Novavax Inc
NASDAQ:NVAX
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Novavax Inc
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Good morning, and welcome to Novavax First Quarter 2023 Financial Results and Operational Highlights Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded.
I would now like to turn the conference over to Erika Schultz, Senior Director, Investor Relations. Please go ahead.
Good afternoon, and thank you all for joining us today to discuss our first quarter 2023 operational highlights and financial results. A press release announcing our results is currently available on our website at novavax.com, and an audio archive of this conference call will be available on our website later today.
Please turn to slid 2. Before we begin with prepared remarks, I need to remind you that this presentation includes forward-looking statements, including information relating to the future of Novavax, its key strategic priorities, operating plans, objective and prospects. Its future financial or business performance, conditions or strategies, including projections on revenue and reductions in expenses, and as global restructuring and cost reduction initiative, key commercial goals, including transitioning to our traditional commercial model, future product demand trends, the ongoing development of our vaccine candidates, including advancing multiple variants strain, strain selection, anticipating timing of trials and results, the scope, timing and outcome of future regulatory filings and actions, the efficacy, safety and intended utilization of our vaccine candidates, including against COVID variants, the global market opportunities for our vaccine candidates, our manufacturing capacity, and the future availability of our vaccine candidates and key upcoming milestones.
Each forward looking statement contained in this presentation is subject to risks and uncertainties that could cause actual results to differ materially from those projected in such statements. Additional information regarding those factors appears under the heading cautionary note regarding forward looking statements in the slide deck we issued this afternoon, and under the heading risk factors, and our most recent form 10-K and subsequent form 10-Q filed with the Securities and Exchange Commission and available@www.sec.gov and on our website at www.novavax.com as well as subsequent filings with the SEC.
The forward looking statements in this presentation speak only as of the original date of this presentation. And we undertake no obligation to update or revise any of these statements.
Please turn to slide 3. This presentation also includes references to non-GAAP financial measure, which is forward-looking information from R&D and SG&A expense as adjusted to exclude onetime restructuring costs as described on this slide.
Please turn to slide 4. Joining me today is John Jacob, our President and CEO, who will provide an update on our progress during the quarter for a three key priorities. Dr. Filip Dubovsky, President of Research and Development will discuss our various strategy and clinical development and pipeline, and John Trizzino, Chief Commercial officer and Chief Business Officer, will provide an update on our commercial activities. Finally, Jim Kelly, Chief Financial Officer and Treasurer will provide an overview of our financial results. Rick Crowley, Chief Operations Officer will also be available for the Q&A section at the end of today's call.
I would now like to hand over the call to John Jacob. Please turn to slide five.
Thank you, Erika, and thank you, everyone, for joining us today to discuss our first quarter 2023 financial results and operational highlights. We have an especially eventful call today, because in addition to our first quarter results, we will also be discussing significant measures we have taken to reduce our costs and restructure our organization, and we look forward to sharing some encouraging top line Phase II results for our combination flu COVID program.
The last time we worked together was in February for the Q4 earnings call, when I was only a few weeks on the job as the new CEO of Novavax. At that time, I shared with you why I was excited to join the company. My early observations and what our near term top priorities are based on those early observations. First, delivering a competitive product for the upcoming fall season, second, reducing our rate of spend, managing our cash flow and evolving our scale and structure, and finally, driving additional value from our technology platform and portfolio.
Now as I join you for the second time with a full quarter of listening and learning behind me, I must say that this recent experience has strengthened my results and confirm for me the strong potential that our company has to make a positive difference in global public health. As we continue to execute on our priorities, if successful, I believe we will place Novavax in a stronger position for future growth and value creation. I'm encouraged by the progress we've made to date. And while we know there are still significant challenges ahead of us before we can claim success, the leadership team and I will remain completely focused.
During the quarter, we have taken decisive actions and made progress on each of our three priorities, which I would like to outline for you next. Let's talk about our first priority, delivering a competitive product for the upcoming 2023 fall vaccination season. This includes aligning our COVID vaccine with regulatory and public health guidance on strain selection and making our product available in the right quantities and in a smaller unit competitive product presentation.
Throughout the quarter, we have made significant progress on this priority. A critical component of which has been the collaborative relationship with the FDA and other global regulatory authorities as we prepare for the fall campaign. As part of that effort, and as we noted in the Q4 earnings call, we've been advancing multiple variant strand vaccine candidates in order to optimize our readiness for final strain selection for the upcoming fall season by the US VRBPAC VERPAC on June 15.
Following the FDA's decision, we will then focus all necessary resources on advancing the required variant strain vaccine with the intent of having our product on the market for the fall vaccination campaign. For the US, which will be the first market to evolve through a commercial purchasing mode, John Trizzino, our Chief Commercial Officer will talk about how we are preparing to make our vaccine available across the major distribution channels for the upcoming fall season. This includes significant progress in our US commercial team build-out and our ongoing discussions and negotiations with customers ahead of the season.
Outside of the US, we are pleased to report that we have secured approximately $800 million in potential APA orders for 2023. We are encouraged by our progress in this area, and excited about the potential we have to positively impact global health of their updated vaccine this year. Assuming we execute successfully on our plans for the US and ex-US, we expect total revenue in the range of $1.4 billion to $1.6 billion for the year, inclusive of product sales and grants.
Let's now move on to priority number two, which is to reduce our rate of spend, manage our cash flow, and evolve our scale and structure. Today, we announced that we are implementing a global restructuring and cost reduction initiative, which will significantly reduce our expenses, while retaining the capabilities we need to help drive results and build value in the future.
When fully implemented, we expect these actions will reduce our combined annual R&D and SG&A expenses for 2024 by approximately 40% to 50% when compared to 2022. Included in the plan is an approximate 25% reduction of our global workforce, as well as a consolidation of our global facilities and infrastructure.
While reducing our workforce was certainly a difficult decision, this was necessary as part of a comprehensive effort to better align our infrastructure and scale to the current global opportunity for our vaccine and ultimately to enhance our ability to help protect global health.
In addition to significantly reducing our scope, scale, and expense base in R&D and SG&A, we are aggressively addressing our significant one-time current liabilities. To this end, we are pleased to report that since our last interaction, we've made significant progress in reducing these liabilities. You will hear more today about our cost management, our restructuring, and cash flow from Jim Kelly, our CFO, later in the call.
And finally, let's discuss priority three, which is to leverage our technology platform, our capabilities, and our portfolio of assets to drive additional value beyond Nuvaxovid alone. We continue to explore opportunities and strategies to unlock additional value from our pipeline and our technology platform, including our Matrix-M adjuvant.
Regarding our pipeline, we are pleased today to announce positive results from our Phase 2 COVID influenza combination and stand-alone influenza vaccine dose-confirming trial. Dr. Filip Dubovsky will update you on these data later in the call.
Depending on the outcome of the full base set, which we expect to receive over the coming months, we will evaluate our options to advance this program through strategic collaborations and/or other financing alternatives. These positive results further value our technology platform and are another example of the potential of our science to contribute to global public health.
Additionally, regarding our Matrix-M adjuvant, we continue to evaluate opportunities and advanced partnerships to leverage this unique asset. This includes our ongoing partnership with the Serum Institute of India for their malaria vaccine R21 that is formulated with our Matrix-M adjuvant. This vaccine has now been authorized in Ghana and Nigeria.
The approval of this novel malaria vaccine with our Matrix-M adjuvant is another example of how we are working to extract additional value from our technology platform and our assets.
Regarding business and corporate development, we've been enhancing our internal focus and efforts on business and corporate development opportunities with the intention of positioning Novavax to build additional value and opportunity through our proven technology platform and our pipeline of early and mid-stage vaccine candidates. This includes the potential for out-licensing, collaborations, partnerships, joint ventures, co-promotion, and other types of opportunities over time.
As I mentioned in my opening comments, my experience at Novavax the past several months has helped to reinforce my belief in the potential of our company and I am encouraged by our recent progress. I also believe that our core business is robust and that our strategy is the right one to help us achieve our objectives.
Let me summarize those objectives one more time for you as I close my opening comments. First, we intend to make our business even stronger through the successful development and launch of a competitive product for the fall vaccination season. At the same time, we are working towards building a solid financial foundation to help support long-term growth and value creation.
And finally, we are working to leverage our proven technology platform, pipeline of early and mid-stage assets and fully integrated global capabilities to drive additional value over the long-term via clinical business and corporate development activities.
As I noted during our Q4 call, we intend to routinely share with you both our potential opportunities as well as the challenges we face and to provide balance and perspective on our business. With that in mind let me be clear, 2023 will continue to be a challenging year for Novavax. Yes, we have made progress during the quarter, but we still face several challenges and have significant work to do before we can fully achieve our objectives for the year.
In the coming months our commitment is that we will continue to focus on our three priorities and put forward our best efforts in all that we do. And we will do so with gratitude for the ongoing support of our key stakeholders.
Now I'd like to hand it over to additional members of the team to discuss our results from the quarter and in more detail, beginning with Filip Dubovsky to discuss updates for our pipeline and COVID variant strategy. Filip?
Thanks, John. Please turn to slide 6. Our research and development program remains focused on our COVID vaccine. While we have multiple ongoing studies to generate additional data needed to expand our label today I will update you on our variant strategy in preparation for the 2023 fall vaccination season, which as John discussed is our numer one priority.
We also continue to advance our standalone influenza and COVID influenza combination vaccine candidates and I'll show you some preliminary top-line data from our Phase 2 study. Development of our other pipeline assets including RSV remains paused allowing us to focus our resources on the programs that are critical to our near-term success.
Okay let's turn to slide 7 and discuss our variant strategy. On our last earnings call we described our approach to developing and evaluating vaccines for different variants. We have executed that strategy and continue to refine variant strain development based on evolving epidemiologic data and ongoing dialogue with the global regulators.
Despite in this table are the recent variants we have progressed into our variant development platform. Whenever a new variant emerges we manufacture the variants spike protein conduct preclinical studies to understand the variant's ability to cross neutralize or escape immune responses from other strains.
The variants that continue to be of concern are advanced into production of GMP master virus seed and then into large-scale manufacturer if warranted. This manufactured vaccine can be used for clinical studies or for commercial release.
Based on regulatory input, our currently candidate is XBB.1.5, which we have progressed into manufacturing of multiple 6,000 liter batches. XBB.1.6 is also of interest. And although there's only a single immunoacid difference the receptor buying domain from XBB.1.5 we're making a master virus seed to be prepared for the vaccine composition announcement.
Based on our close interaction with the Global Public Health agencies, we remain optimistic that this strategy has the potential to minimize the time between strain selection and delivering our vaccine this fall.
Please move to slide 8 so I can remind you of our ongoing strain change study. In the first quarter, Part 2 of Study 311 depicted on the right-hand side of the slide to evaluate our prototype strain vaccine and BA.5 variant vaccine in a bivalent containing prototype plus BA.5.
Enrollment is complete and we expect top-line results midyear. This study is one of the prerequisites for seeking regulatory approval for the new composition for the 2023, 2024 vaccine. We previously conducted a companion study with BA.1 variant and bivalent and therefore anticipate similarly successful results in the current study.
Okay let's turn to slide 9 and 10 to discuss our standalone influenza and COVID influenza combination vaccines. Before I share preliminary data from the Phase 2 trial, I want to remind you that we previously reported on our successful Phase 3 study with quadrivalent influenza as well as a Phase I/II combination study which demonstrated that influenza COVID vaccine is feasible with our technology. In fact we believe our technology is particularly well suited for combination vaccines because large amounts of antigens can be incorporated without impacting tolerability. This is a feature that not all vaccine platforms share.
So let's turn to Slide 11 and review the Phase II study design. This is a Phase II dose confirming study and is not a provisional registrational trial. In fact the primary endpoint is evaluating safety, although there are multiple secondary and exploratory immunogenicity endpoints. These endpoints were designed to inform which formulations could be advanced into late-stage development for the combination vaccine by evaluating different antigen and adjuvant dose ranges. No hypothesis testing was pre-specified.
As you can see, this is a complicated design of experiment study with 20 different treatment groups. Once all the data is available, it will be entered into a 3-dimensional computational model to identify the optimal dose levels. We also took the opportunity to explore high-dose COVID vaccine formulations which I'll share with you later. We enrolled 1,575 adults 50 to 80 years of age. 95% had previously received three or four doses of COVID vaccine with the last dose a median of 28 weeks prior to being enrolled.
The data that is available today is safety through day 21 and anti-SIgG and neutralization responses as well as wild-type HAI for the four strains included in the vaccine. Additional immunogenetic data will be available over the next two to three months including cellular immuno responses, influenza microneutralization responses, immuno responses to strains and HAI against egg-adapted strains.
Please advance to Slide 12 to look at high-level safety. Overall the stand-alone influenza and combination vaccines had a resharing preliminary safety profile and the reactogenicity was clinically indistinguishable from the licensed influenza comparators. As we expected from the small data set, there were no adverse events of special interest, no potential immune-mediated medical conditions and no treatment-related SAEs.
Unsolicited adverse events occurred in less than 25% of any group and were consistent with diagnoses in older adult populations. The local and systemic symptoms were mostly mild and moderate and it recurred rates comparable to the license influenza competitors. We did not observe a consistent pattern of increased reactogenicity as the adjuvant and antigen loads were increased. This seems to be a hallmark of our technology and is an appealing feature when developing combination vaccines.
Let's go to Slide 13 which describes the key competitors for our stand-alone flu vaccine. For the stand-alone quadrivalent influenza vaccine, we evaluated three different hemagglutinin dosage levels formulated with 75 micrograms of Matrix-M adjuvant. These were compared to two licensed premium price vaccines.
Some preliminary data is presented on Slide 14. Presented here are the wild-type HAI results of our vaccine with 30, 45 and 60 micrograms of each strain compared to Fluzone high-dose and adjuvanted FLUAD. The 60-microgram dose is our selected dose level and was used in the previous Phase III study. Although the non-inferiority endpoints was not prespecified or specifically powered for this an ad hoc analysis indicated immuno responses were non-inferior for all four strains for both competitor vaccines.
For H1N1, the HAI for our vaccine was 44% greater than both Fluzone High-Dose and FLUAD. For H3N2 which has been a problem for all vaccines in recent years we were 89% and 55% better. B/Victoria we were non-inferior to Fluzone high dose and 31% greater for FLUAD and for B/Yamagata we were not inferior to Fluzone High Dose and 32% greater than FLUAD.
We've seen lower HAIs for B/Yamagata in previous studies and expect this difference to resolve when we eventually receive the microneutralization data. Also B/Yamagata is not circulating over the past couple of years and may not be relevant. While we still need to analyze other immune responses, this data supports our belief that our technology may play a role in developing a better influenza vaccine.
Okay. Let's go to Slide 15 and talk about combination vaccines. We evaluated three different COVID dosage levels, three different hemagglutinin dosage levels and two different Matrix-M levels for a total of 11 independent formulations. The anti-S and COVID neutralization responses were compared to our authorized COVID vaccine and influenza HAI were compared to Fluzone high-dose and adjuvanted FLUAD.
I won't show you all our data for all 11 formulations instead I'll show you data for a couple of formulations that performed well. Until we receive and analyze the rest of the immune data we won't be able to make a final determination of the formulation we intend to advance.
Let's turn to Slide 16. On the left-hand side of the slide our two combination vaccines in black and teal compared to our authorized cover vaccine depicted here in a solid red bar. The combination vaccine achieved both IgG and neutralizing levels comparable to NVX 2373. In fact the new titles were about threefold higher than seen in our successful Phase 3 study in unprimed adults, giving us additional confidence of its potential performance.
On the right-hand side of the slide, the two combination formulations are compared to Fluzone high dose in a solid orange bar and FLUAD in a solid purple bar. For A strains, the combination levels were greater than that for Fluzone high dose and FLUAD and for the B strains the responses were similar. Although for B/Yamagata, high dose Fluzone did have a higher point estimate. Clearly these results would have been more favorable and the comparator that we use for the standard dose license influenza vaccine. Overall, based on the preliminary data, we believe we have identified at least two combination vaccine formulations that could be advanced into late-stage development.
Okay let's go to Slide 17 and look at some high-dose COVID data. Shown here is a dose ranging from 5 micrograms to 35 micrograms of spike antigen in 50 micrograms of Matrix-M adjuvant. In these well-primed individuals, we hypothesized a larger antigen dose will lead to a better immune response. But this was not true in COVID naive individuals where 5 micrograms and 25 performed comparably. We will be looking not just for increase in magnitude but also durability and breadth of immune response.
The highest dose COVID vaccine achieved a statistically significant increase of approximately 30% for anti-SIgG and neutralization compared to Novavax's prototype COVID-19 vaccine. We're planning to conduct a Phase 2 study in the third quarter of this year to explore the use of high-dose Nuvaxovid as an annual vaccine for older adults. The study will be done with XBB.1.5 vaccine.
Please turn to Slide 18 and I'll sum this up. So for our standalone flu vaccine we observed a safety and reactogenicity profile that was comparable to the two license influenza vaccines but the immune responses were favorable compared to these market leaders. If we have selected a standard dose comparator the differences would have been even greater.
The additional immulogically endpoint will further define the value of this vaccine but in my opinion the data we've shared today significantly increases probably of technical success for future clinical development. For our COVID influenza combination, the reactogenicity was once again comparable to license influenza vaccines. And based on the anti-COVID and influenza HAI responses, we believe we've identified at least two formulations that could be advanced into late-stage development.
Essentially, the combination vaccine appears to be immulogically on par with authorized and licensed competitors. We await further data to make a final selection. And for our high-dose COVID vaccine candidate, we believe the preliminary safety and tolerability profile looks promising and there's some indication of higher immune responses with higher dosage levels. We're planning a Phase 2 study with XBB.1.5 in third quarter as the next stage of development with special attention paid to the breadth, durability of immune responses.
We also know that our vaccine induces mucosal immune responses in non-human primates, so we plan on measuring those as we select our final high-dose formulation for annual vaccination.
With that, I'll hand it over to John Trizzino Terzino to provide an update on our commercial activities.
Thanks, Filip. Please turn to Slide 19 and then Slide 20. As key markets transition to more traditional commercial models, we are gaining more visibility into the expected size of the long-term COVID vaccine market. We remain confident in an ongoing need for annual seasonal vaccination with likely demand in the US in 2023 of approximately 100 million doses. We believe it is reasonable to think this is approximately $7 billion US market with a total global demand greater than $15 billion.
Please turn to Slide 21. I I'd like to discuss our recent progress and commercial readiness efforts to prepare for the 2023 fall vaccination season in the US and rest of world. Beginning with the US, we delivered doses during the first quarter under our modified agreement with the US government for up to 1.5 million doses, which importantly maintains access to our protein-based option in advance of the fall season. This included initial delivery of our product in a five-dose vial presentation in March 2023.
In parallel, we are preparing for the transition to a commercial market in the US, utilizing the existing flu vaccine logistics and go-to-market infrastructure. Today, we have a fully deployed commercial team across the US Canada, EU and UK that have established relationships with key commercial stakeholders and vaccine providers across all distribution channels who are actively working towards ensuring our vaccine is available to consumers at key points of service for the full season.
This includes ongoing discussions with all major retail pharmacies nationwide educating healthcare providers and pharmacists about our COVID vaccine across the country engagement with distributors physician-buying groups doctors' offices and integrated delivery networks coordinating with the US government to provide vaccines through various national public health programs and we are finalizing our participation in the CDC, VFC and VA programs this season.
We are closely monitoring the COVID vaccine market to inform our pricing strategy. We expect our strategy will allow us to be competitively positioned in the US market and will provide support from public and private payers consistent with established vaccine payer infrastructure. We are also preparing our BLA submission and expect to file with the FDA in the second half of 2023. While this is an important milestone we will be able to sell our vaccine in the fall season under emergency use authorization.
Now, I will review key global commercial activities for 2023, fall vaccination season and beyond. We are enabling reliable access to Nuvaxovid, by leveraging our commercial footprint and priority markets to drive demand, and we plan to continue to deliver doses against our outstanding APAs and have secured approximately $800 million, in APA orders for 2023 based upon committed delivery schedules, subject to updated variant manufacturing and regulatory approvals. We expect to deliver the remainder of our APAs in 2024 and 2025.
In EU, we previously did not anticipate new sales during the first quarter, due to the emerging seasonality of COVID vaccines. However, we accelerated our planned shipments and delivered doses committed under our existing APA during the first quarter, to ensure our customers maintain supply in market. We expect to deliver the remaining 20 million doses of committed doses under our APA in the EU in 2023.
In both Europe and APAC, Asia Pacific, we continue to service these customers through our existing APAs. At the same time, our commercial teams are engaged with key decision-makers at both the regional and local levels to prepare for the transition to tender and private markets in 2024 and 2025. We are confident in our product benefits and policy support to capture market share as an important protein-based option. Importantly, across all our priority markets, we are engaged with policymaking bodies to advance policy recommendations for Nuvaxovid, which will be critical to enabling broad market access and capturing market share during the upcoming fall season.
Finally, as John discussed earlier, our top organizational priority remains delivering a competitive product for the upcoming 2023 fall vaccination season. We are transitioning to a smaller dose presentation, which will be important to further differentiate our vaccine in market. This includes in the U.S., where our product will be available in single-dose trials. Both variant strain update and single-dose presentation are key product attributes that we believe will contribute to a strong market acceptance for our adjuvanted protein-based vaccine.
Market research tells us that there is a demand for a non-mRNA COVID vaccine. When we asked health care providers in the U.S. for their preference, they indicated an approximately 31% preference share for our vaccine. This tells us that there is significant market share available to us as we are working towards an unrestricted policy recommendation for the fall season.
And as Filip outlined today, we advanced our variance stream development ahead of regulatory guidance on strain selection for the fall season. In the coming months, we will remain an ongoing dialogue with our customers and commercial stakeholders, as we seek to ensure our vaccine is aligned with market needs and competitive position in the portfolio of COVID vaccines.
With that, I'll hand it over to Jim Kelly to discuss our financial results.
Thank you, John. Please turn to Slide 22. This morning, we announced our financial results for the first quarter of 2023. Details of our results can be found in our press release issued today and our 10-Q filing. I'll begin by providing an overview of our first quarter 2023 results and progress to date on our liability management. Then I'll provide more details regarding the global restructuring and cost-reduction initiative announced today. Finally, I will share financial guidance for the full year 2023.
Please turn to Slide 23. For the first quarter of 2023, we recorded combined R&D and SG&A expenses of $360 million. This reflects a $120 million, or a 25% decrease compared to the first quarter of 2022 and a $60 million, or 14% increase compared to the fourth quarter of 2022. This improvement represents the initial impact of our cost-reduction initiative, putting us on a path towards a significantly lower-cost structure as we transition Novavax' size and scope to align with the COVID opportunity.
We recorded $81 million in total revenue for the first quarter of 2023, which is consistent with an emerging seasonal demand pattern for COVID vaccines.
Importantly, we reduced our outstanding current liabilities by $541 million, including funding the maturity of the $325 million convertible debt. And finally, we ended the quarter with $637 million in cash, compared to $1.3 billion at the end of 2022.
Please turn to slide 24. Beginning with revenue we recorded $81 million in total revenue for the first quarter of 2023, compared to $704 million in the first quarter of 2022. Of note, you will see we recorded a net $7 million reversal of product sales in the first quarter of 2023.
This relates, to a $65 million credit that resulted from a single lot sold to the Australian government that upon a, pre-planned six months stability testing was found to have fallen below the defined specifications and therefore was removed from the market. This credit will be applied against the future sale of doses to this customer.
Our cost of sales for the first quarter of 2023, were $34 million, compared to $15 million in the first quarter of 2022. This includes $20 million related to excess, obsolete or expired inventory and losses on firm purchase commitments.
Research and development expenses for the first quarter of 2023 were $247 million compared to $383 million for the first quarter of 2022. The decrease was primarily due to a reduction in clinical and manufacturing spend.
Selling, general and administrative expenses for the first quarter of 2023 were $113 million, compared to $96 million in the first quarter of 2022. The increase is related to expansion of our commercial sales operations in Europe and commercial investment in preparation for the full 2023 vaccination campaign, partially offset by certain cost containment measures to reduce our operating spend.
For the first quarter of 2023 we recorded a net loss of $294 million, compared to net income of $203 million in the first quarter of 2022, again reflecting the emerging seasonality of our business.
Please turn to slide 25. In addition to making great strides to reduce the rate of spend during the first quarter of 2023, we also made significant progress to reduce our outstanding current liabilities from $2.5 billion to $1.9 billion.
The $541 million decrease including funding of the maturity of the $325 million convertible debt in January of 2023 and, a $190 million reduction to payables. During April 2023, we addressed additional liabilities totaling $140 million.
Supportive of funding this April activity is a $100 million payment to Novavax, secured for the second quarter of 2023 related to a renegotiated EPA, that I will describe in more detail shortly.
As of March 31st 2023 the $858 million of their current liabilities balance includes approximately $700 million related to the ongoing Gavi arbitration and $113 million related to a 2023 UK APA payment.
Eliminating the more significant near-term liabilities is a key component of our objectives this year and combined with our significant cost-reduction initiative is intended to strengthen and stabilize our cash flow position as we seek to position Novavax for future growth.
Please turn to slide 26. Today, we announced that we are implementing a global restructuring and cost-reduction initiative, which will significantly reduce our expenses while retaining the capabilities we need to drive results and build future value. When fully implemented, we expect these actions will reduce our combined R&D and SG&A expenses for 2024 to below $1 billion, reflecting an approximately 40% to 50% decrease when compared to 2022.
For 2023, we expect to realize about half of that amount or 20% to 25% reduction as compared to 2022 due to timing, local laws and regulations and other factors. For the full year 2023, we expect combined R&D and SG&A expenses to be between $1.3 billion and $1.4 billion as adjusted to exclude one-time restructuring costs. This global restructuring cost reduction initiative is targeted to result in a more focused investment in our COVID program, a reduction in our pipeline spending, the continued rationalization of our manufacturing network and approximately 25% reduction to our global workforce, of which 80% of those impacted are full-time employees, as well as a consolidation of facilities and infrastructure. We believe these decisive actions were necessary as we establish a path forward towards long-term financial health and align Novavax to the opportunity ahead.
Please turn to slide 27. For the full year 2023, we expect to achieve total revenue of between $1.4 billion and $1.6 billion from a combination of grant revenue and product sales in Nuvaxovid. Our projected product sales includes approximately $800 million in APA orders secured for 2023 based on committed delivery schedules and currently uncontracted US market sales, each subject to updated variant manufacturing and regulatory approvals.
For expenses, we expect to lower our combined R&D and SG&A expenses for the full year 2023 to between $1.3 billion and $1.4 billion as adjusted to exclude one-time restructuring costs, which at midpoint is approximately $375 million lower than 2022. This expects guidance reflects our COVID stand-alone business cost structure and excludes potential costs associated with a Phase 3 flu kick program. We plan to evaluate our positive Phase 2 flu kick results announced today to frame our options to advance and finance this program via strategic collaborations and/or available finance alternatives.
Our ongoing 2023 cash management and resulting cash flow are important to help enable the delivery of our vaccine for the fall 2023 season. In the combined second and third quarters of 2023, we expect to receive cash inflows of over $500 million from product sales of our prototype Wuhan vaccine, government grants and $100 million payment secured for the second quarter 2023 related to a renegotiated APA.
This $100 million payment is excluded from full year 2023 sales guidance and we plan to continue to negotiate for additional 2023 payments from our committed APA book of business, as we explore a full range of non-dilutive and dilutive funding alternatives to advance our business. If successful in achieving the full year 2023 guidance outlined today, we believe this will support the funding of our operations for the next 12 months.
In our 10-Q filing, you will see that we have provided an update on our going concern disclosure, which we first provided in our 10-K filing in February. Specifically, that this forecast continues to be subject to significant uncertainty related to revenue for the next 12 months funding from the US government and pending arbitration.
With that said, I'd like to turn the call back to John for some closing remarks.
Thank you, Jim. Please turn to slide 28. I'd like to underscore that as I've learned more about our organization and our people in recent months that I've seen a passion across our company to advance our mission and deliver innovative vaccines to improve global public health.
As the team demonstrated today, we've taken decisive actions on the priorities we outlined in our February call, including our intent to advance our updated vaccine for the fall campaign, strategically manage our investments and dramatically reduce our spend and work to drive additional value from our pipeline and technology platforms.
We continue to operate with this focus on fiscal responsibility in parallel with making the investments needed to achieve our three key priorities. The reductions to our workforce that we announced today were difficult decision, but we felt they were a necessary one to put the company on a better pathway towards financial strength and sustainability.
Let me say that we deeply appreciate the contributions made by those employees, who have been adversely impacted today and we will appropriately support them as they make the transition to new opportunities. The positive Phase 2 data we announced today further reinforces our belief in the value of our recombinant protein nanoparticle plus Matrix-M adjuvanted technology platform at Novavax.
Our prior positive Phase 3 results for both our COVID and flu vaccines plus this new Phase 2 data, provide additional confidence for us to move towards Phase 3 for one or more of these products potentially in the future. It is our intention to leverage this technology to build a robust portfolio of vaccines to further support our mission of positively impacting global health.
As we continue to execute on our strategy and key priorities, we're confident that we're taking the right steps with the goal of positioning Novavax for success and delivering positive results for our stakeholders in 2023 and over the long-term.
And with that, we will now take your questions.
Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Roger Song with Jefferies. Please go ahead.
Thank you. Thanks for the update and taking our questions. A couple from us. First one is regarding this -- the revenue guidance, since you provide this revenue guidance in ex-US $800 million APA. I just wonder, get some additional comments related to how confident you are about this APA given the recent EU they have some proposed deal with your competitor? And in terms of the breakdown within the $800 million, can you provide additional color around the timing, geography, maybe last portion -- last part of the question is the -- related to the remaining APA. Last quarter, you said you have $2.1 billion in total since you are doing some renegotiation, just curious, what's left for your APA to be delivered in 2024 and 2025? Thanks a lot.
Thank you, Roger. Appreciate the question. John Trizzino, would you like to take that one?
Sure. Hey Roger. There's a couple of components to your question. Let me try to parse them out. First of all, the $2.1 billion is still a true kind of adherence to the original value of all those contracts and we expect that and to date still have confidence in that value. Now, that's going to be -- some of that is going to fall into '24 and '25, the $800 million for '23 are locked in orders, committed orders, allocated to be shipped during various quarters of the balance of this year, so confident in the $800 million.
That settlement that's happening in Europe with Pfizer, I think there are still some details to be determined there, but that will not affect revenue generation during the APA period. There are possible implications to that in the future, when we go to tender and private market selling, but have already had multiple conversations with the European Commission Director General and his staff about the need for a protein-based vaccine in a vaccine portfolio. So, critical there's an awareness and a need to make sure that our vaccine is available. The contracts and APAs support the $2.1 billion and the $800 million is locked in delivery schedules for 2023.
And Roger, you had a question about the allocation of that $2.1 billion relative to 2023 versus future periods. So, the items we discussed today were the $800 million secured APAs for delivery. And I also mentioned a $100 million payment, which came from a renegotiated APA that has been secured for the second quarter. So that gets you to $900 million total of the $2.1 billion. That leaves an additional $1.2 billion outstanding. And as I mentioned in our remarks, that these are available for delivery. They're of course committed and we are going to actively seek to renegotiate some of these APAs as a mechanism for nondilutive financing and certainly more on that in future calls as we move forward.
Excellent. That's very helpful. Thank you for the comment. And then, so moving on to the US market, understanding you're doing the inventory view for the strain change and you will have the midyear data to potentially support a strain change. Just curious, what additional data you needed once the VRBPAC meeting June 15 decided which strain change to select what additional data you need to be able to deliver in the US market for the fall? And related to that is, for the US market, it seems that's also part of the revenue guidance outside of the $800 million, how much you are building for the US market or it's kind of upside and you have a range of the revenue guidance is maybe towards the upside of the revenue guidance? Thank you.
Filip would you like to take the first part of Roger's question?
Sure. I'll at least take the first part or the first part of Roger's question and that's really the main thing we're waiting for is the strain composition selection, right? The study that we're conducting will read out as you mentioned and we've done this before and we're successful with that study. So, we don't see why it should be any different.
The additional details that need to be part of that file are in fact manufacturing details and it includes stability of the strain that elected, et cetera. And that's all part of the regulatory timeline that we've developed and we've discussed multiple times with the global regulatory agencies. So, they understand the kinds of barriers we have to put in the vaccine in the market and we're pretty confident about that right now.
Thank you Filip. And Jim maybe you could take the second part of Roger's question.
Hey certainly and thanks for asking because gives me the opportunity to walk you through in a little more detail our revenue guidance. So, we've guided to total revenue of $1.4 billion to $1.6 billion, of course, midpoint at $1.5 billion. And that guidance is inclusive of both our product sales and grants and I'll begin with grants.
Grants at the midpoint is $350 million range of $340 million to $360 million. As folks know we've been operating with the US government under Operation Warp Speed to fund much of our clinical activity and that continues through this year and is the basis for grants revenue.
For product sales, our guidance is $1.06 billion to $1.24 billion and that's inclusive of both the $800 million we spoke of just a moment ago, which is for secured APA delivery. And if you subtract that, it results in US at $260 million to $440 million or $350 million at the midpoint. So, hopefully that's helpful.
Thank you, Jim.
No, that's helpful. Okay. I understand basically the balance of the $800 million outside of your product sales that's the US market. Got you. Okay. Great. Bear me for the last one question.
So, related to your the COVID flu combination therapy, data looks pretty robust. But noticing I think John you mentioned, you are moving towards the partnership maybe some strategic collaboration for -- to move forward this program.
Just maybe elaborate on your plan there. What will be the next immediate next step for the combo and some other kind of stand-alone vaccine a little bit different from what you already have do you need a Phase 2b efficacy study before you move into the Phase 3? Just a little bit more detail that would be appreciated. Thank you.
Thank you for your question Roger. Let me answer it this way and I can let Filip address the Phase 2b question, et cetera. As we noted in our call and in our prepared comments our focus this year is on our three priorities our top priority at Novavax is launching our updated Nuvaxovid in line with regulatory authority requirements for this fall season and a competitive product profile and on time for our customers as the fall season emerges. That's our number one goal.
In parallel with that is reducing our cost and resizing the company and addressing our near-term and current liabilities aggressively. I think we've demonstrated some decisive actions that the leadership team and I have taken with the support of our Board in that direction very clearly now in the first quarter. We're excited and encouraged about the data. This is a Phase 2 top line results. And if we continue to execute, on our plan successfully this year, we should be able to position Novavax in a stronger place, from a financial perspective.
So we can have options next year, on how to bring forward these unique and interesting assets that are in development right now. And we'll continue to learn from the data in the coming months, and have discussions with regulatory authorities and how to best bring these forward. Filip, would you like to add additional commentary on Roger's question around, what type of study may be next for these assets?
Yes. I mean a lot of that really depends on regulatory guidance. We would clearly not go into pivotal study, without very firm regulatory guidance. And that may well depend, on what we see in the rest of the data. Additionally, if we do move forward with a strategic partner that ultimate design and time line, will be determined in collaboration with such a partner. Now, what we are planning on doing right now is, doing a Phase 2 study with our high-dose COVID product. And that's going to be done with the XBB 1.5. format. I mentioned that earlier.
And the idea there is going to be to really explore the optimal formulation, including the antigen as well as adjuvant dose levels, to optimize immune response. You followed us for a long time. So you know that we did our initial dose ranging in naïve [ph] at the very beginning of the pandemic, and we saw there was no difference when you changed the antigen dose level.
But we're in a different place now, where people are heavily primed and we are seeing evidence that as we increase the dose level in these primed individuals, we do get a better immune response. So we're looking to develop a high-dose formulation, to be for annual vaccination primarily, in the elderly market similar to what has been done in influenza.
Thank you for questions, Roger
Your next question comes from Eric Joseph with JPMorgan. Please go ahead.
Hi, guys. Very good morning for taking the questions. So I just wanted to come back on launch preparedness for the fall season and just -- and kind of get a sense of where your confidence comes from being able to launch ahead of a BLA approval? And I guess, it's currently planned proceeding under EUA. Can you talk about whether there are any amendments or expansions of the existing EUA, that are necessary to facilitate a commercial launch in the US?
John Trizzino, would you like to take that question from Eric, please?
Yes. So we have been in constant coordination with the FDA, on where we are today under emergency use authorization, as well as submission of the BLA and the timing of the BLA submission, and where that leaves us under emergency use authorization. So we have emergency use authorization for the product that is today approved and labeled by the FDA and around the globe. We will need an additional emergency use authorization, similar to all of the other manufacturers for the new strain and the new format, which is yet to be decided.
Based upon those conversations with the FDA, it is our expectation and specifically based upon conversations we've had with them, that we will be operating under an emergency use authorization without restriction. So I think that really says all that we need to know, at this point. And that means that all of the activities that I talked about, during our planned remarks, with access to pharmacies, access to all healthcare providers, access to distributors will be unrestricted.
Okay. And maybe just a follow-up on the manufacturing side. Can you just talk about sort of the manufacturing lead time, after appropriate strain selection, it sounds like in June I guess what -- ultimately what those quantities, do you think could be supplied or market-ready at launch? And also a little more detail on sort of where supply is being sourced from whether it's from serum or other facilities? Thanks.
Thank you, Eric. Right now, we're not disclosing specific quantities of our production plan in the public domain, but that's a very good question. And we've -- as we said on our prior call, we've changed the way we're working with FDA and the way we're working internally with our project teams to do everything we can to appropriately minimize the time it takes to be ready for the fall season, and that includes quite a nice shift in the dynamic with FDA. We've seen an excellent partnership from both FDA and global regulatory authorities who have expressed to us that they value a protein-based option in the marketplace for consumers around the globe.
And we've made significant progress, as we said before, in bringing multiple strains forward and that's key because we're able to get the data, assess the data on which strains are becoming predominant and bring several streams forward. And Filip discussed that during his prepared remarks earlier, and we have some slides on that.
So we feel that we're currently on track to be ready despite potentially taking protein-based vaccines a little bit longer from the very beginning of go to get finished. We've been taking steps right now already to prime that pump and to be ready to bring the vaccine forward. John Trizzino, would you like to add any color or comment to that? And Rick Crowley as well, who leads our manufacturing.
No, I think, John, that pretty well captures it. Of course, Eric, you can imagine that as we're anticipating revenue generation and product availability, we're thinking through exactly all of those time lines. And it's manufacturing time lines, fill finish, getting product to the right distribution centers making sure that the regulatory approvals are impacted. So end to end, those time lines have been examined and scrutinized to make sure that we have product available at the start of the fall season.
Okay. Great. Thanks for taking the questions.
Thank you, Eric.
Our next question comes from Mayank Mamtani with B. Riley. Please go ahead.
Good morning team. Thanks for taking the question. Appreciate the level of detail this morning. Including the progress on balance sheet and OpEx resizing, are you able to provide any granularity on how fiscal year 2023 reductions will be split between R&D and SG&A? And in terms of workforce restructuring also 2023 versus 2024, any level of granularity there would be helpful. And then I have a couple of follow-ups.
Thank you, Mayank. Jim Kelly, would you like to take Mayank's question?
Hey, certainly. And good morning Mayank, as we announced this morning, I mean, we have a significant global restructuring and cost-saving initiatives that touches each corner of our organization, both functionally and geographically. That means that we will, among other things, focus on our core priority of delivering our vaccines fall, you're watching a sharpening of our investment on our COVID program. The cost structure that we're describing today is the COVID stand-alone cost structure.
I described in more detail that it did not include at this time, advancement of pipeline, including based on some of the great flu kick results we saw today. So when we look back to these reductions, again, it's a sharpening of our focus on the COVID business. It is a pausing of our pipeline. It includes a continued rationalization of our manufacturing network as we size it for the endemic opportunity.
It also includes a 25% reduction in our total workforce, inclusive approximately of 80% of those impacted our full-time employees and then also a consolidation of facilities and infrastructure. When you look at where this from 2022 to 2024 will hit in different aspects of R&D plus SG&A, it is primarily going to be in the R&D realm. And this is because as we continue to make investments in our commercial footprint to ensure success in the marketplace in our priority markets of the US, Europe and select APAC what we're seeking to do is further reduce our G&A and infrastructure to enable that investment. So watch us seek to hold steady as best possible SG&A. And then when you look at the reductions from 2022 to 2024 a significant amount will be reflective of those steps I just described. So hopefully that's helpful.
Yes, very helpful. Since we are on that topic if you could comment also on the liabilities reduction program? Obviously, great updates on the par and UK government payment, but there are a number of other things in the works like Gavi, if you could provide any update on that that would be helpful?
Yes. Jim, do you want to just cover the liabilities question first?
Hey, certainly.
Yes.
Beginning with the liabilities, we made significant progress this quarter reducing our current liabilities by over $541 million. And you will see that one of the key components of that was funding the maturity of our convertible notes for $325 million, but also you saw a significant reduction in our payables approximately $190 million. So that's a part of a really important step for us to address in some cases onetime liabilities as we better put this company on a strong financial footing.
So hopefully that covers at least through 3/31 your question, but we also make sure we make folks aware of that. We addressed another $140 million in liabilities in April including resolution of the par arbitration for $27 million. And then also we did make that payment to the UK per our APA of $113 million and that related to the terms of the agreement that had previously been discussed.
Now one of the things that is helpful here is I announced that we had secured a $100 million payment under a renegotiated APA. So that's incredibly helpful to help fund those liabilities. And I also described in our remarks that during Q2 and Q3, we expect inflows of cash flow of over $500 million. So it is the combination of liability management progress to-date, our expectations around future cash flow into Q2 and Q3 that we find important to put us on the right footing towards being prepared for the fall vaccination season.
And then Mayank you did ask about Gavi. So look there's obviously not much I can say related to the legal matters that the company is addressing. But what I can do is confirm that we're currently in the arbitration process with Gavi regarding this matter and to restate Novavax's position that we do not believe we owe the money that's in question. And obviously we cannot predict the outcome of any arbitration.
But what I can say is we'd like to put the matter behind us as soon as possible and that frankly were frustrated by the situation. And that's because we believe we share the same mission as Gavi to help improve global public health and to provide high-quality vaccines to people in low-income countries. And we're frustrated that the current matter is not yet resolved and has the potential of impeding our ability to fulfill this mission to the best of our capabilities. Thank you for your question, Mayank.
This concludes our question-and-answer session. I would like to turn the conference back over to John Jacobs for any closing remarks.
Just like to thank everyone for joining us today. We appreciate your time and your confidence in us. Thank you very much. Appreciate it.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.