023, we completed an underwritten public offering of 13,030,000 shares of our common stock, which included the full exercise of the underwriters’ option to purchase an additional 1,830,000 shares, at a public offering price of $41.00 per share and pre-funded warrants to purchase 1,000,000 shares of our common stock at a public offering price of $40.999 per underlying share. The aggregate gross proceeds to us from the offering were $575.2 million, before deducting underwriting discounts and commissions and other estimated offering expenses payable by us, and excluding the exercise of any pre-funded warrants.

Current wording

•In September 2024, we completed an underwritten public offering of 12,087,378 shares of our common stock, which included the full exercise of the underwriters’ option to purchase an additional 1,893,203 shares, at a public offering price of $103.00 per share and pre-funded warrants to purchase 2,427,184 shares of our common stock at a public offering price of $102.999 per pre-funded warrant. The aggregate gross proceeds to us from the offering were $1.5 billion, before deducting underwriting discounts and commissions and other estimated offering expenses payable by us, and excluding the exercise of any pre-funded warrants.

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 losses were $402.3 million, $223.5 million and $100.1 million for the years ended December 31, 2023, 2022 and 2021, respectively. As of December 31, 2023, we had an accumulated deficit of $924.4 million and cash, cash equivalents and investments of $1,242.9 million. We believe our cash, cash equivalents and investments will be sufficient to fund our operating expenses and capital expenditure requirements through at least 12 months from the filing date of this Annual Report on Form 10-K.

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 losses were $463.9 million, $402.3 million and $223.5 million for the years ended December 31, 2024, 2023 and 2022, respectively. As of December 31, 2024, we had an accumulated deficit of $1,388.3 million and cash, cash equivalents and investments of $3,134.7 million. We believe our cash, cash equivalents and investments will be sufficient to fund our operating expenses and capital expenditure requirements through at least 12 months from the filing date of this Annual Report on Form 10-K.

Previous wording

We do not expect to generate any revenue from commercial product sales unless and until we successfully complete development and obtain regulatory approval for one or more of our vaccine candidates, which we expect will take a number of years. We expect our expenses will increase substantially in connection with our ongoing activities, as we:

Current wording

We do not expect to generate any revenue from commercial product sales unless and until we successfully complete development and obtain regulatory approval for one or more of our vaccine candidates, which we expect will take a number of years. We expect our expenses and capital expenditures will increase substantially in connection with our ongoing activities, as we:

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-31 in the adult population and VAX-31 and/or VAX-24 in the pediatric population;

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

establish additional manufacturing capacity to meet potential incremental supply requirements following the potential initial commercial launch of VAX-24 or VAX-31 for adults;

Current wording

•establish additional manufacturing capacity to meet potential incremental supply requirements following the potential initial commercial launch of VAX-31 in adults;

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.

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-31 and VAX-24, including the polysaccharide antigens, our proprietary eCRM protein carrier and conjugated drug substances.

Previous wording

Under each of the 2022 Lonza DMSA and 2023 Lonza DMSA (collectively, the “Lonza Agreements”) we pay Lonza agreed-upon fees for their performance of development and manufacturing services and pass through expenses incurred by Lonza for raw materials, as well as customary procurement and handling fees. Under each Lonza Agreement, we own all rights, title and interest in and to any and all New Customer Intellectual Property (as defined in each Lonza Agreement), and Lonza owns all right, title and interest in New General Application Intellectual Property (as defined in each Lonza Agreement).

Current wording

Under each of the 2022 Lonza DMSA and 2023 Lonza DMSA (collectively, the “Lonza Agreements”), we pay Lonza agreed-upon fees for their performance of development and manufacturing services and pass-through expenses incurred by Lonza for raw materials, as well as customary procurement and handling fees. Under each Lonza Agreement, we own all rights, title and interest in and to any and all New Customer Intellectual Property (as defined in each Lonza Agreement), and Lonza owns all rights, title and interest in New General Application Intellectual Property (as defined in each Lonza Agreement). For additional information about the Lonza Agreements, see “Manufacturing and Supply—Lonza Agreements—Development and Manufacturing Services Agreements” included in Part I, Item 1. Business of this Annual Report on Form 10-K.

Previous wording

Pursuant to the Commercial Manufacturing and Supply Agreement, Lonza will (i) construct and build out a dedicated suite (the “Suite”) at Lonza’s facilities in Visp, Switzerland to manufacture certain key components (including drug substance) for our proprietary PCV franchise and any other products or intermediates Vaxcyte GmbH may choose (collectively, the “Products”) and (ii) maintain and operate the Suite (utilizing Lonza’s employees) to manufacture the Products as a service provided to Vaxcyte GmbH, including conducting related quality control and quality assurance operations. Lonza will be a preferred, non-exclusive, supplier of the Products to Vaxcyte GmbH, and Vaxcyte GmbH retains the right to procure the Products from one or more alternate and/or backup manufacturers of the Products (including at our own facilities).

Current wording

In October 2023, we entered into a pre-commercial services and commercial manufacturing supply agreement with Lonza (the “Commercial Manufacturing and Supply Agreement”), pursuant to which Lonza will (i) construct and build out a dedicated suite (the “Suite”) at Lonza’s facilities in Visp, Switzerland to manufacture certain key components (including drug substance) for our proprietary PCV franchise and any other products or intermediates we may choose (collectively, the “Products”) and (ii) maintain and operate the Suite (utilizing Lonza’s employees) to manufacture the Products as a service provided to us, including conducting related quality control and quality assurance operations. Pursuant to the Commercial Manufacturing and Supply Agreement, Lonza will be a preferred, non-exclusive, supplier of the Products to us, and we retain the right to procure the Products from one or more alternate and/or backup manufacturers of the Products (including at our own facilities).

Previous wording

For additional details regarding our relationship with Lonza, see Note 7, “Commitments and Contingencies,” and Note 4, “Commercial Manufacturing and Supply Agreement” to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.

Current wording

For additional details regarding our relationship with Lonza and the Commercial Manufacturing and Supply Agreement, see “Manufacturing and Supply—Lonza Agreements—Commercial Manufacturing and Supply Agreement” included in Part I, Item 1. Business of this Annual Report on Form 10-K, Note 7, “Commitments and Contingencies,” and Note 4, “Commercial Manufacturing and Supply Agreement” to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.

Previous wording

We are party to an amended and restated license agreement with Sutro Biopharma, dated October 12, 2015, which was subsequently amended on May 9, 2018, May 29, 2018, September 28, 2023 and November 21, 2023 (as amended, the “Sutro Biopharma License Agreement”). Under the Sutro Biopharma License Agreement, we received an exclusive, worldwide, royalty-bearing, sublicensable license under Sutro Biopharma’s patents and know-how relating to cell-free expression of proteins to (i) research, develop, use, sell, offer for sale, export, import and otherwise exploit specified vaccine compositions, such rights being sublicensable, for the treatment or prophylaxis of infectious diseases, excluding cancer vaccines, and (ii) manufacture, or have manufactured by an approved contract manufacturing organization, such vaccine compositions from extracts supplied by Sutro Biopharma pursuant to the Sutro Biopharma Supply Agreement (as described below). We are obligated to use commercially reasonable efforts to develop, obtain regulatory approval for and commercialize the vaccine compositions. In consideration of the rights granted under the Sutro Biopharma License Agreement, we are obligated to pay Sutro Biopharma a 4% royalty on worldwide aggregate annual net sales of our vaccine products for human health and a 2% royalty on such net sales of vaccine products for animal health. Such royalty rates are subject to specified reductions, including standard reductions for third-party payments and for expiration of relevant patent claims. We are also obligated to pay Sutro Biopharma any royalties due to Stanford University (the upstream licensor of Sutro Biopharma), to the extent the royalties payable by Sutro Biopharma to Stanford University are greater than the royalties payable by us to Sutro Biopharma. Royalties are payable on a vaccine composition-by-vaccine composition and country-by-country basis until the later of expiration of the last valid claim in the licensed patents covering such vaccine composition in such country and ten years after the first commercial sale of such vaccine composition. The latest expiration date of a licensed Sutro Biopharma patent application, if issued, would be 2036, subject to any adjustment or extension of patent term that may be available in a particular country. In addition, we are obligated to pay Sutro Biopharma a percentage of net sublicensing revenue received in the low teen percentages. In addition, in the event we sublicense our non-manufacturing rights under the Sutro Biopharma License Agreement before a specified date, we are obligated to pay Sutro Biopharma a percentage, in the low double-digits, of the sublicensing revenue we receive under such agreement.

Current wording

We are party to an amended and restated license agreement with Sutro Biopharma, dated October 12, 2015, which was subsequently amended on May 9, 2018, May 29, 2018, September 28, 2023 and November 21, 2023 (as amended, the “Sutro Biopharma License Agreement”). Under the Sutro Biopharma License Agreement, we received an exclusive, worldwide, royalty-bearing, sublicensable license under Sutro Biopharma’s patents and know-how relating to cell-free expression of proteins to (i) research, develop, use, sell, offer for sale, export, import and otherwise exploit specified vaccine compositions, such rights being sublicensable, for the treatment or prophylaxis of infectious diseases, excluding cancer vaccines, and (ii) manufacture, or have manufactured by an approved contract manufacturing organization, such vaccine compositions from extracts supplied by Sutro Biopharma pursuant to the Sutro Biopharma Supply Agreement (as described below).

Previous wording

On September 28, 2023, we and Sutro Biopharma amended certain terms of the Sutro Biopharma License Agreement, including with respect to (i) royalty reduction provisions applicable in the event of expiration of relevant patent claims, which would result in lower royalties payable by us to Sutro Biopharma under certain circumstances, (ii) the ownership, prosecution, maintenance and enforcement of certain intellectual property rights licensed or arising under the Sutro Biopharma License Agreement (including as agreed to be amended in the Option Agreement (as defined below), and (iii) the timing and form for financial reporting of royalty payment calculations.

Current wording

On September 28, 2023, we and Sutro Biopharma amended certain terms of the Sutro Biopharma License Agreement, including with respect to (i) royalty reduction provisions applicable in the event of expiration of relevant patent claims, which would result in lower royalties payable by us to Sutro Biopharma under certain circumstances, (ii) the ownership, prosecution, maintenance and enforcement of certain intellectual property rights licensed or arising under the Sutro Biopharma License Agreement (including as agreed to be amended in the Option Agreement (as defined below), and (iii) the timing and form for financial reporting of royalty payment calculations. For additional information about the Sutro Biopharma License Agreement, see “Manufacturing and Supply—Sutro Biopharma Agreements—Amended and Restated License Agreement with Sutro Biopharma” included in Part I, Item 1. Business of this Annual Report on Form 10-K.

Previous wording

In May 2018, we entered into a supply agreement with Sutro Biopharma, which was subsequently amended on February 22, 2021 and November 21, 2023 (as amended, the “Sutro Biopharma Supply Agreement”) pursuant to which we purchase from Sutro Biopharma extract and custom reagents for use in manufacturing non-clinical and certain clinical supply of vaccine compositions utilizing the technology licensed under the Sutro Biopharma License at prices not to exceed a specified percentage above Sutro Biopharma’s fully burdened manufacturing cost. If any extracts or custom reagents do not meet the specifications and warranties provided, then we will not have an obligation to pay for the non-conforming product, and Sutro Biopharma will be obligated to replace the non-conforming product within the shortest possible time with conforming product at our cost. The term of the Sutro Biopharma Supply Agreement is from execution until the later of (i) July 31, 2022, or (ii) or the date that we and Sutro Biopharma enter into the Phase 3/Commercial Supply Agreement and Sutro is supplying to us each Product under the Phase 3/Commercial Supply Agreement (each term as defined in the Sutro Biopharma Supply Agreement). The Sutro Biopharma Supply Agreement may be terminated by either party for the other party’s material breach uncured within 60 days’ notice, by us at will with 60 days’ notice, or by mutual agreement of the parties. In December 2019, we exercised our right to require Sutro Biopharma to establish a second supplier for extract and custom reagents to support our anticipated clinical and commercial needs.

Current wording

In May 2018, we entered into a supply agreement with Sutro Biopharma, which was subsequently amended on February 22, 2021 and November 21, 2023 (as amended, the “Sutro Biopharma Supply Agreement”) pursuant to which we purchase from Sutro Biopharma extract and custom reagents for use in manufacturing non-clinical and certain clinical supply of vaccine compositions utilizing the technology licensed under the Sutro Biopharma License at prices not to exceed a specified percentage above Sutro Biopharma’s fully burdened manufacturing cost. If any extracts or custom reagents do not meet the specifications and warranties provided, then we will not have an obligation to pay for the non-conforming product, and Sutro Biopharma will be obligated to replace the non-conforming product within the shortest possible time with conforming product at our cost. In December 2019, we exercised our right to require Sutro Biopharma to establish a second supplier for extract and custom reagents to support our anticipated clinical and commercial needs. For additional information about the Sutro Biopharma Supply Agreement, see “Manufacturing and Supply—Sutro Biopharma Agreements—Supply Agreement with Sutro Biopharma” included in Part I, Item 1. Business of this Annual Report on Form 10-K.

Previous wording

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”). On September 28, 2023, we and Sutro Biopharma mutually agreed in writing upon the Form Definitive Agreement to become effective in the event that we exercise the Option, and on October 2, 2023, we paid the $5.0 million accrued commitment.

Previous wording

In November 2023, 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 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. This has been accrued on our consolidated balance sheets as of December 31, 2023. 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, followed by the second and final installment of $25.0 million in cash on May 13, 2024. Upon the occurrence of certain regulatory milestones, certain additional milestone payments may total up to $60.0 million in cash. In the event that we undergo a change of control, certain rights and payments may be accelerated. For additional information about the Option Agreement, see “Manufacturing and Supply—Sutro Biopharma Agreements—Option Agreement with Sutro Biopharma” included in Part I, Item 1. Business of this Annual Report on Form 10-K.

Previous wording

Exercised Option and Entered into Manufacturing Rights Agreement with Sutro Biopharma to Obtain Control Over Manufacturing and Development of Cell-Free Extract: In November 2023, we exercised the option and entered into a manufacturing rights agreement with Sutro Biopharma to obtain control over the development and manufacture of cell-free extract, a key component of our PCV candidates. Pursuant to the manufacturing rights agreement, we obtained exclusive rights to independently, or through certain third parties, develop, improve and manufacture cell-free extract for use in connection with our vaccine candidates.

Current 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. Pursuant to the Manufacturing Rights Agreement, we obtained exclusive rights to independently, or through certain third parties, develop, improve and manufacture cell-free extract for use in connection with our vaccine candidates.

Previous wording

For additional details regarding our relationship with Sutro Biopharma, see Note 7, “Commitments and Contingencies,” and Note 15, “Related Party Transactions,” to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.

Current wording

For additional details regarding our relationship with Sutro Biopharma and the Manufacturing Rights Agreement, see “Manufacturing and Supply—Sutro Biopharma Agreements—Manufacturing Rights Agreement with Sutro Biopharma” included in Part I, Item 1. Business of this Annual Report on Form 10-K and Note 7, “Commitments and Contingencies,” to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.

Previous wording

Impact of Certain Trends

Current wording

Impact of Certain Trends and Macroeconomic Environment

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, fluctuating interest rates and increases in overhead costs may adversely affect our operating results. Fluctuating interest rates and rising inflation rates have in the past and may in the future 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

We may experience increases in our operating costs in the near future including our labor costs and research and development costs, due to rising inflation, supply chain constraints, and civil and political unrest in certain countries and regions.

Current wording

We may experience increases in our operating costs in the near future, including our labor costs and research and development costs, due to rising inflation, tariffs, supply chain constraints, and civil and political unrest in certain countries and regions.

Previous wording

Research and development expenses represent costs incurred in performing research, development and manufacturing activities in support of our own product development efforts and include personnel-related costs (including salaries, employee benefits and stock-based compensation) for our personnel in research and development functions; costs related to acquiring, developing and manufacturing supplies for preclinical studies, clinical trials and other studies, including fees paid to CMOs; costs and expenses related to agreements with contract research organizations (“CROs”), investigative sites and consultants to conduct non-clinical and preclinical studies and clinical trials; professional and consulting services costs; research and development consumables costs; laboratory supplies and equipment costs; and facility and other allocated costs.

Current wording

Research and development expenses represent costs incurred in performing research, development and manufacturing activities in support of our own product development efforts. These include internal personnel-related costs (including salaries, employee benefits and stock-based compensation) for our personnel in research and development functions, and external costs related to (i) acquiring, developing and manufacturing supplies for preclinical studies, clinical trials and other studies, including fees paid to CMOs; (ii) agreements with contract research organizations (“CROs”), investigative sites and consultants to conduct non-clinical and preclinical studies and clinical trials; (iii) professional and consulting services; (iv) research and development consumables; (v) laboratory supplies and equipment; and (vi) facility and other allocated shared services.

Previous wording

Research and development expenses are expensed as incurred. Non-refundable advance payments for services that will be used or rendered for future research and development activities are recorded as prepaid expenses and recognized as expenses as the related services are performed. We do not allocate all of our costs by vaccine candidates, as our research and development expenses include internal costs, such as payroll and other personnel expenses, which are not tracked by vaccine candidate. In particular, with respect to internal costs, several of our departments support multiple vaccine candidate research and development programs.

Current wording

Research and development expenses, including costs related to acquired manufacturing rights, are expensed as incurred if it is determined there is no alternative future use. Non-refundable advance payments for services that will be used or rendered for future research and development activities are recorded as prepaid expenses and recognized as expenses as the related services are performed. We do not allocate all of our costs by vaccine candidates, as our research and development expenses include internal costs, such as payroll and other personnel expenses, which are not tracked by vaccine candidate. In particular, with respect to internal costs, several of our departments support multiple vaccine candidate research and development programs.

Previous wording

We expect our research and development expenses to increase substantially in absolute dollars for the foreseeable future as we advance our vaccine candidates into and through preclinical studies and clinical trials, manufacture drug product for our clinical trials, scale up our manufacturing activities, establish additional manufacturing capacity to meet potential incremental supply requirements following the potential initial commercial launch of VAX-24 or VAX-31 for adults, pursue regulatory approval of our vaccine candidates and expand our pipeline of vaccine candidates. The process of conducting the necessary preclinical and clinical research and completing the manufacturing requirements to obtain regulatory approval is costly and time-consuming. The actual probability of success for our vaccine candidates may be affected by a variety of factors, including the safety and efficacy or immunogenicity of our vaccine candidates, clinical data, investment in our clinical programs, competition, manufacturing capabilities and commercial viability. We may never succeed in achieving regulatory approval for any of our vaccine candidates. As a result of the uncertainties discussed above, we are unable to determine the duration and completion costs of our research and development projects or if, when and to what extent we will generate revenue from the commercialization and sale of our vaccine candidates.

Current wording

We expect our research and development expenses to increase substantially as we advance our vaccine candidates into and through preclinical studies and clinical trials, manufacture drug product for our clinical trials, scale up our manufacturing activities, establish additional manufacturing capacity to meet potential incremental supply requirements following the potential initial commercial launch of VAX-31 for adults, pursue regulatory approval of our vaccine candidates and expand our pipeline of vaccine candidates. The process of conducting the necessary preclinical and clinical research and completing the manufacturing requirements to obtain regulatory approval is costly and time-consuming. The actual probability of success for our vaccine candidates may be affected by a variety of factors, including the safety and efficacy or immunogenicity of our vaccine candidates, clinical data, investment in our clinical programs, competition, manufacturing capabilities and commercial viability. We may never succeed in achieving regulatory approval for any of our vaccine candidates. As a result of the uncertainties discussed above, we are unable to determine the duration and completion costs of our research and development projects or if, when and to what extent we will generate revenue from the commercialization and sale of our vaccine candidates.

Previous wording

the costs related to raw materials we purchase directly or through third-party manufacturing and supply partners;

Current wording

•the costs related to raw materials we purchase directly or through our third-party manufacturing and supply partners;

Previous wording

the costs of establishing additional manufacturing capacity to meet potential incremental supply requirements following the potential initial commercial launch of VAX-24 or VAX-31 for adults;

Current wording

•the costs of establishing additional manufacturing capacity to meet potential incremental supply requirements following the potential initial commercial launch of VAX-31 for adults;

Previous wording

General and administrative expenses consist primarily of costs and expenses related to personnel (including salaries, employee benefits and stock-based compensation) in our executive, legal, finance and accounting, human resources and other administrative functions; legal services relating to intellectual property and corporate matters; accounting, auditing, consulting and tax services; insurance; and facility and other allocated costs not otherwise included in research and development expenses. We expect our general and administrative expenses to continue to increase in absolute dollars for the foreseeable future as we increase our headcount and expand our services to support our continued research and development activities and grow our business. We expect continued increases in general and administrative expenses related to human resources, finance and accounting, legal, insurance expenses, investor relations and corporate communications activities and other administrative and professional services.

Current wording

General and administrative expenses consist primarily of costs and expenses related to personnel (including salaries, employee benefits and stock-based compensation) in our executive, legal, finance and accounting, human resources and other administrative functions; legal services relating to intellectual property and corporate matters; accounting, auditing, consulting and tax services; insurance; and facility and other allocated shared costs not otherwise included in research and development expenses. We expect our general and administrative expenses to continue to increase as we increase our headcount and expand our services to support our continued research and development activities and grow our business.

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, has been 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 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.

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 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

We recognized $4.8 million, $1.9 million and $1.6 million in grant income for funding research and development under these awards during the years ended December 31, 2023, 2022 and 2021, respectively. Grant income is included as a component of Other income (expense), net in the consolidated statements of operations.

Current wording

We recognized $1.0 million, $4.8 million and $1.9 million in grant income for funding research and development under these awards during the years ended December 31, 2024, 2023 and 2022, respectively. Grant income is included as a component of Other income (expense), net in the consolidated statements of operations.