Yahoo Finance CureVac N.V. (NASDAQ:CVAC) Q4 2023 Earnings Call Transcript
CureVac N.V. (NASDAQ:CVAC) Q4 2023 Earnings Call Transcript April 24, 2024
CureVac N.V. isn't one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Greetings and welcome to the CureVac Fourth Quarter and Full Year 2023 Financial Results and Business Update Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note this conference is being recorded. I will now turn the conference over to your host Sarah Fakih, you may begin.
Sarah Fakih: Thank you. Good morning, good afternoon, and welcome to our conference call. My name is Sarah Fakih and I'm the Vice President of Corporate Communications and Investor Relations at CureVac. Please let me introduce today's speakers. On the call with me from CureVac are Alexander Zehnder, Chief Executive Officer of CureVac; Myriam Mendila, our Chief Development Officer; and Pierre Kemula, Chief Financial Officer of CureVac. Our Head of Intellectual Property, Marcus Dalton will be present for the Q&A session. Please note that this call is being webcast live and will be archived on the Events & Presentations section under Investor Relations on our website. Before we begin, a few forward-looking statements. The discussions and responses to your questions on this call reflect management's view as of today, Wednesday, April 24, 2024.
We will be making statements and providing responses to your questions that state our intentions, beliefs, expectations, or predictions of the future. These constitute forward-looking statements for the purpose of the Safe Harbor provisions. These statements involve risks and uncertainties that could cause actual results to differ materially from those projected. CureVac disclaims any intention or obligation to revise any forward-looking statements. For more information, please refer to our filings with the US Securities and Exchange Commission. I will now turn the call over to Alexander.
Alexander Zehnder: Thank you, Sarah. Ladies and gentlemen, good morning and afternoon to everyone on the webcast. After recently celebrating my first year as CEO of CureVac, I'm thrilled to be speaking to you today as a leader of a company that is dramatically transforming itself. As societies are moving beyond the COVID-19 pandemic, we are embracing a new normal agility and innovation are more vital than ever. At CureVac this means we are taking decisive steps in 2024 to trim unnecessary residual pandemic infrastructure and have started redesign initiatives to increase efficiency, reduce operating costs and extend our cash runway. These initiatives began in March this year with a voluntary lever program that aims to reduce 150 positions and is intended to align our workforce to our business scope and priorities.
At the same time, based on the rapidly changing epidemiological environment, following the end of the COVID-19 pandemic together with our partner GSK, we have made the decision to wind down the pandemic preparedness agreement with the German government signed in April 2022. Based on our solid cash position of €402.5 million at the end of 2023 and despite a negative cash impact in 2025 related to the wind down of the Pedemic Preparedness Agreement, our efficiency initiatives are expected to result in a net extension of our cash runway into the fourth quarter of 2025. While we continue to streamline the company and optimize costs, it is essential for us to preserve and create new value by maintaining a strong focus on advancing our research and development activities.
Accordingly, we have made substantial progress in our clinical trials and are growing our pipeline of development programs in infectious disease and oncology. In Infectious Diseases together with GSK, we have initiated a new Phase 1/2 study in avian flu, which is considered a potential future pandemic threat. It is the latest program progressing to clinical trials under a broad infectious disease collaboration with GSK. Our ongoing programs in seasonal flu and COVID-19 has provided promising Phase 2 interim data confirming that our technology platform generates strong antibody types and well-tolerated dose levels. In oncology, the dose escalation Part A of our Phase 1 study in patients with resected glioblastoma has completed enrollment. Part A successfully progressed to a safety review confirming no dose-limiting toxicity and providing a recommended dose of 100 micrograms for the Part B of the study.
This important growth driver I'm particularly thrilled about our collaboration with MD Anderson. One of the world's leading cancer centers with whom we are joining forces for the development of novel mRNA cancer vaccines. Further expanding such strategic collaborations will be a key focus for Thaminda Ramanayake, a veteran in the biopharma industry who we are delighted to welcome as our new Chief Business Officer as of June 1 this year. Also supporting our oncology strategy is the mRNA printer, CureVac end-to-end solution for automated manufacturing of GMP-grade RNA vaccines and therapeutics. The printer achieved next important regulatory milestones by obtaining a framework license providing even greater freedom and flexibility to manufacture different mRNA cancer vaccine candidates.
Taking a step back and looking at 2023 on slide 5, I am profoundly inspired by the progress that has been achieved by the entire CureVac team. Last year, we made critical advancements in our clinical trials was notably the positive Phase 1 data in COVID-19 and flu that allowed us to transition into the current Phase 2 programs with potentially differentiated vaccine candidates in collaboration with GSK. We started the Phase 1 program in glioblastoma kicking off our strategy for the development of next-generation cancer vaccines based on our proprietary second-generation mRNA backbone. Our successful capital raise in February 2023 was a lot of confidence of investors providing us with the resources to advance multiple programs and research activities.
And last but not least, we strengthened our intellectual property position by adding new IP rights to ongoing patent litigation with Pfizer-BioNTech demonstrating that we continue to be at the forefront of mRNA innovation. Building on our achievements in 2023, we are poised to continue in 2024 with a clear focus to make CureVac fit for the future. To this end, we have put a strategic emphasis on an organizational redesign which I will describe in more detail on the next slide. In our clinical trial programs, we continue to move forward with GSK following the promising Phase 2 interim data in COVID and flu this year as well as the newly started Phase 1/2 study in avian flu. In oncology following the clearance of the Phase 1 Part A glioblastoma safety data, we anticipate advancing to the dose confirmation Part B mid-2024.
We expect to report a first data readout in the second half of 2024 most likely at scientific conferences such as ESMO or [indiscernible]. Our efforts to build up our manufacturing facility GMP IV are progressing and we expect certification of the facility in the second half of 2024 contingent on regulatory approvals. With these catalysts driving our efforts, we are confident in our ability to make meaningful strides in maturing the company and advancing our clinical trial programs in 2024. On Slide 6, let me provide you with a more detailed overview of our corporate streamline and redesign initiatives in 2024. As already mentioned, the redesign aims to significantly increase efficiencies and performance, while maintaining a strong focus on innovation and R&D activities.
This encompasses a rate of targeted actions to trim unneeded pandemic area infrastructure, reduce operating costs and become a leaner, more agile and focused organization. The cornerstones of our efforts include our strategic reorganization, streamlining reporting lines and digitizing the company. The focus is on an improved interface between our discovery, research and clinical development areas by bringing them together under the leadership of Myriam, as Chief Scientific Officer. A unified leadership will allow for an optimal alignment on strategic goals, improved prioritization, resource allocation and seamless transition from innovation from discovery to the clinic. Furthermore, we will double down our company-wide digital and data strategy to enhance the use of data and AI throughout the company and enable accelerated business processes and pipeline innovation.
The areas where we are trimming pandemic structures as mentioned earlier, the targeted results in the "voluntary leaver" program to reduce the 150 positions is ongoing. The reduction of workforce will be accompanied by novels stronger financial discipline. This includes a much leaner budget in 2024 compared to 2023, which is driven by lower operating costs and lower expenses in raw materials as our commitments for first-generation COVID vaccines are mostly closed. Also our CapEx spend will be significantly lower with the completion of our GMP IV manufacturing plant. While these actions have already been initiated, we will continue to look for more opportunities to improve efficiencies throughout 2024. Pierre will go into more detail in the financial update later in this call and we will continue to inform you on the progress of these initiatives throughout the year.
In parallel with our organizational redesign, we have made significant progress in achieving our goals through strategic collaboration, such as the co-development and licensing agreement we recently entered with one of the world's most renowned cancer institutions, the University of Texas and the Anderson Cancer Center. The collaboration focuses on the joint development of differentiated off-the-shelf mRNA-based cancer vaccines in selected hematological and solid tumor indications with higher unmet medical needs. It combines CureVac's unique end-to-end mRNA capabilities for cancer antigen discovery, MRNA design and manufacturing with MD Anderson's world-class expertise in cancer antigen discovery and validation, translational drug development and clinical research.
This collaboration is more than just the synergy of skills. It's a shared commitment of CureVac as the pioneer of mRNA. And MD Anderson is one of the most trusted leaders in cancer care to go further and faster in making a profile impact on the lives of cancer patients. Accordingly, both sites will contribute to the identification of novel cancer antigens based on whole genome sequencing, RNA sequencing and cutting-edge bioinformatics. So preclinical validation of the highest quality cancer antigens is expected to be followed by Phase 1/2 studies with potential lead candidates conducted by MD Anderson. We are convinced that this collaboration will be instrumental in boosting our oncology strategy. It will be an engine for the development of new cancer vaccines helping us to deliver novel treatment options faster and more efficiently.
In this context it is with great pleasure that I introduce Thaminda Ramanayake as our new Chief Business Officer. Thaminda will join our management team on June 1 at this pivotal moment in our corporate evolution. Thaminda joins from Affini-T Therapeutics. He brings 15-plus years of international experience in business development and corporate strategy. He has a strong track record of successful clinical collaborations M&A asset and licensing and strategic financing across multiple therapeutic areas. He has previously had positioned at Sanofi BioMarin Pharmaceuticals and Amgen. This wealth of knowledge is complemented by a strong foundation in science with focus on immunology and oncology. This broad expertise uniquely positions Thaminda to build upon our current achievements and drive CureVac's corporate strategy forward.
With this, let me hand over the call to Myriam for an update on our clinical development programs.
Myriam Mendila: Thank you, Alex. Moving on to Slide 9. I would like to take a moment to outline our most recent development pipeline which forms the core of our business strategy. Based on the versatility of our unique mRNA platform, we address indications in the three therapeutic areas of prophylactic vaccines, oncology and molecular therapy. In this updated layout, you can see that across these areas, we have focused our program resources and have discontinued legacy programs that no longer align with our development goals and expectations for adding value. In our most advanced area prophylactic vaccine. the Phase 2 COVID-19 and seasonal two programs are ongoing being developed jointly with GSK. Both Phase 2 studies are fully enrolled and recent interim analysis data confirms that our platform has strong antibody titers at well-tolerated dose levels.
The newly initiated combined Phase 1/2 study in avian flu is being conducted in the US and this is a modified monovalent vaccine candidate encoding an influenza H5 antigen in younger and older adults against the placebo controlled. We continue to translate the progress in our prophylactic vaccines area into oncology. Our Phase 1 study in patients with resected glioblastoma is currently preparing to start Part B after having successfully completed the dose escalation Part A as previously mentioned. In the third therapeutic area, molecular therapy, we are developing optimized mRNA therapeutics together with several collaboration partners which are intended to enable the expression of therapeutic proteins to treat diseases in different areas with unmet medical need.
We remain committed to broadening and diversifying our pipeline being guided by our mission of advanced innovation and health solutions for people and patients. I'm now on Slide 10 which offers more detail on our development programs in COVID-19 and seasonal flu. The Phase 2 part of the combined Phase 1 study for flu, as this is a potentially differentiated multivalent candidate encoding antigens match to all four WHO recommended flu strain. The candidate was selected from the Phase I part of the study which tested a comprehensive series of multivalent modified seasonal two candidates with up to eight constructs per candidate. The Phase 2 part of the study is fully enrolled with 480 younger adults aged 18 to 64 and 480 older adults, age 65 to 80, both age groups were tested against age match licensed comparator vaccine.
The vaccine candidate showed an acceptable safety and tolerability profile with the majority of solicited adverse events reported as either mild or multivalent. For influenza A strains, geometric mean titers generated by the vaccine candidate numerically exceeded the geometric mean titers of the licensed comparator vaccine, consistently across all tested dose levels and age groups. For influenza B strains, geometric mean titers were generally lower than those invested by the licensed comparator vaccine. Based on the challenges and addressing B strains across vaccine technologies, this is in line with our expectations and the results from early studies of other mRNA-based flu development programs. Together with GSK, we plan to assess targeted optimizations to further improve immune responses against these trends in an additional Phase II study.
We are confident and planned optimization will improve performance against this historically challenging influenza strains. In the Phase II COVID-19 study, we assess different booster vaccinations of two vaccine candidates. CV0601, a modified monovalent construct encoding the Omicron BA.4-5 variant and CV0701, a modified bivalent construct encoding the Omicron BA.4-5 variant, as well as the original SARS-CoV-2 strain. The study is fully enrolled with 427 participants aged 18 or older. According to the applicable standard of care at the time, the study employed and licensed bivalent mRNA comparator vaccine. Interim data was reported in early 2024 and confirms a favorable tolerability profile combined with competitive immune responses at low doses.
All tested dose levels were well below those use in any of the mRNA-based COVID-19 vaccines licensed in the US and EU. As can be seen in the left of the two graphs, both vaccine candidates showed a lower or similar proportion of participants reporting solicited adverse events compared to those who received the comparator vaccine. As illustrated in the right graph CV0601 shown in orange was tested at the medium dose level and elicited neutralizing antibody titers against the Omicron BA.4-5 variant on day 29, which numerically exceeded the titers generated by the comparator vaccine by a factor of 1.4%. For the low medium and high dose levels tested for bivalent CV0701, neutralizing antibody titers were 0.7, 1 and 1.3 times the titers of the comparator vaccine.
The study is currently ongoing with an additional expansion cohort. Taken together, the promising interim data strongly underscores the strength of our proprietary technology platform. With this, let me shift our focus back to our oncology area. On Slide 11, let me briefly remind you of the strategy for our oncology area, which we consider a cornerstone of our future growth. We have made significant strides in advancing our cancer vaccine program based on our 2-prong strategy, which encompasses both off-the-shelf and personalized cancer vaccines. Our off-the-shelf programs target the discovery of shared antigens with high prevalence and specific cancer types and the potential to enable more scalable and rapid cancer care. In this part, we have achieved key milestones over the past several months.
We are delivering on our glioblastoma study by targeting known glioblastoma antigens to validate our second-generation backbone in the oncology setting. At the same time, in collaboration with myNEO Therapeutics, we have identified novel shared antigens based on myNEO's advanced AI power technology platform, which shows strong immunogenicity in undisclosed preclinical studies. The combination of antigens evolving from the myNEO collaboration with antigens discovered with our proprietary platform enables selection of the next clinical candidate in oncology. We plan to advance this candidate to the clinic in 2025. Our collaboration with MD Anderson will also be an engine for the future development of new cancer vaccine candidates further strengthening our off-the-shelf clinical development program.
In parallel, we are also aiming to push the boundaries of personalized cancer vaccine tailored to the unique genetic makeup of a patient's tumor. We have evolved our antigen discovery platform acquired with Frame Cancer Therapeutics and specifically directed the technology towers the identification of novel classes of personalized cancer antigens. Fast and flexible access to cancer candidates based on novel personalized antigens will be critically enabled by the RNA Printer, which was just granted a framework license in the ongoing regulatory review. As we continue to navigate the challenges and opportunities of the oncology landscape, our achievements in both off-the-shelf and personalized cancer vaccines position us strongly for future growth and success in this important area.
Turning our attention now to the clinical front in oncology on slide 12. Let me give you a little bit more detail on our Phase 1 study in patients with surgically resected MGMT unmethylated glioblastoma. On this slide you can see the setup of the open-label Phase 1 study with a multi-epitope cancer vaccine candidate, CVGBM. CVGBM features a single unmodified mRNA, encoding eight epitopes derived from tumor-associated antigens with demonstrated immunogenicity in glioblastoma. The exact nature of the epitopes is not disclosed. The dose escalation Part A has successfully completed recruitment with 16 patients across four dose levels between 12 and 100 micrograms. A review of the safety data for these dose levels by the Data Safety Monitoring Board or DSMB confirms no dose-limiting toxicities.
Accordingly, the DSMB get a recommendation for a preferred dose of 100 micrograms for the subsequent Part B of the study. Part B expected to start mid-2024 will enroll up to 20 patients. We are looking forward to sharing first immunogenicity data from this study in the second half of 2024 at the scientific conference. To finalize the encouraging news flow in the context of our oncology strategy, the RNA Printer, our highly automated solution for GMP-grade manufacturing of cancer vaccines has achieved the next important regulatory milestone. You might remember that we reported the first manufacturing license for the Printer to spot our oncology strategy in the third quarter of 2023. In an ongoing regulatory review, this license was expanded by a so-called framework license, which allows the flexible manufacturing of different mRNA constructs based on the established processes on the Printer.
In 2024, our goal is to further expand this approach to also include the formulation module of the printer to complete the end-to-end capabilities of the system. With this, let me hand back to Alexander.
Alexander Zehnder : Thank you, Myriam. Before we move on to the financial part of this call on Slide 14, I would like to briefly provide an update on our patent litigation against Pfizer BioNTech in Germany and the U.S. Starting with the recent development in the U.S. shown on the left-hand side of the slide, please recall that a total of 10 patents are currently at issue in this geography. In November 2023, our partner Acuitas Therapeutics moved to intervene sever or stay our U.S. litigation against Pfizer BioNTech. The motion is based on a co-ownership and co-inventorship claim related to one patent family covering four patents out of the 10 litigated in the U.S. These four patents cover the specific design of COVID-19 vaccine.
This is in a lipid nanoparticle, which was used in combination, but first introduced to the clinic by CureVac in 2018. Recently a magistrate judge granted intervention and recommendation to stay litigation of all 10 patents before the district court until the Acuitas claims resolved. So far no decision has been made and we are currently preparing objections to this recommendation and anticipate a decision within the next two months. Germany shown on the right-hand side of the slide on December 19, 2023 the German Federal Patent Court granted in the first instance the 2022 request by BioNTech to nullify the German part of our technology patent on GC enrichment. Given the broad scope of our robust patent portfolio this initial position does not damage the strength of our value of our intellectual property position as this is only the first instance decision and proceedings are continuing in Germany with the remaining IP rights.
We are currently waiting to receive the written judgment of the December decision, which will enable us to find an appeal before the German Federal Court of Justice that will firmly establish the merits of our case. Patent litigation is part of the business landscape, especially in industries driven by high-stakes innovations such as ours and routinely take years to play out. However delays and setbacks will not deter us from having our intellectual property rights acknowledged and fairly compensated. With this, I would like to conclude the business update, and hand over to Pierre for a review of the financial data.
Pierre Kemula : Thank you Alexander. Good morning and good afternoon to everyone on the call. Before we go into financial statement details, I would like to provide a little context on our updated runway guidance and the main factors that are impacting our 2024 and 2025 projections. Alexander already mentioned the joint CureVac GSK decision to wind down the 2022 Pandemic Preparedness Agreement with the German government. Based on the 2024 obligation from this agreement, we expect the wind down to have a positive cash impact supporting a 2024 runway. This relates to significant savings on raw material stockpiling a reduction in running costs for our GMP IV manufacturing facility. On the other hand in 2025, we will no longer receive the standby fee that the German government would have paid for maintaining a warm manufacturing base resulting in a decreased 2025 revenues.
We will offset this overall negative cash impact with two things. First, we have closed all remaining raw material commitments related to our first-generation COVID-19 vaccine. And second our organizational redesign including voluntary leaver program will enable reduced operating costs allowing additional investments into selective development programs. Further reduction in cash out in 2024 compared to 2023 will be driven by lower operating expenses in various SG&A functions. With our GMP IV facility expected to be certified in the second half of this year, subject of course to regulatory approval, the CapEx requirements in 2024 will also be significantly reduced compared to 2023. Taken together, it allows us to extend our cash runway from mid-2025 into the fourth quarter of 2025.
We will continue to look for more opportunities to increase efficiency in 2024, and we'll keep you updated. Looking at our cash position on Slide 16. As already mentioned, we closed 2023 with €402.5 million. Cash used in operation in operations was mainly allocated to R&D activities, expenditures for our GMP IV production facility, and purchases of R&D materials. I will underline in this presentation, the significant one-off effects that took place in 2022, as a consequence of closing our first-generation vaccine assets in COVID-19. First, let us look at revenues. Revenues increased by €10.9 million to €22.6 million for the fourth quarter and decreased by €13.6 million to €53.8 million for the 12 months of 2023 compared to the same period in 2022.
The decrease year-on-year was primarily driven by lower revenues from our two GSK collaboration agreements. Revenues from both collaborations decreased year-on-year and amounted to a total of €47.1 million in 2023 compared to €62.3 million in 2022. The decrease was driven by the agreement of both companies to focus on the larger indications. Revenues for the fourth quarter was higher compared to the prior year period, as a significant portion of the milestone related to the initiation of Phase 2 for the seasonal flu clinical trial was recognized. Operating loss was €88 million for the fourth quarter 2023, representing a €33.5 million decrease compared to the same quarter of 2022. For 12 months of 2023, operating loss increased by €24.7 billion to €274.2 million compared to the same period in 2022.
The operating result was affected by several key drivers. First, cost of sales decreased year-on-year mainly as the impact of our first generation COVID-19 vaccine subsided. This resulted in lower write-off of raw materials in 2023, as well as lower impact on cost related termination of CMO activities. Second, R&D expenses increased with higher investment in later-stage infectious disease and oncology development programs as well as strengthening the workforce. In 2022, R&D expenses were positively impacted by a €38.5 million related -- related to the reversal of an outstanding CRO provision as well as by a one-off net gain for a change in contract termination provision, resulting primarily in GSK taking over from the company committed capacity at the CMO.
Third, and still in 2022, other income was positively impacted by a €32.5 million one-off of reimbursement of prepayments and production activity set up at the CMO. Financial results increased by €8.7 million to a profit of €1.5 million in the fourth quarter of 2023, an increase by €13.9 million to a profit of €14.2 million for the 12 months of 2023 compared to the same periods in 2022. They were mainly driven by interest income on cash investments. Pre-tax losses were €86.5 million for the fourth quarter and €260 million for the full year of 2023. With this overview, I would like to hand back the call to Alexander for the summary of today's key messages.
Alexander Zehnder: Thank you, Pierre. So, building on our achievements in 2023, we have kicked off 2024 by delivering progress across several key areas and positioned ourselves for continued success throughout the year. Foremost, we have launched a comprehensive organizational redesign initiatives that trims residual endemic era infrastructure, streamlines our organization, and applies increased financial discipline. We expect these measures to significantly improve our operational efficiency and agility and contribute to a stronger financial performance in 2024. This expectation is reflected in the extension of our cash runway for mid-2025 into the fourth quarter of 2025. In the clinic, our infectious disease vaccine development pipeline continues to make significant progress, marked by most recently by a start of a new study in Avian flu together with GSK.
This is complemented by key data milestones in the Phase 2 studies for COVID-19 and seasonal flu confirming the competitiveness of our proprietary mRNA technology platform. In oncology cornerstone of our strategy the establishment of our cancer vaccine collaboration with MD Anderson and the advancement of our Phase 1 study in patient with glioblastoma, both reinforce our commitment to staying at the forefront of oncology innovation. The pandemic dramatically illustrated the utility of mRNA technology and we believe that mRNA most significant promises still lays ahead of us and CureVac is rescued in its mission to bring that tremendous potential to life. And with this I would like to conclude our presentation and I would now open the webcast to your questions.
Operator: Thank you. At this time, we will be conducting a question-and-answer session. [Operator Instructions] And our first question comes from the line of Evan Wang with Guggenheim. Please proceed with your question.
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