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CureVac (NASDAQ:CVAC)
Q3 2020 Earnings Call
Nov 30, 2020, 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Sarah Fakih

Good morning, good afternoon, and welcome to our conference call. My name is Sarah Fakih and I'm the vice president of investor relations at CureVac. Please let me introduce today's speakers. On the call with me are Franz Haas, the chief executive officer of CureVac; Pierre Kemula, our chief financial officer; and Mariola Fotin-Mleczek, our chief technology officer.

Please note that this call is being webcast live and will be archived on the events and presentations section under investor relations on our website. Before we begin, a few forward-looking statements. The discussion and responses to your questions on this call reflect management's view as of today, Monday, November 30th, 2020. We will be making statements and providing responses to your questions that state our intentions, beliefs, expectations or predictions of the future.

These constitute forward-looking statements for the purpose of the safe harbor provision. These statements involve risks and uncertainties that could cause actual results to differ materially from those projected. CureVac disclaims any intention or obligation to revise any forward-looking statements. For more information, please refer to our filings with the U.S.

Securities and Exchange Commission. I will now turn the call over to Franz.

Franz Haas -- Chief Executive Officer

Thank you, Sarah. Ladies and gentlemen, a warm welcome to this conference call from all of us here at CureVac. In this presentation, we will provide you with business updates and financial results of the third quarter, as well as, the first nine months of 2020. 2020, the date to date has been very transformative for CureVac.

We have significantly grown our business, strengthened our unique technology platform, and further matured our diverse clinical pipeline. Let me briefly talk you through selected key highlights of the past month. From the start of this year, we remain highly focused on the development of our COVID-19 vaccine candidate, CVnCoV, to help stop the spread of this dangerous virus. Based on our recently reported positive interim data Phase 1, we were able to select a 12-microgram dose for our vaccine candidate with an optimal balance between tolerability and induced immunogenicity.

A pivotal Phase 2b/3 clinical study is due to begin very shortly. The potential clinical efficacy of CVnCoV was completed by a best-in-class temperature stability profile, which enables the shelf life of at least three months at standard fridge temperature, which we believe will enable distribution and application of CVnCoV long existing and well-established vaccine cold chain infrastructures, if it is shown to be effective. To make our vaccine candidate as broadly available as possible, we were particularly happy to have finalized an advanced purchase agreement with the European Commission to deliver 225 million doses of CVnCoV with an option of an additional 180 million dosages. To meet this demand and create further capacity, we were extending our in-house manufacturing capacities with an integrated manufacturing network that we are currently establishing across several European countries.

We estimate this will provide us with an annual output of up to 300 million dosages in 2021 and up to 600 million dosages in 2022. Moving into 2021, we remain focused on continuing the growth of the company by successfully bringing CVnCoV to market, but also by advancing our broad clinical pipeline. At the end of September 2020, we had a cash position of EUR 892 million. Pierre will talk you through the key financial matters later in the presentation.

But you can see our diverse pipeline, which builds on our differentiated technology platform and focuses on three therapeutic areas. Prophylactic vaccines for infectious diseases, oncology, and protein therapies. Our prophylactic vaccine pipeline is led by COVID-19 vaccine candidate, CVnCoV. Another important part of our infectious disease vaccine portfolio is being developed in collaboration with GSK, the Bill & Melinda Gates Foundation.

The GSK partnership is based on strategic mRNA technology collaboration, which we entered into in July 2020, which covers a certain number of mRNA based vaccines and monoclonal antibodies targeting infectious disease pathogen. In oncology, our lead candidate is CV8102, a strong immunostimulator for which, we recently reported updated Phase 1 clinical data at the Society of Immunotherapy of Cancer or SITC Conference and which I will describe later in greater detail. In protein therapy, in addition to collaborating with CRISPR therapeutics and Genmab, we also have collaborations with Yale and Harvard Universities for lung breath diseases and ocular diseases. For these products, we are also developing our proprietary policy-based formulation technology.

On Slide 6, let me briefly remind you of our unique technological approach, which is based on the use of natural and non-chemically modified Messenger RNA or mRNA. We have built extensive expertise and know-how over the last past 20 years in targeted optimization of mRNA, which allow us to tailor protein coding region, as well as, the untranslated regions of our unmodified constructs. A key optimization is the improvement of Ribosome interaction, which delivers highly efficient protein production and forms the core of our ability to induce mRNA activity at very low doses. Our key optimization process involves the immunity of our mRNA construct.

This is based on a differentiated mechanism of action mediated through the induction of interferon type 1. Through this differentiated mechanism of action, we believe our COVID-19 vaccine candidate is able to induce broad and balanced immune activation, including both humoral and cellular immune responses that mimic the natural immune response to a COVID-19 infection. On Slide 7, you can see a condensed overview of the most important CVnCoV development milestones that we achieved over the course of this year. On November 10th, 2020, we reported positive interim data from Phase 1 study initiated in June this year following selection of a preclinically successful vaccine candidate earlier in 2020.

In March, we ramped up GMP manufacturing for CVnCoV in our in-house GMP 3 suite and now are establishing an integrated European network with experienced partners to further expand capacity for the current and planned clinical CVnCoV trials, as well as, potential market supply. In September 2020, we started a clinical Phase 2a in Peru and Panama to confirm safety and evaluate reactogenicity of CVnCoV in adults older than 60 years and in a geographical environment with a high incidence of COVID-19 infection. As I have already highlighted, we expect to initiate a pivotal Phase 2b/3 clinical trial in the fourth quarter of 2020, pending the receipt of necessary regulatory approval. Moving on to Slide 8.

I would like to give you a brief overview of the recent interim data readout of our comprehensive CVnCoV Phase 1 clinical trial. The ongoing study assesses the safety reactogenicity and immunogenicity of our COVID-19 vaccine candidate across a tested dose range of 2 to 12 microgram. At the time of the interim data readout, the study had enrolled more than 250 participants. The Phase 1 data showed that immune responses induced by CVnCoV were comparable to those recovered by COVID-19 patients, thereby, mimicking the natural immune response to SARS-CoV-2.

CVnCoV was generally well tolerated and demonstrated activity across all tested doses. We were particularly pleased that the 12-microgram binding, as well as, binding, as well as, neutralizing antibody titers reached the level of our human convalescent serum panel. This panel represents a stringent comparison group of high clinical relevance with 67 individuals who were symptomatic for COVID-19, exhibiting multiple symptoms, and of which 24% were hospitalized. Based on this data, we selected the 12-microgram dose to advance into the upcoming pivotal Phase 2b/3 study.

This dose currently represents the lowest mRNA dose of any mRNA-based vaccines in an advanced clinical trial. The Phase 1 study is ongoing and we were recently given approval by the Data Safety Monitoring Board to also escalate to a 16 and 20-microgram dose to further assess the therapeutic window of CVnCoV. I'm now on Slide 9 to give you an overview of the ongoing temperature stability study for CVnCoV, which contemplates the promising clinical data. We were able to show that CVnCoV remained stable for at least three months when stored at standard fridge temperature of 5 degrees Celsius or 41 degrees Farenheit and up to 24 hours as ready-to-use vaccine when stored at room temperature.

This represents a best-in-class stability profile among the currently developed mRNA-based vaccine. This is important as temperature stability has emerged as a key characteristic for the logistics associated with the upcoming large-scale COVID-19 vaccination programs, including international delivery of the vaccine, it's storage, distribution, and individual application. Let me talk about these multistage logistics and associated challenges in more detail on the next slide. I'm now on Slide 10 to provide information on the anticipated supply chain for CVnCoV.

Once the vaccine leaves our storage facility, the best-in-class stability profile of CVnCoV is generally expected to allow for international delivery, in-country storage, and subsequent distribution of CVnCoV at a standard fridge temperature without the need to reengineer logistical routes to accommodate ultra-cold temperature devices. This is not only -- this not only has the potential to facilitate the logistics around the storage and execution of large-scale vaccinations, but would also have a very positive impact on cost and potential waste compared to ultra-low cold chain requirements. On Slide 11, I would like to highlight the recently announced buildup of a broad and integrated European network, which we believe would accelerate the expansion of our current manufacturing capacity to deliver pandemic scale volumes of CVnCoV. This network includes highly experienced and established partners for each of the key manufacturing steps for CVnCoV.

At our core of the network -- at the core of our network is the cloning of the efficient and output optimized processes, we have established in 2020 for CVnCoV in our GMP 3 manufacturing site. In view of upcoming large-scale vaccination programs, we believe this highly coordinated network is experienced to mitigate supply chain risks. We believe that it further provides us with the flexibility to respond to changes in demand by easily adding or closing production lines. The network is expected to provide an annual output of up to 300 million dosages of CVnCoV in 2021 and up to 600 million dosages in 2022.

I'm now on Slide 12 to update you on the finalization of our advanced purchase agreement with the European Commission for the delivery of 225 million dosages of CVnCoV with an option for an additional 180 million dosages. Two weeks ago, the European Commission announced that CureVac had become the fifth company to contribute to this portfolio once CVnCoV is shown to be safe and effective. As a result of the signing of this agreement, we will receive an undisclosed upfront payment, which is expected to support the advanced clinical development of CVnCoV and accelerated ramp-up of our CVnCoV manufacturing capacity -- capacities. Our lead oncology candidate, CV8102 is currently in Phase 1 clinical trial for the treatment of solid tumors.

On Slide 13, let me give you a short overview of the latest Phase 1 data update we recently reported at SITC Conference. To briefly remind you, CV8102 is a strong immunomodulator, which is injected intratumorally. This local immune activation is translated into systemic reaction that can broadly activate the immune system to reject the tumor. In the Phase 1 study, tolerability, as well as, activity of CV8102 is assessed in a single agent and in combination with systemic anti PD-1 antibodies in four types of solid tumors.

In the single-agent cohort, we previously observed objective tumor responses in two melanoma patients and stable disease in two additional patients, including shrinkage of noninjected lesions. In the latest update, a new partial response was observed in a patient with cutaneous squamous cell carcinoma, expanding activity from melanoma into a second indication. In the PD-1 combination cohort, the first response was observed in a PD-1 refractory melanoma patients exhibiting regression of noninjected lesions in the lung and liver. Intratumoral injection was observed to be tolerated with our dose-limiting toxicities at dose levels of up to 600 micrograms.

Based on interim data from the ongoing Phase 1 trial, further clinical development of CV8102 will continue after selection of a recommended Phase 2 dose. With this, let me conclude the business update and hand over to Pierre to provide you with key financials for the third quarter and first nine months of 2020.

Pierre Kemula -- Chief Financial Officer

Thank you, Franz, and thanks to all of you for joining the call. We are executing our financial strategy, and as a result, have considerably changed the financial profile of the company in 2020. Our cash position has significantly benefited from the capital we were able to raise through a private investment round in July 2020, which provided us with a EUR 300 million equity investment from the German government, EUR 150 million equity investment by GSK and, as well as, EUR 110 million of additional cumulative investments. A EUR 120 million upfront payment from GSK as part of the collaboration further grew our cash position.

Together with the net proceeds of our successful NASDAQ IPO amounting to about EUR 193 million, we closed the third quarter of 2020 with a very favorable cash position of EUR 892 million at the end of September 2020. This cash position was further supported in July 2020 by a loan agreement by the European Investment Bank of EUR 75 million to support the development of CVnCoV and the buildup of our in-house industrial scale manufacturing suite, GMP 4. The amount is paid in three EUR 25 million tranches and are currently -- and we are currently calling for Tranche 1 and 2. Finally, we have secured a grant from the German Federal Ministry of Education and Research for up to EUR 252 million to support the development and manufacturing of CVnCoV.

Looking at our profit and loss statement on the next slide. Our revenues for the third quarter of 2020 increased EUR 4.1 million to EUR 5.2 million, compared to the same period in 2019. This decrease comes mainly from the EUR 120 million upfront payment by GSK and the start of the release of the deferred revenues into our top line. From this deferred revenue, EUR 3.7 million was recognized as revenues for Q3 2020.

For the first nine months of 2020, revenues increased by EUR 32.2 million to EUR 42.8 million, compared with the same period in 2019. This increase was mainly driven by one-off events, which was the termination of the Eli Lilly partnership in June 2020. As a result, we recognized the full deferred revenue amount for EUR 33.1 million in our top line. Cost of sales decreased by EUR 11.8 million or decreased 63% over the first nine months of 2020.

This was driven by a lower product cost as a result of the termination of the agreement with Eli Lilly and a lower setup and quality assurance activities for the production processes. In line with our strong CVnCoV development efforts initiated at the beginning of 2020 and carried out throughout the year, our research and development expenses, including CVnCoV, research material manufacturing expenses have significantly increased. R&D expenses increased from EUR 5.4 million in Q3 2019 to EUR 34.6 million in the third quarter of 2020. For the first nine months, R&D costs more than doubled from EUR 30.7 million in 2019 to EUR 76.3 million in 2020.

Operating loss was EUR 36.8 million for the third quarter of 2020, representing a 92% increase, compared to the third quarter of 2019. For the first nine months of 2020, we posted an operating loss of EUR 63.2 million, an improvement of 2%, compared to the same period in 2019. This mainly reflects the full recognition of the Eli Lilly upfront payments in our revenue. Finance results over the first nine months of 2020 decreased by EUR 9.6 million, mainly related to interest incurred on convertible loans, which were fully repaid prior to the IPO.

In the first nine months of 2020, we had a net loss of EUR 71 million or a loss of $0.61 per share, compared to a net loss of EUR 63.9 million or a loss of $0.66 per share for the same period in 2019. With this, I would like to hand back to Franz for today's key takeaways.

Franz Haas -- Chief Executive Officer

Thank you, Pierre. Let me quickly summarize before we move into the question-and-answer session. For our COVID-19 vaccine, CVnCoV, we have reported positive interim Phase 1 data and achieved our goal to identify an optimal dose for 12 microgram to advance in our pivotal Phase 2b/3. Analytical testing, complementing the clinical data revealed a best-in-class temperature stability profile, which will potentially enable us to use established vaccine cold chain distribution road.

To serve the urgent demand for a safe and efficient vaccine, we are ramping up significantly our manufacturing capacities in-house, as well as, through a European partner network of experienced and established manufacturing experts. This capacity is expected to also cover the advanced purchase agreement with the European Commission. The development of our technology, pipeline, and business operations are ongoing and our balance sheet with a cash position of EUR 892 million is expected to give us a solid foundation to execute and deliver on our plans. With this, I would like to conclude our presentation and would now like you to open the webcast to our questions -- to your questions.

Questions & Answers:


Operator

Thank you. [Operator instructions] Our first question comes from the line of Eun Yang with Jefferies. Please proceed with your question.

Eun Yang -- Jefferies -- Analyst

Thank you. So I have a question on manufacturing. So you're expected output is up to 300 million doses next year and up to 600 million doses in 2022. With your agreement with the European Commission, is there a timeline when you have to deliver first the 225 million doses?

Franz Haas -- Chief Executive Officer

There is a nondisclosed schedule, yes. So the way these agreements work is you agree on a volume and then you ramp it up according to your capacities.

Eun Yang -- Jefferies -- Analyst

I see. And then can you also comment on your plan for the U.S. launch or trial that may be required for COVID-19 vaccine? And then last question is on Phase 2a trial currently ongoing in older adults. When do we expect to see some data from there? Thank you.

Franz Haas -- Chief Executive Officer

So I think we heard the first question. I'm not sure we should -- not sure we heard the second part. Would you repeat, please?

Eun Yang -- Jefferies -- Analyst

The first of the question is in the U.S. I think currently, you're focusing on [Inaudible] titering, but is the plan for entering and COVID-19 vaccine more here in the U.S.?

Franz Haas -- Chief Executive Officer

Well, for the pandemic, actually, we -- we are not planning to run the clinical trial in the U.S. because the U.S. is well covered with vaccines for the pandemic outbreak, even more than inhabitants. And therefore, we decided to run the clinical trial outside the U.S.

as there is no demand in the U.S., and this is why we are running the clinical trial in Latin America and Europe.

Eun Yang -- Jefferies -- Analyst

OK.

Operator

Our next question comes from the line -- go ahead, I'm sorry.

Franz Haas -- Chief Executive Officer

No, I thought there was a second part of the question as well. We don't want to leave unanswered or is your question answered?

Operator

OK. One moment. Let me bring her -- make her live again, one second.

Eun Yang -- Jefferies -- Analyst

Timing in older --

Operator

You're now live again, Eun Yang.

Eun Yang -- Jefferies -- Analyst

Yes, so second question was timing for Phase 2a trial in older adults for COVID-19 vaccine.

Franz Haas -- Chief Executive Officer

Yes.

Eun Yang -- Jefferies -- Analyst

For the data --

Franz Haas -- Chief Executive Officer

Yeah. So we started the clinical trial back in September. We are now [Inaudible] the 12-microgram dose in this cohort in Peru and Panama. So we will have results in due time.

Eun Yang -- Jefferies -- Analyst

Thank you.

Operator

Our next question comes from the line of Geoff Meacham with Bank of America. Please proceed with your question.

Aspen Mori -- Bank of America Merrill Lynch -- Analyst

Hey, guys. It's Aspen on for Geoff. Thanks for taking our questions. Just first off, I want to follow-up on that last question.

So did I hear correctly and that you don't expect there to be much of a market for CVnCoV in the U.S.? I guess, are you not planning on marketing the drug there at any point in time? And then secondly, just what are your thoughts on the potential value of a marketing partnership for your COVID vaccine in some other global territories? Thank you.

Franz Haas -- Chief Executive Officer

Yeah. Thanks for the question. Again, at the moment, the U.S. is well covered with different kind of technologies for vaccines and prepurchase agreements, which is for us, a point not to run a clinical trial at the moment there, but this is just for the pandemic.

Post pandemic, of course, we are not underevaluating the U.S. market, and certainly, we are also in contact with the authorities here. So that's -- the other one, you have been talking about the commercial value of -- if I understand your question correctly, is we cannot talk about prices with the European Commission as under confidentiality, but we expect this to be quite competitive to what we have been seeing there as prices as we are having this lower dose, which would bring us in cost of goods also in a very competitive situation.

Aspen Mori -- Bank of America Merrill Lynch -- Analyst

OK. Thanks. And one more quick follow-up there. So just on the decision to study higher doses in the Phase 1 study, understanding that the DSMB has given you clearance to do so.

I just wanted to get a better sense of how you're thinking about the value. What kind of information you're hoping to get from setting higher doses if you are advancing that full microgram dose into the Phase 2b, Phase 3 study?

Mariola Fotin-Mleczek -- Chief Technology Officer

Yeah. Thank you for the question. As you know, the dose for Phase 2b/3 is selective and there's no doubt about this. But we are still interested here to explore and to learn about the therapeutic window of our vaccine.

And therefore, I'm encouraged by DSMB, so we are also testing higher dose. You have to see how high can we go with our kind of [Inaudible] with our approach.

Aspen Mori -- Bank of America Merrill Lynch -- Analyst

OK. Thank you.

Operator

Our next question comes from the line of Vinh Hung Hsu with Berenberg. Please proceed with your question.

Unknown speaker

Hi, thanks for taking my questions. Congrats on the -- all the progress. A couple of questions, if I may. First, on the mechanism action, you mentioned about the vaccines actually mimicking natural infection.

I wonder if that could be equivalent to -- for the vaccine to confirm longer durational protection than other type of vaccines, other mRNA vaccines or other type of vaccines? When do we -- when can we get some data on that duration of protection? That's the first one. And secondly, considering the favorable transportation conditions your vaccine has, I'm wondering if you guys are looking into bringing in -- bringing the vaccine to developing countries, given those countries may have the instructure, they don't have the instructure of developed countries have. And lastly, I want to also ask Pierre for -- you know broadly for the cash position, strong cash position you have. Can you comment on how would you deploy cash to further advance the pipeline? Thank you very much.

Mariola Fotin-Mleczek -- Chief Technology Officer

OK. Then let me take the first question on the [Inaudible] infection. Yes, what we know about our technology, also based on all this data we generated for different vaccine and different animal models. We always see very similar immune response here to the nature one after the infection.

And therefore, as we know here, that other COVID convalescent patients, they develop memory responses. And we saw this also in different animal models, we will expect here also that we will induce memory cells after vaccination with our COVID vaccine. But we need to show these with the human data and this is exactly one of the goal of our immuno analysis here we are conducting.

Franz Haas -- Chief Executive Officer

And then perhaps to the second question about the stability and developing countries. Of course, we see this really as an advantage for the distribution, especially in this kind of mass immunization, which should be the goal overall. And then certainly, the less hurdles you're bringing on the logistics, the better it is for even countries which have not the infrastructure on these very deep frozen, cold freezing facilities, and this should be an advantage. As we always said, the vaccine should be approachable and available to everyone because to get rid of the pandemic, this would be a goal to vaccinate the world, so to speak.

Pierre Kemula -- Chief Financial Officer

And so maybe on your last question on the use of cash and the strong balance sheet. So, of course, developing a vaccine quickly and producing, I would say, at risk, does take a lot of capital. We are very fortunate to have the support of this grant from the German government. This upfront from, of course, this European APA, but also the cash that we have.

All in all, this derisks this current endeavor and so that allows us to continue to finance the rest of the organization, and i.e., I would say, the rest of the vaccine and also cancer vaccine activities. So these are the things that we're looking at. At the same time, we also have a financing to grow our capacity with GMP 4. So these would be the main, I would say, focus of the use of our cash.

Unknown speaker

Great. Thanks very much. Congrats again.

Pierre Kemula -- Chief Financial Officer

Thanks.

Operator

Our next question comes from the line of Martin Auster with Credit Suisse. Please proceed with your question.

Unknown speaker

Yeah. Hi, everyone. This is Thomas on for Marty. Thanks for taking the questions.

I guess, just curious on what are the gating steps at this point for initiation of the CVnCoV Phase 3 trial? Is there certain data that you're waiting on or waiting to provide to regulators? And then curious if you guys can just walk through your current thinking on the timelines for that trial in terms of how quickly do you think you can enroll it? What kind of triggers and interim analysis and when could we see that? And what data is needed for the full -- full regulatory approval in Europe and other territories as well? Appreciate it.

Franz Haas -- Chief Executive Officer

So maybe I can try to chime in here from a high-level perspective. So we are discussing very actively with the authorities here and we said that we would start the trial before the end of the year. So I think we are working hard to be able to do that in the time frame that we've always put out. So once you do that, then the idea is to recruit up to, I think, 37,000 subjects and we have a significant amount of large centers that can process a lot of subjects on a weekly basis.

So I think this is what we're looking at. So we are full on pushing on and so we -- as soon as we have the desired -- and I think -- I don't think we can go public about that yet, but the desired number of events, then we will have interim Phase 1 data that should take place sometime in the first quarter of next year.

Operator

There are no further questions in the queue. I'd like to hand the call back to management for closing remarks.

Sarah Fakih

With this, we would like to conclude this conference call. Thank you very much for your participation. Stay safe, and please don't hesitate to contact us should you have any further questions. Thank you, and goodbye.

Duration: 0 minutes

Call participants:

Sarah Fakih

Franz Haas -- Chief Executive Officer

Pierre Kemula -- Chief Financial Officer

Eun Yang -- Jefferies -- Analyst

Aspen Mori -- Bank of America Merrill Lynch -- Analyst

Mariola Fotin-Mleczek -- Chief Technology Officer

Unknown speaker

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