CureVac N.V. (CVAC) Earnings Call Transcript

Welcome, everyone, to this year Annual General Meeting of Shareholders of CureVac N.V. My name is Baron Jean Stephenne, Chairman of the company's Supervisory Board, and I will chair today's meeting in accordance with Dutch law and the company's Article of Association. Present in person are Alexander Zehnder, our Chief Executive Officer; Axel Malkomes, our Chief Financial Officer; Thaminda Ramanayake, our Chief Business Officer; Marco Rau, our General Counsel, who will act as Secretary of today's meeting. Nominees for Supervisory Board appointment and reappointment as set out in the convening notice. Representative of KPMG; our Dutch Legal Counsel, Paul van der Bijl; Mike Koudenburg from NautaDutilh. Before proceeding, I give the floor to the Secretary for legal formality. Marco?

Thank you, Jean. For the record, I confirm that today's meeting has been convened in accordance with Dutch law and the company's Articles of Association. At this meeting, 140,238,267 shares or 62.28% of the company's issued share capital are represented. We are live streaming this Annual General Meeting. However, please note that shareholders and others following the live stream will not be able to vote or ask questions. As an aid in the preparation of the minutes of this meeting, the proceedings will also be recorded. We kindly request you not to use social media or other means to communicate about the proceedings at this meeting. The company will make the appropriate disclosures and communications after the meeting has been concluded. Participants wishing to speak should raise their hand and state their name and if applicable, the name of the shareholder they represent. I now return the floor to the Chair.

Thank you, Marco. Before proceeding, I will determine the voting procedure for this meeting. Voting will -- shall take place by show of hands. When putting a resolution to a vote, I will ask whether any participant wish to vote against the resolution or wish to abstain from voting. In that case, please raise your hand during the vote, state your name and if applicable, the name of the shareholder you are representing and the number of shares you are voting. Unless you raise your hand and indicate otherwise, your vote will be recorded as a vote for the proposed resolution. Valid voting proxies given to our civil law notary, Paul van der Bijl, to the extent that these have been received in a timely fashion in advance of the meeting will automatically be tabulated in the voting result without future action, in accordance with the corresponding voting instruction. After each vote, I will announce whether the relevant resolution has passed. This voting procedure will be supervised by our civil law notary. Unless there are questions regarding this voting procedure, we'll now proceed to the next item on the agenda. Are there any questions? I will now give the floor to Alexander Zehnder, our Chief Executive Officer for a business update of 2024. Alex?

Thank you, Jean, and good afternoon to all in the room, and hello on those participating via live stream. Before we proceed with today's agenda, I would like to briefly address the announcement made on June 12 regarding the agreement reached with BioNTech regarding a share-for-share acquisition of CureVac by BioNTech. While today's Annual General Meeting concerns the financial year 2024 and the matters formally on the agenda, this transaction represents an important milestone for CureVac and its future. The transaction remains subject to further steps, including a public tender offer procedure under which CureVac shareholders can tender their shares in exchange for BioNTech American Depository Shares, or ADSs, and customary regulatory approvals. In due course and as required under applicable law, shareholders will receive further detailed information regarding the transaction, including the terms of the offer and the convening of an extraordinary general meeting of CureVac. The Management Board and the Supervisory Board of CureVac fully support this transaction, which we believe is in the best interest of the company and the sustainable success of its business, having considered the interest of its shareholders, employee, partners and other relevant stakeholders. In addition, CureVac's 2 largest shareholders, the dievini Hopp BioTech holding GmbH and Co. KG and certain of its affiliates as well as the German Federal Government, together representing over 50% of CureVac shares are supportive of the transaction. For details about the announced offer by BioNTech, we refer to the joint press release issued on 12 of June and subsequent filings. In addition, BioNTech will make considerable additional information available in the coming weeks in press releases as well as in filings with the SEC and additional documents with respect to investors in member states of the European Economic Area and the United Kingdom. Contact information for an information agent to assist with any inquiries will also be made available. An extraordinary general meeting will be convened in connection with the exchange offer to adopt, among other things, certain resolutions relating to the transaction. With that, let us now return to the formal agenda of this Annual General Meeting. Let me begin with a brief overview of CureVac. Founded in 2000, CureVac is a pioneer in mRNA technology headquartered in Tübingen, Germany. We are focused on realizing the promise of mRNA technology by developing novel treatments that enable the body to make its own prophylactic and therapeutic drugs. We have been listed on the NASDAQ since 2020, and we are part of the NASDAQ Biotech Index since 2021. Our proprietary mRNA platform underpins development of novel oncology transition immunotherapies, prophylactic vaccines against infectious diseases and molecular therapeutics. 2024 was a year of transformation. We refocused the company on what we do best, technology, innovation and R&D, and we made substantial progress in expanding and advancing our pipeline of early proprietary clinical development programs in oncology and infectious diseases. We accomplished this through taking decisive action to streamline and right size the company, reducing our workforce by approximately 30% to enhance efficiency and agility. We sharpened our strategic focus on high-value R&D and deprioritized large-scale commercial manufacturing operations. This transformation was supported by a significant new licensing agreement with GSK, leveraging our second-generation mRNA technology in prophylactic respiratory infectious vaccines. This agreement provided a significant financial foundation and importantly validates our scientific leadership in the mRNA sector. In 2024, CureVac continued to advance its pipeline in both prophylactic vaccines and oncology immunotherapies. We reported promising preliminary Phase I data from our glioblastoma study, demonstrating antigen-specific T cell responses in the majority of patients. In addition, new pipeline programs were initiated, including a prophylactic vaccine targeting urinary tract infections caused by uropathogenic E. coli and an immunotherapy program addressing squamous non-small cell lung cancer. In our partnered infectious disease programs, our collaboration with GSK yielded further positive results. GSK reported positive Phase II data from its seasonal influenza study, demonstrating strong immune responses across both A and B strains, further validating the potential of our mRNA technology in seasonal flu vaccines. On the management side, we welcomed 2 new members to our leadership team, Thaminda Ramanayake as Chief Business Officer; and Axel Malkomes as Chief Financial Officer, both seasoned industry experts that bring significant expertise and experience to CureVac. And we ended 2024 with a robust cash position of EUR 482 million, extending our expected cash financial runway into 2028. On Slide 5, a snapshot of our diversified pipeline. Our glioblastoma program leads the oncology pipeline. And here, we completed enrollment of Part B in the Phase I study and data are expected in the second half of 2025. In the Part A study, [ 70% ] of patients showed antigen-specific T cell responses with 84% being de novo responses. We also advanced a second program in squamous non-small cell lung cancer, leveraging novel antigens from our myNEO collaboration. This program has received IND clearance in the U.S. and CTA approval in the EU, and we will start the Phase I clinical study in the second half of 2025. Turning to our infectious disease programs. From our in-house prophylactic nonrespiratory infectious disease program, we advanced the [ candidate ] vaccine against uropathogenic E. coli bacteria or UPEC, which is a major cause of urinary tract infections, one of the most common bacterial infections with high unmet medical need. Preclinical data to date shows strong immunogenicity. An IND filing is expected in late 2025 with a Phase I scheduled to begin in early 2026. And we are seeing continued progress under our new licensing partnership with GSK for prophylactic respiratory vaccines. Notably, GSK has initiated a combined Phase I/II clinical trial for seasonal influenza and COVID-19 combination vaccine built on our second-generation mRNA platform. This milestone triggered a EUR 10 million payment, which was invoiced at the end of 2024 and received early this year. In addition, GSK has publicly confirmed preparations are underway for a Phase III study of its stand-alone seasonal flu vaccine candidate, another program developed using our mRNA technology. To support efficacy in both oncology and infectious diseases, we continue to advance our proprietary lipid nanoparticle or LNP delivery systems tailored to the distinct needs of each therapeutic area. In prophylactic vaccines, our LNPs are designed for high immunogenicity with minimal side effects and strong thermostability critical for global distribution without reliance on ultra-cold storage. Data from an ongoing stability study of our [ rabies ] antigen mRNA formulation remains intact and effective after 12 months at room temperature refrigeration and even in freeze-dried form, offering real-world flexibility. For precision immunotherapy by contrast, our LNPs are engineered to induce potent systemic immune responses with greater tolerance for reactogenicity, a trade-off aligned with the demands of cancer immunotherapy. With the shift in focus toward high-value R&D and platform innovation, we have also streamlined our manufacturing operations. This includes deprioritizing large-scale commercial production and scaling back infrastructure to better match our strategic priorities. At the same time, we have retained a highly flexible manufacturing network, purpose-built to serve the needs of our evolving pipeline across different life cycle stages. Our current manufacturing footprint enables rapid small to mid-scale production to support early clinical development while maintaining the capabilities to scale up as programs progress to later stages. This flexible setup positions us efficiently to support our R&D-driven business model. Now let me walk you through the key messages summarizing our progress and strategic direction in 2024. First, we successfully completed a major strategic transformation in 2024, including a 30% reduction in workforce. This was difficult but necessary and has positioned us to significantly lower our cost base from 2025 onwards. Second, our pipeline is expanding with good momentum, especially in oncology, where we are advancing both off-the-shelf and personalized immunotherapies. Our Phase I study in squamous non-small cell lung cancer has been cleared by both the FDA and EU regulators and early signs from our glioblastoma trials are promising. In parallel, we're making progress in infectious diseases, both through our internal programs as well as our ongoing partnership with GSK. Third, we strengthened our financial discipline, resulting in a strong cash position. This gives us the confidence in our expected cash runway, which is expected to go into 2028. And finally, we are future-ready. Our focus is firmly on high-value opportunities, deepening strategic partnerships and fully leveraging our broad intellectual property portfolio and a solid financial base to build long-term value. With this, I return the floor to the Chairman.

Thank you, Alexander. I will now open the floor for questions. Are there any questions? No question. We will move to Item 2. The next item on the agenda is the discussion of the company annual report over the financial year 2024. I will now give the floor to Axel Malkomes, our Chief Financial Officer. Axel?

Thank you, Jean. Ladies and gentlemen, I would now like to walk you through key financial highlights from our 2024 statutory and consolidated annual accounts, distinguishing between the consolidated figures for the CureVac Group and those for CureVac N.V., the Dutch parent entity. Looking at the profit and loss statement of the CureVac Group for the financial year ended December 31, 2024, the group reported a net profit of EUR 179.2 million compared to a net loss of EUR 277.2 million in the prior year period, which is mainly attributable to the restructuring of the GSK collaboration into a license agreement. Total revenues amounted to EUR 535.2 million, representing a substantial increase from EUR 53.8 million in 2023. This sharp rise was primarily driven by a EUR 400 million upfront payment under the revised licensing agreement with GSK, which was received as a nonrefundable payment for granting licenses to GSK and the exclusive right to use our intellectual property relating to applicable vaccine programs with no further R&D work obligation on our side and which was, as such, fully recognized as revenue in 2024. The revenue recognition of EUR 80.4 million of remaining contract liabilities related to the previous GSK collaboration agreements as all unfulfilled performance obligation expired. A EUR 10 million development milestone for the initiation of Phase I for a combo vaccine and EUR 15 million in development milestones for the initiation of Phase I and II of the pre-pandemic avian influenza vaccine. Of the total revenues, EUR 519.8 million was generated from collaboration and license agreements with GSK. Incremental revenues of EUR 13 million and EUR 2.4 million were provided from our CRISPR and Genmab collaborations, respectively. Aside of the revenues already discussed, the operating result was affected by several key drivers. Cost of sales amounted to EUR 88.8 million, down from EUR 141.4 million in 2023, driven largely by higher write-offs of raw material in the prior year originally purchased for the stockpiling of the pandemic preparedness agreement. Further, the prior year period was impacted by extraordinary expenses as part of an arbitration ruling for CMO activities related to the first-generation COVID-19 vaccine. In addition, cost of sales decreased year-on-year due to the change in strategy associated with a new license agreement with GSK, resulting to a change in the activities of the organization towards R&D. As CureVac's manufacturing organization is now solely serving the R&D pipeline, such costs are subsequent to the change no longer recognized as cost of sales. R&D expenses increased to EUR 153 million, up from -- EUR 153 million, up from EUR 115.7 million in 2023. The increase is attributed to the costs of CureVac's manufacturing organization classified as R&D expenses rather than cost of sales following the change in strategy. Higher clinical trial and preclinical development costs for our glioblastoma squamous non-small cell lung cancer and UPEC vaccine programs, among others. Extraordinary expenses related to the litigation to enforce intellectual property rights and by higher personnel expenses related to the restructuring of the organization. Coming back to the operating statement of the group. General and administrative expenses decreased from EUR 91.8 million in 2023 to EUR 69.7 million in 2024. This reduction reflects the successful execution of our workforce restructuring and reduced external services. We recorded EUR 8.9 million in other operating income and EUR 33.4 million in other operating expenses, which included a EUR 32.1 million impairment of our large-scale pDNA production line within our GMP IV production facility or mMC, which was initially planned and set up for commercial large-scale production and cannot be scaled down to provide products for clinical production in alignment with our refocus on R&D. These developments led to a turnaround in performance with the group achieving an operating profit of EUR 194.7 million compared to an operating loss -- operative loss of EUR 291.2 million reported in 2023. Financial result for the full year 2024 was positive with EUR 13.2 million, representing a decrease of EUR 1 million compared to the same period in 2023. Net profit for the year totaled EUR 179.2 million, up from a net loss of EUR 277.2 million in the prior year period. This equates to basic and diluted earnings per share of EUR 0.80 based on basic weighted average of 224.4 million and diluted weighted average of 225.3 million common shares outstanding. Moving on to the balance sheet of the CureVac Group. Assets showed a net increase year-on-year of EUR 14.6 million from EUR 788.2 million at the end of 2023 to EUR 802.8 million at the end of 2024. Noncurrent assets decreased by EUR 33.5 million, mainly due to the partial impairment of our production facility. In current assets, Inventory decreased due to the write-off of raw materials, which would have been recoverable under the previous GSK collaboration. The increase in cash and cash equivalents was mainly due to the receipt of the EUR 400 million upfront payment related to the new license agreement with GSK. Increase was offset by extraordinary payments amounting to a total of EUR 137 million related to the termination of raw material commitments for the first-generation COVID-19 vaccine, the payment of CMO-related arbitration awards, payments related to the restructuring of the organization and payments related to the litigation to enforce intellectual property rights. The remaining cash spend was mainly related to ongoing R&D activities. We closed the year with a strong cash position of EUR 481.7 million, reaffirming our expected cash runway into 2028. Equity increased by EUR 196.7 million, mainly due to the positive P&L result associated with the decisive revenue resulting of the new GSK licensing agreement. Provisions decreased from EUR 54.4 million to EUR 2 million, mainly due to payments related to rulings on the CMO arbitrations. Contract liabilities decreased due to the release of all remaining upfront payments and milestones related to GSK as a consequence of the new licensing agreement, wherein all unfulfilled performance obligations of the prior collaboration agreements expired. Let me now go over to the stand-alone statutory financial statements of CureVac N.V. For the 2024 financial year, CureVac N.V. reported low operating expenditures consistent with its governance and nonoperational function, resulting to a net operating loss of EUR 3.6 million, which was mainly driven by personnel expenses, legal services and insurance. A financial gain of EUR 16.2 million, mainly driven by interest income and foreign currency gains. And lastly, as the CureVac N.V. is the parent company of the CureVac Group, it consolidates the share profit of its subsidiaries after tax of EUR 168.6 million, mainly driven by the decisive revenue associated with the new licensing agreement with GSK, partially offset by further write-offs of materials, costs related to ongoing IP litigation, the partial impairment of the production facility and severance payments related to the restructuring of the organization. Overall, CureVac N.V. reported a net profit of EUR 179.2 million for the full year 2024 compared to a net loss of EUR 277.2 million for the same period in 2023. Regarding the balance sheet of CureVac N.V., noncurrent assets increased mainly due to the share of result of participating interest. Current assets increased mainly by increased cash position due to the repayment of a loan and related accrued interest by CureVac SE. The equity and liability side of the balance sheet increased mainly by the settlement of share-based payment awards, realized tax benefits and by the positive P&L result. CureVac N.V. does not propose a dividend for financial year 2024, consistent with its strategy to reinvest earnings into long-term R&D initiatives. These statutory results form the basis for consideration of distributable reserves and have been audited by KPMG. With that, I return the floor to the Chairman.

Thank you, Axel. Are there any questions on this topic? As there is no question, I will proceed to the next item of the agenda. The next item on the agenda is the adoption of the annual account of the financial year 2024. Are there any questions on this topic? As there is no question, I will put this agenda to a vote. [Voting]

As there is no hand raised based on the voting results, I conclude that this resolution has passed. The next item on the agenda is the explanation of the company dividend [indiscernible] in the explanatory note to the convening notice of this meeting. Are there any questions on this topic? As there is no question, I will proceed to the next item of the agenda. The next item on the agenda is the release of the company Managing Director from liability for the exercise of their duties during the financial year 2024. Are there any questions on this topic? As there is no questions in the room based on the voting results, I conclude that this resolution has passed. The next item on the agenda is the release of the company's Supervisory Director from liability for the exercise of their duties during the financial year 2024. Are there any questions on this topic? As there is no question and based on the voting results, I can conclude that this resolution has passed. We now proceed to the agenda Item 7, which concerns the appointment of Axel-Sven Malkomes as a member of the Company's management board. The Supervisory Board has made a binding nomination to appoint Mr. Malkomes as Managing Director of the company for a period of 3 years ending at the close of the Annual General Meeting to be held in 2028. Mr. Malkomes joined CureVac as Chief Financial Officer in November 2024, bringing over 3 decades of senior corporate and investment banking experience within the biotech and pharmaceutical industry. Prior to joining CureVac, he served as CFO at Cardior Pharmaceuticals, where he played a crucial role in preparing the company for capital market and its subsequent acquisition by Novo Nordisk. His extensive experience also includes senior role at Medigene, Barclays, Société Générale, 3i Group and Merck KGaA. I now invite Mr. Malkomes to say a few words. Axel?

Thank you, Jean. Ladies and gentlemen, I'm honored to be considered for appointment to CureVac's Management Board. Joining CureVac has been a significant milestone in my career. The company's pioneering work in mRNA technology and its commitment to developing transformative medicines aligned with my professional values and aspirations. With the background spanning over 30 years in corporate finance and investment banking within the biotech and pharmaceutical sectors, I've witnessed firsthand the challenges and opportunities that companies like CureVac encounter. I'm committed to leveraging my experience to support CureVac's strategic initiatives, strengthen its financial foundation and contribute to its mission of bringing innovative therapies to patients worldwide. Thank you for your trust and consideration.