10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 10-Q

 

 

(Mark One)

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2022

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ___________ to ____________

Commission File Number: 001-39323

 

 

VAXCYTE, INC.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

46-4233385

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

825 Industrial Road, Suite 300

San Carlos, California

94070

(Address of principal executive offices)

(Zip Code)

 

Registrant’s telephone number, including area code: (650) 837-0111

 

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock, $0.001 par value per share

 

PCVX

 

The Nasdaq Stock Market

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

 

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

 

Smaller reporting company

 

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No ☒

As of May 5, 2022, the registrant had 58,313,828 shares of common stock, $0.001 par value per share, outstanding.

 


Table of Contents

 

 

 

Page

PART I.

FINANCIAL INFORMATION

 

Item 1.

Financial Statements (unaudited)

1

 

Condensed Balance Sheets

1

 

Condensed Statements of Operations

2

 

Condensed Statements of Comprehensive Loss

3

 

Condensed Statements of Stockholders’ Equity

4

 

Condensed Statements of Cash Flows

6

 

Notes to Unaudited Condensed Financial Statements

7

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

21

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

35

Item 4.

Controls and Procedures

35

PART II.

OTHER INFORMATION

 

Item 1.

Legal Proceedings

37

Item 1A.

Risk Factors

37

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

81

Item 3.

Defaults Upon Senior Securities

82

Item 4.

Mine Safety Disclosures

82

Item 5.

Other Information

82

Item 6.

Exhibits

83

Signatures

84

 

Unless the context otherwise requires, all references in this Quarterly Report on Form 10-Q to “we,” “us,” “our,” “our company” and “Vaxcyte” refer to Vaxcyte, Inc.

 

“Vaxcyte,” “eCRM,” and other trademarks of ours appearing in this report are our property. This report contains additional trade names and trademarks of other companies. We do not intend our use or display of other companies’ trade names or trademarks to imply an endorsement or sponsorship of us by such companies, or any relationship with any of these companies.

i


Special Note Regarding Forward-Looking Statements

 

This Quarterly Report on Form 10-Q contains forward-looking statements about us and our industry that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our future results of operations or financial condition, business strategy and plans and objectives of management for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements because they contain words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “seek,” “should,” “target,” “will,” or “would,” or the negative of these words or other similar terms or expressions. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:

 

our expectations regarding the potential benefits, spectrum coverage and immunogenicity of our vaccine candidates;
our expectations regarding our preclinical study results potentially being predictive of clinical study results;
our belief that our pneumococcal conjugate vaccine candidates could receive regulatory approval based on a demonstration of non-inferiority to the standard of care using well-defined surrogate immune endpoints rather than requiring clinical field efficacy studies;
the timing of the initiation, progress and potential results of our preclinical studies, clinical trials and our research and development programs;
our ability to advance vaccine candidates into, and successfully complete, preclinical studies and clinical trials;
the commercialization of our vaccine candidates, if approved;
estimates of our future expenses, capital requirements and our needs for additional financing;
our ability to compete effectively with existing competitors and new market entrants;
our ability to establish and maintain intellectual property protection for our products or avoid claims of infringement;
our and our third-party manufacturers’ manufacturing capabilities and the scalable nature of our manufacturing process;
potential effects of extensive government regulation;
the pricing, coverage and reimbursement of our vaccine candidates, if approved;
our ability and the ability of our third-party contract manufacturers to operate and continue operations in light of the COVID-19 pandemic;
our ability to hire and retain key personnel;
our ability to obtain additional financing; and
the volatility of the trading price of our common stock.

ii


Actual events or results may differ from those expressed in forward-looking statements. You should not rely on forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition and operating results. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described in the section titled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q. The results, events and circumstances reflected in the forward-looking statements may not be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based on information available to us as of the date of this Quarterly Report on Form 10-Q. While we believe that information provides a reasonable basis for these statements, that information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely on these statements.

The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments.

iii


Summary of Risks Affecting Our Business

 

Our business is subject to numerous risks and uncertainties, including those discussed more fully in the section titled “Risk Factors” in this Quarterly Report on Form 10-Q. These risks include, but are not limited to, the following:

We are in the early stages of vaccine development and have a very limited operating history and no products approved for commercial sale, which may make it difficult for you to evaluate the success of our business to date and to assess our future viability.
We have incurred significant net losses since inception and anticipate that we will continue to incur substantial net losses for the foreseeable future. We currently have no source of product revenue and may never achieve profitability. Our stock is a highly speculative investment.
We will require substantial additional funding to finance our operations, which may not be available to us on acceptable terms, or at all. If we are unable to raise additional capital when needed, we could be forced to delay, reduce or terminate certain of our development programs or other operations.
Our approach to the discovery and development of our vaccine candidates is based on novel technologies that are unproven, which may expose us to unforeseen risks, require us to modify processes, and make it difficult to predict the time and cost of vaccine candidate development and the timing to apply for and obtain regulatory approvals.
Our vaccine candidates have never been tested in human subjects and are in early clinical or preclinical stages of development and may fail in development or suffer delays that materially and adversely affect their commercial viability. If we are unable to complete development of or commercialize our vaccine candidates or experience significant delays in doing so, our business would be materially harmed.
The U.S. Food and Drug Administration ("FDA") may disagree with our regulatory plan, and we may fail to obtain regulatory approval of our vaccine candidates.
Our business is highly dependent on the success of VAX-24, which is in the early stages of development. If we are unable to obtain approval for VAX-24 and effectively commercialize VAX-24, our business would be significantly harmed.
Our primary competitors have significantly greater resources and experience than we do, which may make it difficult for us to successfully develop our vaccine candidates, or may result in others discovering, developing or commercializing products before or more successfully than us.
We may not be successful in our efforts to use our cell-free protein synthesis platform to expand our pipeline of vaccine candidates and develop marketable products.
We currently rely on third-party manufacturing and supply partners, including Lonza Ltd. ("Lonza") and Sutro Biopharma, Inc. ("Sutro Biopharma") to supply raw materials and components for, and manufacture of, our preclinical and clinical supplies as well as our vaccine candidates. Our inability to procure necessary raw materials or to have sufficient quantities of preclinical and clinical supplies or the inability to have our vaccine candidates manufactured, including delays or interruptions at our third-party manufacturers, or our failure to comply with applicable regulatory requirements or to supply sufficient quantities at acceptable quality levels or prices, or at all, would materially and adversely affect our business.
Health epidemics, including the effects of the ongoing COVID-19 pandemic, have impacted and could continue to impact our business, including in regions where we or third parties on which we rely have significant manufacturing facilities, concentrations of potential clinical trial sites or other business operations.
The FDA regulatory approval process is lengthy and time-consuming, and we may experience significant delays in the clinical development and regulatory approval of our vaccine candidates.
If we are unable to obtain and maintain patent protection for our technology and products, or if the scope of the patent protection obtained is not sufficiently broad, we may not be able to compete effectively in our markets.

iv


PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

VAXCYTE, INC.

Condensed Balance Sheets

(in thousands, except share and per share data)

(unaudited)

 

 

 

March 31, 2022

 

 

December 31, 2021

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

201,741

 

 

$

68,985

 

Short-term investments

 

 

132,900

 

 

 

176,985

 

Prepaid expenses and other current assets

 

 

7,582

 

 

 

10,378

 

Total current assets

 

 

342,223

 

 

 

256,348

 

Property and equipment, net

 

 

10,138

 

 

 

7,954

 

Operating lease right-of-use assets

 

 

26,121

 

 

 

27,958

 

Long-term investments

 

 

17,697

 

 

 

27,117

 

Restricted cash

 

 

871

 

 

 

871

 

Other assets

 

 

5,667

 

 

 

4,089

 

Total noncurrent assets

 

 

60,494

 

 

 

67,989

 

Total assets

 

$

402,717

 

 

$

324,337

 

 

 

 

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

4,801

 

 

$

6,758

 

Accrued compensation

 

 

1,270

 

 

 

3,455

 

Accrued manufacturing expenses

 

 

6,856

 

 

 

4,440

 

Accrued expenses

 

 

7,744

 

 

 

8,787

 

Operating lease liabilities — current

 

 

6,578

 

 

 

5,276

 

Total current liabilities

 

 

27,249

 

 

 

28,716

 

Operating lease liabilities — long-term

 

 

15,832

 

 

 

11,507

 

Other liabilities

 

 

93

 

 

 

96

 

Total liabilities

 

 

43,174

 

 

 

40,319

 

 

 

 

 

 

 

 

Commitments and contingencies (Note 6)

 

 

 

 

 

 

Stockholders' Equity

 

 

 

 

 

 

Preferred stock, $0.001 par value — 10,000,000 shares authorized at
   March 31, 2022 and December 31, 2021;
no shares issued and outstanding
   at March 31, 2022 and December 31, 2021

 

 

 

 

 

 

Common stock, $0.001 par value — 500,000,000 shares authorized at
   March 31, 2022 and December 31, 2021;
56,499,544 and 53,031,978 shares
   issued and outstanding at March 31, 2022 and December 31, 2021, respectively

 

 

59

 

 

 

56

 

Additional paid-in capital

 

 

697,944

 

 

 

582,844

 

Accumulated other comprehensive loss

 

 

(833

)

 

 

(241

)

Accumulated deficit

 

 

(337,627

)

 

 

(298,641

)

Total stockholders' equity

 

 

359,543

 

 

 

284,018

 

Total liabilities and stockholders' equity

 

$

402,717

 

 

$

324,337

 

 

The accompanying notes are an integral part of these unaudited condensed financial statements.

1


VAXCYTE, INC.

Condensed Statements of Operations

(in thousands, except share and per share data)

(unaudited)

 

 

 

Three Months Ended
March 31,

 

 

 

2022

 

 

2021

 

Operating expenses:

 

 

 

 

 

 

Research and development (including related party expenses of $0 
   and $
1,612 for the three months ended March 31, 2022 and 2021,
   respectively

 

$

31,678

 

 

$

17,258

 

General and administrative

 

 

7,543

 

 

 

5,885

 

Total operating expenses

 

 

39,221

 

 

 

23,143

 

Loss from operations

 

 

(39,221

)

 

 

(23,143

)

Other income (expense), net:

 

 

 

 

 

 

Interest income

 

 

134

 

 

 

61

 

Grant income

 

 

160

 

 

 

 

Realized loss on marketable securities

 

 

(65

)

 

 

 

Foreign currency transaction gains

 

 

6

 

 

 

1,862

 

Total other income (expense), net

 

 

235

 

 

 

1,923

 

Net loss

 

$

(38,986

)

 

$

(21,220

)

Net loss per share, basic and diluted

 

$

(0.68

)

 

$

(0.41

)

Weighted-average shares outstanding, basic and diluted

 

 

57,547,808

 

 

 

51,174,978

 

 

The accompanying notes are an integral part of these unaudited condensed financial statements.

2


VAXCYTE, INC.

Condensed Statements of Comprehensive Loss

(in thousands, except share and per share data)

(unaudited)

 

 

 

 

Three Months Ended
March 31,

 

 

 

2022

 

 

2021

 

Net Loss

 

$

(38,986

)

 

$

(21,220

)

Other comprehensive loss:

 

 

 

 

 

 

Unrealized losses on investments

 

 

(592

)

 

 

(47

)

Comprehensive loss

 

$

(39,578

)

 

$

(21,267

)

 

The accompanying notes are an integral part of these unaudited condensed financial statements.

 

3


VAXCYTE, INC.

Condensed Statements of Stockholders’ Equity

(in thousands, except share data)

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

Other

 

 

Total

 

 

 

Common Stock

 

 

Paid-in

 

 

Accumulated

 

 

Comprehensive

 

 

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Loss

 

 

Equity

 

Balance — December 31, 2021

 

 

53,031,978

 

 

$

56

 

 

$

582,844

 

 

$

(298,641

)

 

$

(241

)

 

$

284,018

 

Exercise of stock options

 

 

91,044

 

 

 

 

 

 

282

 

 

 

 

 

 

 

 

 

282

 

Vesting of early exercised stock options

 

 

 

 

 

 

 

 

2

 

 

 

 

 

 

 

 

 

2

 

Issuance of common stock and pre-funded
   warrants in connection with
   follow-on public offering, net of
   issuance costs of $
7,376

 

 

3,250,000

 

 

 

3

 

 

 

107,619

 

 

 

 

 

 

 

 

 

107,622

 

Issuance of common stock in connection
   with at-the-market offering, net of
   issuance costs of $
114

 

 

126,522

 

 

 

 

 

 

3,098

 

 

 

 

 

 

 

 

 

3,098

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

4,099

 

 

 

 

 

 

 

 

 

4,099

 

Unrealized losses on investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(592

)

 

 

(592

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

(38,986

)

 

 

 

 

 

(38,986

)

Balance — March 31, 2022

 

 

56,499,544

 

 

$

59

 

 

$

697,944

 

 

$

(337,627

)

 

$

(833

)

 

$

359,543

 

 

The accompanying notes are an integral part of these unaudited condensed financial statements.

4


VAXCYTE, INC.

Condensed Statements of Stockholders’ Equity

(in thousands, except share data)

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Other

 

 

Total

 

 

 

 

Common Stock

 

 

 

Paid-in

 

 

 

Accumulated

 

 

Comprehensive

 

 

Stockholders’

 

 

 

 

Shares

 

 

Amount

 

 

 

Capital

 

 

 

Deficit

 

 

Loss

 

 

Equity

 

 

Balance — December 31, 2020

 

 

51,071,593

 

 

$

54

 

 

 

$

544,353

 

 

 

$

(198,564

)

 

$

 

 

$

345,843

 

 

Exercise of stock options

 

 

267,208

 

 

 

 

 

 

 

487

 

 

 

 

 

 

 

 

 

 

487

 

 

Vesting of early exercised
   stock options

 

 

 

 

 

 

 

 

 

9

 

 

 

 

 

 

 

 

 

 

9

 

 

Stock-based compensation
   expense

 

 

 

 

 

 

 

 

 

1,865

 

 

 

 

 

 

 

 

 

 

1,865

 

 

Unrealized losses on investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(47

)

 

 

(47

)

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

(21,220

)

 

 

 

 

 

(21,220

)

 

Balance — March 31, 2021

 

 

51,338,801

 

 

$

54

 

 

 

$

546,714

 

 

 

$

(219,784

)

 

$

(47

)

 

$

326,937

 

 

 

The accompanying notes are an integral part of these unaudited condensed financial statements.

5


 

VAXCYTE, INC.

Condensed Statements of Cash Flows

(in thousands)

(unaudited)

 

 

Three Months Ended March 31,

 

 

 

2022

 

 

2021

 

Cash flows from operating activities:

 

 

 

 

 

 

Net loss

 

$

(38,986

)

 

$

(21,220

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

582

 

 

 

347

 

Stock-based compensation expense

 

 

4,099

 

 

 

1,865

 

Amortization of operating right-of-use assets

 

 

1,787

 

 

 

180

 

Net amortization of premiums on investments

 

 

321

 

 

 

151

 

Loss on disposal of fixed assets

 

 

44

 

 

 

 

Asset impairment charges

 

 

57

 

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

2,791

 

 

 

(557

)

Other assets

 

 

(1,577

)

 

 

(441

)

Operating lease liabilities

 

 

5,619

 

 

 

(105

)

Accounts payable

 

 

(1,933

)

 

 

2,185

 

Accrued compensation

 

 

(2,185

)

 

 

723

 

Accrued manufacturing expenses

 

 

2,416

 

 

 

2,525

 

Accrued expenses

 

 

(737

)

 

 

1,142

 

Net cash used in operating activities

 

 

(27,702

)

 

 

(13,205

)

Cash flows from investing activities:

 

 

 

 

 

 

Purchases of property and equipment

 

 

(2,920

)

 

 

(1,246

)

Proceeds from sale of property and equipment

 

 

7

 

 

 

 

Purchases of investments

 

 

(6,972

)

 

 

(172,145

)

Maturities of investments

 

 

59,551

 

 

 

 

Net cash provided by (used in) investing activities

 

 

49,666

 

 

 

(173,391

)

Cash flows from financing activities:

 

 

 

 

 

 

Proceeds from follow-on public offering, net of underwriters' commissions and discounts

 

 

107,622

 

 

 

 

Proceeds from exercise of common stock options

 

 

282

 

 

 

487

 

Proceeds from issuance of common stock related to at-the-market offering, net of issuance costs

 

 

3,115

 

 

 

 

Net cash provided by financing activities

 

 

111,019

 

 

 

487

 

Effect of exchange rate changes on cash and cash equivalents

 

 

(227

)

 

 

(281

)

Net increase (decrease) in cash, cash equivalents and restricted cash

 

 

132,756

 

 

 

(186,390

)

Cash, cash equivalents and restricted cash, beginning of period

 

 

69,856

 

 

 

386,200

 

Cash, cash equivalents and restricted cash, end of period

 

$

202,612

 

 

$

199,810

 

Supplemental disclosures of non-cash investing and financing activities:

 

 

 

 

 

 

Purchases of property and equipment recorded in accounts payable and accrued expenses

 

$

664

 

 

$

1,537

 

Deferred offering costs included in accounts payable and accrued expenses

 

$

23

 

 

$

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these unaudited condensed financial statements.

6


 

VAXCYTE, INC.

Notes to Unaudited Condensed Financial Statements

1. Company Organization and Nature of Business

Vaxcyte, Inc. (“we,” “us,” “the Company,” or “Vaxcyte”), headquartered in San Carlos, California, was incorporated in the state of Delaware on November 27, 2013 as SutroVax, Inc. and we changed our name to Vaxcyte, Inc. on May 15, 2020. We are a clinical-stage vaccine innovation company engineering high-fidelity vaccines to protect humankind from the consequences of bacterial diseases. We are developing broad-spectrum conjugate and novel protein vaccines to prevent or treat bacterial infectious diseases. We are re-engineering the way highly complex vaccines are made through modern synthetic techniques, including advanced chemistry and the XpressCF cell-free protein synthesis platform, exclusively licensed from Sutro Biopharma, Inc. Unlike conventional cell-based approaches, our system for producing difficult-to-make proteins and antigens is intended to accelerate our ability to efficiently create and deliver high-fidelity vaccines with enhanced immunological benefits. Our pipeline includes pneumococcal conjugate vaccine ("PCV") candidates that we believe are among the most broad-spectrum PCV candidates currently in development, targeting the approximately $7 billion global pneumococcal vaccine market. Our lead vaccine candidate, VAX-24, is a 24-valent broad-spectrum investigational PCV being developed for the prevention of invasive pneumococcal disease ("IPD") and pneumonia. On January 6, 2022, we announced that the U.S. Food and Drug Administration ("FDA"), cleared our investigational new drug ("IND") application for VAX-24 in adults. On February 23, 2022, we announced the initiation of our Phase 1/2 clinical proof-of-concept study in adults 18 to 64 years of age. The Phase 1 portion of the study includes 64 healthy adults 18 to 49 years of age and the Phase 2 portion of the study includes approximately 800 healthy adults 50 to 64 years of age. On April 4, 2022, we announced the initiation of the Phase 2 portion of this study in adults 50 to 64 years of age. The initiation of the Phase 2 portion of the study occurred after an independent Data Monitoring Committee completed a prespecified review of Phase 1 safety and tolerability data and recommended that the study progress as planned. We expect to announce topline safety, tolerability and immunogenicity results from the Phase 1 and Phase 2 portions of this study by the end of 2022. Based on the successful completion of the Phase 1 portion of this study, we expect to begin enrollment in a separate Phase 2 study in healthy adults aged 65 and older and to announce topline safety, tolerability and immunogenicity results from this study in the first half of 2023. Subject to a pre-IND meeting with the FDA and the successful topline results of the Phase 1/2 proof-of-concept study in adults 18 to 64 years of age, we anticipate submitting a pediatric IND application to the FDA for VAX-24 in the first half of 2023. Our second PCV candidate, VAX-XP, leverages our scalable and modular platform and builds on the technical proof of concept established by VAX-24 and is designed to expand the breadth of coverage to greater than 30 strains without compromising immunogenicity due to carrier suppression. In addition to our PCV franchise, our pipeline includes VAX-A1, a novel conjugate vaccine candidate designed to prevent Group A Strep; VAX-PG, a novel protein vaccine candidate targeting the keystone pathogen responsible for periodontitis; and other discovery-stage programs. Our primary activities since incorporation have been to perform research and development, undertake preclinical studies and conduct manufacturing activities in support of our product development efforts; organize and staff the Company; establish our intellectual property portfolio; and raise capital to support and expand such activities.

Follow-on Offering

In January 2022, we completed an underwritten public offering in which we issued 2,500,000 shares of our common stock at a price of $20.00 per share, and pre-funded warrants to purchase 2,500,000 shares of our common stock at a price of $19.999 per underlying share. In February 2022, the underwriters exercised their option to purchase an additional 750,000 shares of common stock. In aggregate, we received approximately $107.6 million in net proceeds after deducting underwriting discounts and commissions and other offering expenses payable by us.

2. Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation

These condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, or U.S. GAAP, and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with U.S. GAAP have been condensed or omitted in accordance with such rules and regulations.

Unaudited Interim Condensed Financial Statements

The condensed balance sheet as of March 31, 2022, the condensed statements of operations, comprehensive loss and stockholders’ equity for the three months ended March 31, 2022 and 2021 and the condensed statements of cash flows for the three months ended March 31, 2022 and 2021 are unaudited. The unaudited interim condensed financial statements have been prepared on the same basis as the audited annual financial statements and reflect, in the opinion of management, all adjustments of a normal and recurring nature that are necessary for the fair statement of our financial information. The financial data disclosed in the footnotes to

7


 

the condensed financial statements related to the three months ended March 31, 2022 and 2021 are also unaudited. The results of operations for the three months ended March 31, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022 or for any other future annual or interim period. These interim condensed financial statements should be read in conjunction with our audited financial statements and related notes thereto for the year ended December 31, 2021 included in our Annual Report on Form 10-K filed with the SEC on February 28, 2022.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and expenses and the disclosure of contingent assets and liabilities at the date of the financial statements. On an ongoing basis, we evaluate our estimates and assumptions, including those related to stock-based compensation expense, accruals for certain research and development costs, the determination of our incremental borrowing rate, the valuation of deferred tax assets and income taxes. Management bases our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ materially from those estimates.

Cash, Cash Equivalents and Restricted Cash

We consider all highly liquid investments purchased with original maturities of three months or less from the date of purchase to be cash and cash equivalents. Cash equivalents consist primarily of amounts invested in money market accounts and commercial paper and are stated at their fair values. Restricted cash consists of a standby letter of credit, which was issued in the first quarter of 2021, that serves as collateral for the lease agreement for our new corporate headquarters. Cash, cash equivalents and restricted cash as reported within the condensed balance sheets that total to the same amounts shown in the condensed statement of cash flows as follows:

 

 

 

March 31,

 

 

December 31,

 

 

 

2022

 

 

2021

 

 

 

(in thousands)

 

Cash and cash equivalents

 

$

201,741

 

 

$

68,985

 

Restricted cash

 

 

871

 

 

 

871

 

Cash, cash equivalents and restricted cash

 

$

202,612

 

 

$

69,856

 

Investments

Our investments have been classified and accounted for as available-for-sale securities. Fixed income securities consist of U.S. Treasury securities, U.S. government agency securities, corporate debt, commercial paper and asset-backed securities. These securities are recorded on the condensed balance sheets at fair value. Unrealized gains and losses on these securities are included as a separate component of accumulated other comprehensive loss. The cost of investment securities is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization and accretion are included in other income (expense), net. Realized gains and losses and declines in fair value judged to be other-than-temporary, if any, are also included in other income (expense), net. We evaluate securities for other-than-temporary impairment at the balance sheet date. Declines in fair value determined to be other-than-temporary are included in other income (expense), net. We classify our investments as short or long term primarily based on the remaining contractual maturity of the securities.

Net Loss Per Share

Basic net loss per share is calculated by dividing the net loss by the weighted average of shares of common stock outstanding, including pre-funded warrants issued, during the period, without consideration for common stock equivalents. Shares of common stock into which the pre-funded warrants may be exercised are considered outstanding for the purposes of computing net loss per share because the shares may be issued for little consideration, are fully vested and are exercisable after the original issuance date. Diluted net loss per share is the same as basic net loss per share, since the effects of potentially dilutive securities are antidilutive given the net loss for each period presented.

Deferred Offering Costs

Deferred offering costs consist of fees and expenses incurred in connection with the sale of our common stock in equity transactions, including legal, accounting, printing and other issuance-related costs. Prior to the completion of such equity transactions,

8


 

these deferred offering costs were included in Other assets on the condensed balance sheet. In connection with and as of the closing of such equity transactions, these costs were reclassified to Additional paid-in capital, representing a reduction to the gross proceeds. As of March 31, 2022 and December 31, 2021, we recorded deferred offering costs of $0.5 million and $0.5 million, respectively, in Other assets on the condensed balance sheets.

Leases

Under Financial Accounting Standards Board ("FASB") Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842) and its associated amendments (“ASC 842”), we determine if an arrangement is a lease at inception. In addition, we determine whether a lease meets the classification criteria of a finance or operating lease at the lease commencement date considering whether: (i) the lease transfers ownership of the underlying asset to the lessee at the end of the lease term; (ii) the lease grants the lessee an option to purchase the underlying asset that the lessee is reasonably certain to exercise; (iii) the lease term is for a major part of the remaining economic life of the underlying asset; (iv) the present value of the sum of the lease payments and residual value guaranteed by the lessee equals or exceeds substantially all of the fair value of the underlying asset; and (v) the underlying asset is such a specialized nature that it is expected to have no alternative use to the lessor at the end of the lease term. As of March 31, 2022, our lease population consisted of real estate operating leases. As of March 31, 2022, we did not have finance leases.

Operating leases are included in Operating lease right-of-use ("ROU") assets, Operating lease liabilities — current and Operating lease liabilities — long term in our condensed balance sheet. ROU assets represent our right to use the underlying assets for the lease term and lease liabilities represent our obligation to make lease payments arising from the leases. Operating lease ROU assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. In determining the present value of lease payments, if the rate implicit in the lease is not readily determinable, we use our incremental borrowing rate based on the information available at the lease commencement date. We determine the incremental borrowing rate based on an analysis of corporate bond yields with a credit rating similar to us. The determination of our incremental borrowing rate requires management judgment, including development of a synthetic credit rating and cost of debt, as we currently do not carry any debt. We believe that the estimates used in determining the incremental borrowing rate are reasonable based upon current facts and circumstances. Applying different judgment to the same facts and circumstances could yield a different incremental borrowing rate. The operating lease ROU assets also include adjustments for prepayments and accrued lease payments and exclude lease incentives. ROU assets and lease liabilities may include options to extend or terminate leases if it is reasonably certain that we will exercise such options. Lease payments which are fixed and determinable are amortized as rent and lease expense on a straight-line basis over the expected lease term. Variable lease costs, which are dependent on usage, a rate or index, including common area maintenance charges, are expensed as incurred. Lease agreements that include lease and non-lease components are accounted for as a single lease component. Lease agreements with non-cancelable terms of less than 12 months are not recorded on our condensed balance sheets.

Concentration of Credit Risk and Other Risks and Uncertainties

Financial instruments that potentially subject us to a concentration of credit risk consist primarily of cash and cash equivalents and investments. We invest in money market funds, U.S. Treasury securities, U.S. government agency securities, corporate debt, commercial paper and asset-backed securities. We maintain bank deposits in federally insured financial institutions and these deposits may exceed federally-insured limits. We are exposed to credit risk in the event of a default by the financial institutions holding our cash and issuers of investments to the extent recorded on the condensed balance sheets. Our investment policy limits investments to money market funds, certain types of debt securities issued by the U.S. Government and its agencies, corporate debt, commercial paper and asset-backed securities, and places restrictions on the credit ratings, maturities and concentration by type and issuer. We have not experienced any significant losses on our deposits of cash, cash equivalents or investments.

We are subject to supplier concentration risk from our suppliers. We source our critical raw materials from a sole source supplier, Sutro Biopharma, Inc. (“Sutro Biopharma”). We also use one contract manufacturing organization (“CMO”), Lonza Ltd. (“Lonza”), to handle most of our manufacturing activities. If we were to experience disruptions in raw materials supplied by Sutro Biopharma, or in manufacturing activities at Lonza, we may experience significant delays in our product development timelines and may incur substantial costs to secure alternative sources of raw materials or manufacturing.

Our future results of operations involve a number of other risks and uncertainties. Factors that could affect our future operating results and cause actual results to vary materially from expectations include, but are not limited to: our early stages of clinical vaccine development; our ability to advance vaccine candidates into, and successfully complete, clinical trials on the timelines we project; our ability to adequately demonstrate sufficient safety and efficacy of our vaccine candidates; our ability to enroll subjects in our ongoing and future clinical trials; our ability to successfully manufacture and supply our vaccine candidates for clinical trials; our ability to obtain additional capital to finance our operations; our ability to obtain, maintain and protect our intellectual property rights; developments relating to our competitors and our industry, including competing vaccine candidates; general and market conditions; and other risks and uncertainties, including those more fully described in the “Risk Factors” section of this Quarterly Report on Form 10-Q.

9


 

Recently Adopted Accounting Pronouncements

 

In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832): Disclosure by Business Entities about Government Assistance, which requires disclosures about transactions with a government entity that are accounted for by applying a grant or contribution accounting model by analogy to other accounting guidance, such as a grant model within International Accounting Standard 20, Accounting for Government Grants and Disclosure of Government Assistance (Subtopic 958-605), Not-For-Profit Entities - Revenue Recognition. The required disclosures include (i) the nature of the transaction and the related accounting policy used to account for the transaction, (ii) the financial statement line items that are affected by the transactions and (iii) the significant terms and conditions of the transactions, including commitments and contingencies. This standard is effective for annual periods beginning after December 15, 2021, with early adoption and retrospective or prospective application permitted. This standard is effective for us on January 1, 2022 and only impacts annual financial statement footnote disclosures. In Note 10, "Funding Arrangement," we included disclosures on our cost-reimbursement research award from Combating Antibiotic Resistant Bacteria Biopharmaceutical Accelerator ("CARB-X"). The adoption of this standard did not have a material impact on our financial statements.

Recently Issued Accounting Pronouncements – Not Yet Adopted

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments and has subsequently issued related amendments, collectively referred to as “Topic 326.” Topic 326 requires that financial assets measured at amortized cost be presented at the net amount expected to be collected. The measurement of expected credit losses is based on historical experience, current conditions and reasonable and supportable forecasts that affect collectability. Topic 326 also eliminates the concept of “other-than-temporary” impairment when evaluating available-for-sale debt securities and instead focuses on determining whether any impairment is a result of a credit loss or other factors. An entity will recognize an allowance for credit losses on available-for-sale debt securities rather than an other-than-temporary impairment that reduces the cost basis of the investment. Topic 326 is effective for fiscal years beginning after December 15, 2022 and interim periods within those fiscal years. Early adoption is permitted. We are currently assessing the impact of this standard to our financial statements and related disclosures. 

3. Fair Value Measurements and Fair Value of Financial Instruments

Assets and liabilities recorded at fair value on a recurring basis in the condensed balance sheets, as well as assets and liabilities measured at fair value on a non-recurring basis or disclosed at fair value, are categorized based upon the level of judgment associated with inputs used to measure their fair values. The accounting guidance for fair value provides a framework for measuring fair value and requires certain disclosures about how fair value is determined. Fair value is defined as the price that would be received upon the sale of an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The accounting guidance also establishes a three-level valuation hierarchy that prioritizes the inputs to valuation techniques used to measure fair value based upon whether such inputs are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions made by the reporting entity. The three-level hierarchy for the inputs to valuation techniques is briefly summarized as follows:

Level 1—Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date;

Level 2—Inputs are observable, unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities; and

Level 3Unobservable inputs that are significant to the measurement of the fair value of the assets or liabilities that are supported by little or no market data.

Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires management to make judgments and consider factors specific to the asset or liability. Changes in the ability to observe valuation inputs may result in a reclassification of levels of certain securities within the fair value hierarchy. We recognize transfers into and out of levels within the fair value hierarchy in the period in which the actual event or change in circumstances that caused the transfer occurs.

Level 1 securities consist of highly liquid money market funds for which the carrying amounts approximate their fair values due to their short maturities. U.S. Treasury securities are valued using Level 1 inputs based on unadjusted, quoted prices in active markets that are observable at the measurement date for identical assets or liabilities. Level 2 securities, consisting of corporate debt, commercial paper, U.S. government agency securities and asset-backed securities, are measured based on other observable inputs, including broker or dealer quotations or alternative pricing sources. When quoted prices in active markets for identical assets

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or liabilities are not available, we rely on non-binding quotes from our investment managers, which are based on proprietary valuation models of independent pricing services. These models generally use inputs such as observable market data, quoted market prices for similar instruments or historical pricing trends of securities relative to our peers. To validate the fair value determinations provided by our investment managers, we review the pricing movement in the context of overall market trends and trading information from our investment managers. In addition, we assess the inputs and methods used in determining the fair value in order to determine the classification of securities in the fair value hierarchy. We had no Level 3 securities as of March 31, 2022 or December 31, 2021.

 

There were no transfers within the hierarchies during the three months ended March 31, 2022 or the year ended December 31, 2021.

The following tables set forth our financial instruments measured at fair value on a recurring basis by level within the fair value hierarchy at March 31, 2022 and December 31, 2021:

 

 

 

 

March 31, 2022

 

 

Fair Value
Hierarchy Level

 

Amortized
Cost

 

 

Gross
Unrealized Gains

 

 

Gross
Unrealized Losses

 

 

Fair
Value

 

Assets

 

 

(in thousands)

 

Cash and cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash

Level 1

 

$

140,164

 

 

$

 

 

$

 

 

$

140,164

 

Money market funds

Level 1

 

 

23,104

 

 

 

 

 

 

 

 

 

23,104

 

U.S. Treasury securities

Level 1

 

 

3,000

 

 

 

 

 

 

 

 

 

3,000

 

Commercial paper

Level 2

 

 

35,476

 

 

 

 

 

 

(3

)

 

 

35,473

 

Total cash and cash equivalents

 

 

 

201,744

 

 

 

 

 

 

(3

)

 

 

201,741

 

Investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury securities

Level 1

 

 

45,191