SEC Filing - Vaxcyte, Inc.

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10-Q

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, 2023


☐	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.

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 4, 2023, the registrant had 93,706,790 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	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	39
Item 4.	Controls and Procedures	40
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	42
Item 1A.	Risk Factors	42
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	89
Item 3.	Defaults Upon Senior Securities	89
Item 4.	Mine Safety Disclosures	89
Item 5.	Other Information	89
Item 6.	Exhibits	90
Signatures		91

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.

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 of 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.

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 clinical or preclinical phase 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 are in 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, or 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 our pneumococcal conjugate vaccine candidates – VAX-24, which is in clinical development, and VAX-31, which is in preclinical development. If we are unable to successfully develop, obtain approval for and effectively commercialize VAX-24 or VAX-31, 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. and Sutro Biopharma, Inc. 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.

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

VAXCYTE, INC.

Condensed Balance Sheets

(in thousands, except share and per share data)

(unaudited)


	March 31, 2023			December 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	380,451		$	834,657
Short-term investments		441,587			96,719
Prepaid expenses and other current assets		18,636			11,179
Total current assets		840,674			942,555
Property and equipment, net		15,205			10,360
Operating lease right-of-use assets		19,658			21,288
Long-term investments		127,815			26,549
Restricted cash		871			871
Other assets		3,940			4,555
Total noncurrent assets		167,489			63,623
Total assets	$	1,008,163		$	1,006,178

Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	11,615		$	9,795
Accrued compensation		1,879			1,180
Accrued manufacturing expenses		14,955			8,265
Accrued expenses		18,351			15,375
Operating lease liabilities — current		5,947			5,910
Total current liabilities		52,747			40,525
Operating lease liabilities — long-term		10,638			12,031
Other liabilities		7			9
Total liabilities		63,392			52,565

Commitments and contingencies (Note 6)
Stockholders' Equity
Preferred stock, $0.001 par value — 10,000,000 shares authorized at March 31, 2023 and December 31, 2022; no shares issued and outstanding at March 31, 2023 and December 31, 2022		—			—
Common stock, $0.001 par value — 500,000,000 shares authorized at March 31, 2023 and December 31, 2022; 80,640,851 and 79,470,670 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively		84			82
Additional paid-in capital		1,527,228			1,476,018
Accumulated other comprehensive gain (loss)		47			(361	)
Accumulated deficit		(582,588	)		(522,126	)
Total stockholders' equity		944,771			953,613
Total liabilities and stockholders' equity	$	1,008,163		$	1,006,178

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

VAXCYTE, INC.

Condensed Statements of Operations

(in thousands, except share and per share data)

(unaudited)


	Three Months Ended March 31,
	2023			2022
Operating expenses:
Research and development	$	58,080		$	31,678
General and administrative		13,112			7,543
Total operating expenses		71,192			39,221
Loss from operations		(71,192	)		(39,221	)
Other income (expense), net:
Interest income		10,393			134
Grant income		654			160
Realized losses on marketable securities		—			(65	)
Foreign currency transaction (losses) gains		(317	)		6
Total other income (expense), net		10,730			235
Net loss	$	(60,462	)	$	(38,986	)
Net loss per share, basic and diluted	$	(0.70	)	$	(0.68	)
Weighted-average shares outstanding, basic and diluted		86,206,817			57,547,808

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

VAXCYTE, INC.

Condensed Statements of Comprehensive Loss

(in thousands)

(unaudited)


	Three Months Ended March 31,
	2023			2022
Net Loss	$	(60,462	)	$	(38,986	)
Other comprehensive loss:
Unrealized gains (losses) on investments		408			(592	)
Comprehensive loss	$	(60,054	)	$	(39,578	)

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

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			Gain (Loss)			Equity
Balance — December 31, 2022		79,470,670	$	82	$	1,476,018		$	(522,126	)	$	(361	)	$	953,613
Exercise of stock options		100,964		1		501			—			—			502
Issuance of common stock in connection with at-the-market offering, net of commissions and offering expenses of $1,237		1,041,536		1		41,786			—			—			41,787
Release of restricted stock units		27,681				(727	)		—			—			(727	)
Vesting of early exercised stock options		—		—		2			—			—			2
Stock-based compensation expense		—		—		9,648			—			—			9,648
Unrealized gains on investments		—		—		—			—			408			408
Net loss		—		—		—			(60,462	)		—			(60,462	)
Balance — March 31, 2023		80,640,851	$	84	$	1,527,228		$	(582,588	)	$	47		$	944,771

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

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 commissions and offering expenses 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.

VAXCYTE, INC.

Condensed Statements of Cash Flows

(in thousands)

(unaudited)


	Three Months Ended March 31,
	2023			2022
Cash flows from operating activities:
Net loss	$	(60,462	)	$	(38,986	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		712			582
Stock-based compensation expense		9,648			4,099
Amortization of operating right-of-use assets		1,630			1,787
Net amortization of premiums on investments		(5,990	)		321
Loss on disposal of fixed assets		—			44
Asset impairment charges		—			57
Changes in operating assets and liabilities:
Prepaid expenses and other current assets		(4,702	)		2,791
Other assets		615			(1,577	)
Operating lease liabilities		(1,356	)		5,619
Accounts payable		1,789			(1,933	)
Accrued compensation		699			(2,185	)
Accrued manufacturing expenses		6,689			2,416
Accrued expenses		3,038			(737	)
Net cash used in operating activities		(47,690	)		(27,702	)
Cash flows from investing activities:
Purchases of property and equipment		(5,609	)		(2,920	)
Purchases of investments		(483,779	)		(6,972	)
Maturities of investments		40,160			59,551
Sale of investments		1,127			—
Proceeds from sale of property and equipment		—			7
Net cash (used in) provided by investing activities		(448,101	)		49,666
Cash flows from financing activities:
Proceeds from exercise of common stock options		502			282
Proceeds from issuance of common stock related to at-the-market offering, net of issuance costs		41,787			3,115
Proceeds from issuance of common stock from follow-on offering, net of issuance costs		—			107,622
Release of restricted stock units		(727	)		—
Net cash provided by financing activities		41,562			111,019
Effect of exchange rate changes on cash and cash equivalents		23			(227	)
Net (decrease) increase in cash, cash equivalents and restricted cash		(454,206	)		132,756
Cash, cash equivalents and restricted cash, beginning of period		835,528			69,856
Cash, cash equivalents and restricted cash, end of period	$	381,322		$	202,612
Supplemental disclosures of non-cash investing and financing activities:
Purchases of property and equipment recorded in accounts payable and accrued expenses	$	57		$	664
Deferred offering costs included in accounts payable and accrued expenses	$	—		$	23

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

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. (“Sutro Biopharma”). 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 primary activities since incorporation have been to perform research and development, undertake preclinical and clinical studies and conduct manufacturing activities in support of our product development efforts; organize and staff our Company; establish our intellectual property portfolio; and raise capital to support and expand such activities.

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, 2023, the condensed statements of operations, comprehensive loss and stockholders’ equity for the three months ended March 31, 2023 and 2022 and the condensed statements of cash flows for the three months ended March 31, 2023 and 2022 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 the condensed financial statements related to the three months ended March 31, 2023 and 2022 are also unaudited. The results of operations for the three months ended March 31, 2023 are not necessarily indicative of the results to be expected for the year ending December 31, 2023 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, 2022 included in our Annual Report on Form 10-K filed with the SEC on February 27, 2023.

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 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 equivalents. Cash equivalents consist primarily of amounts invested in money market funds 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 current 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 are as follows:


	March 31,		December 31,
	2023		2022
	(in thousands)
Cash and cash equivalents	$	380,451	$	834,657
Restricted cash		871		871
Cash, cash equivalents and restricted cash	$	381,322	$	835,528

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 gain (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 are also included in other income (expense), net. When the fair value of a debt security declines below its amortized cost basis, any portion of that decline attributable to credit losses, to the extent expected to be nonrecoverable before the sale of the security, is recognized in our condensed statements of operations. When the fair value of a debt security declines below its amortized cost basis due to changes in interest rates, such amounts are recorded in other comprehensive loss, and are recognized in our condensed statements of operations only if we sell or intend to sell the security before recovery of its cost basis.

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.

Leases

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, 2023, our lease population consisted of office operating leases. As of March 31, 2023, 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 ours. 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, 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. For example, on March 10, 2023, the California Department of Financial Protection and Innovation took control of Silicon Valley Bank (“SVB”) and appointed the Federal Deposit Insurance Corporation (“FDIC”) as receiver. While SVB was our primary bank at the time, we maintained banking relationships with other major banks. The substantial majority of funds we held at SVB, which included cash, cash equivalents and investments were held in custodial accounts of a third-party institution for which SVB Asset Management was the advisor (“SVB Custodial Accounts”). On March 12, 2023, the FDIC confirmed that depositors of SVB would have access to all of their money and, as a result, we regained access to all of our funds deposited with SVB. The FDIC subsequently transferred SVB’s deposits and loans to a newly created bridge bank, named Silicon Valley Bridge Bank, N.A. (“Silicon Valley Bridge Bank”). On March 26, 2023, the FDIC announced that First Citizens Bank & Trust Company (“First Citizens Bank”) had agreed to purchase and assume all deposits and loans of Silicon Valley Bridge Bank. Management believes that we are not exposed to significant credit risk as our deposits are held at First Citizens Bank, and our investments are held under separate financial institution custodial accounts, each of which management continues to believe to be of high credit quality. We have not experienced any losses on these deposits or investments as a result of this market event. While we were able to recover all deposited amounts from SVB, and continue to have access to all investments held in the SVB Custodial Accounts, there can be no assurance that our current or future banks will not face similar risks as SVB or that we will be able to recover in full our deposits in the event of similar closures. 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. Although we are working to establish secondary sources of supply, we currently source several of our critical raw materials from single-source suppliers. We also use one contract manufacturing organization (“CMO”), Lonza Ltd. (“Lonza”), to handle most of our manufacturing activities for our VAX-24 and VAX-31 programs. If we were to experience disruptions in raw materials supplied by our suppliers, 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 immunogenicity or 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.

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 3—Unobservable inputs based on our own data or other assumptions 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 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, 2023 or December 31, 2022.

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