2023-08-17 18:34:35 ET
Summary
- Vaxcyte, Inc. is a clinical-stage vaccine company developing high-fidelity vaccines for bacterial diseases.
- The company's Q2 2023 earnings report shows significant growth in cash and investments, indicating a solid liquidity position.
- Positive Phase 2 data for Vaxcyte's VAX-24 vaccine and a promising pipeline make it a recommended speculative "Buy" for investors.
Introduction
Vaxcyte, Inc. ( PCVX ) is a clinical-stage company focused on creating high-fidelity vaccines for bacterial diseases. Using advanced chemistry and the XpressCF cell-free protein synthesis platform from Sutro Biopharma, Vaxcyte develops broad-spectrum and novel protein vaccines for all ages. Their efficient system accelerates vaccine creation and targets diseases with significant unmet needs, aiming to enhance global health by preventing or treating bacterial infections.
The following article discusses Vaxcyte's strong financial position, positive Phase 2 data for its VAX-24 vaccine, and promising pipeline. The article concludes with a speculative "Buy" recommendation, but with the typical biotech-related risks.
Q2 2023 Earnings
The most recent earnings report from Vaxcyte reveals a significant increase in its cash and investment holdings, reaching $1,440.8M as of June 30, 2023, a substantial rise from the $957.9M recorded at the close of 2022. This boost can be largely attributed to net proceeds of $545.3M that were generated from a secondary offering that took place in April 2023. Additionally, the company's research and development (R&D) expenditures have seen an uptick to $72.7M in the second quarter of 2023, a considerable rise from the $38.5M recorded in the corresponding quarter of the previous year. This increase is primarily due to the elevated costs tied to the VAX-24 program and an expanded R&D team. General and administrative (G&A) expenses also saw an increase to $14.5M, from the previous $9.4M, reflecting the expansion of the company's G&A staff. The net loss for the second quarter of 2023 amounted to $68.3M, marking an increase from the $48.5M reported in the same period of 2022.
Liquidity & Cash Runway
As of June 30, 2023, Vaxcyte's balance sheet shows $531.0M in cash, $756.0M in short-term investments, and $153.7M in long-term investments, totaling $1,440.7M. The company's net cash used in operations for the first six months of 2023 was $128.8M, averaging a monthly net burn of around $21.5M. Based on this, Vaxcyte has a cash runway of about 67 months. Having raised $545.3M in a public offering earlier this year, the company is in a strong liquidity position. With current liabilities at $60.2M, Vaxcyte can comfortably meet its short-term obligations. Despite a net loss of $128.8M in the six months ending June 30, 2023, the company's robust cash position indicates it may not need further financing soon. However, these estimates are my own and may differ from other analyses.
Valuation, Growth, & Momentum
According to Seeking Alpha, Vaxcyte has a relatively small debt-to-market capitalization ratio, with total debt at $15.21 million compared to a market cap of $4.46 billion. The company is in a strong cash position, holding $1.29 billion. The enterprise value stands at $3.18 billion. As for valuation, Vaxcyte's non-GAAP P/E ratio is not available, and its GAAP P/E ratio is not meaningful, as it is not be profitable currently. The company is showing solid growth potential, with a 2023 earnings estimate at -3.17 EPS, a 7.78% YoY increase, though expected to decrease by 15.72% in 2024. The stock momentum is positive, with a 3-month change of -5.70%, a 6-month change of +10.06%, and a 1-year change of +82.37%, indicating a strong upward trend over the past year.
Vaxcyte Secures Funding to Boost VAX-24 Vaccine Development
Vaxcyte's progress on its VAX-24 vaccine program is notable, with positive Phase 2 data in adults aged 65 and older. The robust immune responses across all serotypes and doses provide strong evidence of its potential efficacy. The move into the second and final stage of the Phase 2 study in infants is another key milestone, signaling confidence in the vaccine's safety and tolerability. The successful $575.2 million financing gives Vaxcyte substantial resources to advance its clinical development, particularly the planned regulatory interactions for the VAX-24 adult program. The VAX-GI preclinical data offers promise for a Shigella vaccine, which could address a significant unmet need given the global burden of Shigella infection . Vaxcyte's anticipated milestones, such as top line data from its VAX-24 and VAX-31 programs, indicate a strong pipeline with potential for addressing critical public health needs.
VAX-24 Shows Strong Results in Phase 2, Vaxcyte Gears Up for Phase 3
Vaxcyte has shared detailed positive Phase 2 results of its VAX-24 pneumococcal conjugate vaccine candidate for adults aged 65 and over. Alongside previous Phase 1/2 data for ages 18-64, the results confirm the vaccine's strong immunogenicity and safety. VAX-24 showed robust OPA immune responses across all 24 serotypes at every dosage level, corroborating earlier findings. The 2.2mcg dose, slated for Phase 3, demonstrated enhanced immune responses compared to the current standard, PCV20. Safety data revealed comparable results between VAX-24 and PCV20 at all doses.
Vaxcyte plans to move VAX-24 into a pivotal Phase 3 trial, aligning with its ambition to create a superior PCV with broader coverage and better immune responses. VAX-24's carrier-sparing approach potentially offers 10-28% more IPD coverage in adults compared to standard PCVs.
Given these results, VAX-24's future looks promising. The vaccine's strong immune responses and safety data suggest it could be a significant step forward in preventing IPD, particularly in older adults. VAX-24's broader coverage could enhance pneumococcal disease protection, a vital public health concern. With this positive data and regulatory support, Vaxcyte is poised to advance to Phase 3, moving closer to potential approval and market entry. In the long run, VAX-24 could become a key player in the pneumococcal vaccine market, projected , per Bloomberg , to exceed $13.5 billion in 2023, offering broader IPD protection and improving global health outcomes.
My Analysis & Recommendation
In summary, Vaxcyte's pipeline, especially the VAX-24 and VAX-GI programs, offers promising solutions for significant unmet medical needs. The company's robust financial position, bolstered by a large cash reserve and a successful follow-on offering, enables continued R&D efforts. Increased R&D expenses indicate a strong commitment to advancing vaccine programs, which could yield long-term value. Though the company is likely 3-5 years away from substantial revenue, its promising pipeline and potential to address global health issues make it an attractive investment opportunity.
Given Vaxcyte, Inc.'s strong liquidity, lengthy cash runway, and encouraging clinical trial developments, I recommend a speculative "Buy" position in the stock. Investors should watch for regulatory updates on the VAX-24 adult program and the VAX-24 infant program's progress, as well as potential advancements in the VAX-31 adult program. These milestones could further validate the pipeline and enhance long-term growth potential.
Risks to Thesis
When the facts change, I change my mind.
I'd like to highlight some risks associated with my "Buy" recommendation for Vaxcyte. Firstly, their vaccines are still in clinical development and have not entered Phase 3 trials yet, so there's uncertainty about their performance in these pivotal studies compared to earlier trials. Secondly, their vaccines will face stiff competition in a highly competitive vaccine market, including established vaccines like PCV20. Lastly, gaining regulatory approval is a complex process and vaccines must meet strict regulatory standards, which could present hurdles in the future.
For further details see:
Strong Financials And Pipeline Position Vaxcyte For Success