Vaxcyte, Inc. (PCVX)

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes and other financial information included elsewhere in this Annual Report on Form 10-K. For discussion and analysis related to our financial condition and results of operations comparing the year ended December 31, 2023 ("2023") to the year ended December 31, 2022, refer to Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for 2023, which was filed with the Securities and Exchange Commission on February 27, 2024. This discussion and analysis contain forward-looking statements based upon our current beliefs, plans and expectations that involve risks, uncertainties and assumptions, such as statements regarding our plans, objectives, expectations, intentions and beliefs. Our actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under the section titled “Risk Factors” and elsewhere in this Annual Report on Form 10-K. You should carefully read the “Risk Factors” section of this Annual Report on Form 10-K to gain an understanding of the important factors that could cause actual results to differ materially from our forward-looking statements. Please also see the section titled “Special Note Regarding Forward-Looking Statements.”

Overview

We are a clinical-stage vaccine innovation company engineering high-fidelity vaccines to protect humankind from the consequences of bacterial diseases. We are developing broad-spectrum conjugate and novel protein vaccines to prevent or treat bacterial infectious diseases. We are re-engineering the way highly complex vaccines are made through modern synthetic techniques, including advanced chemistry and the XpressCF™ cell-free protein synthesis platform, exclusively licensed from Sutro Biopharma, Inc. (“Sutro Biopharma”). Unlike conventional cell-based approaches, our system for producing difficult-to-make proteins and antigens is intended to accelerate our ability to efficiently create and deliver high-fidelity vaccines with enhanced immunological benefits.

Our pipeline includes:

•Pneumococcal conjugate vaccine (“PCV”) candidates that we believe are among the broadest-spectrum PCV candidates currently in development, targeting the approximately $8 billion global pneumococcal vaccine market. Pneumococcal disease is an infection caused by Streptococcus pneumoniae bacteria. It can result in invasive pneumococcal disease (“IPD”), including meningitis and bacteremia, and non-invasive pneumococcal disease, including pneumonia, otitis media and sinusitis. Our broad-spectrum, carrier-sparing PCV candidates, VAX-31 and VAX-24, are designed to improve upon the standard-of-care PCVs for both adults and children by covering the serotypes that are responsible for a significant portion of IPD in circulation and are associated with high case-fatality rates, antibiotic resistance and meningitis, while maintaining coverage of previously circulating strains that are currently contained through continued vaccination practice.

◦PCV Franchise Adult Indication:

▪VAX-31 is a 31-valent, broad-spectrum, carrier-sparing investigational PCV being developed for the prevention of IPD. VAX-31 is the broadest-spectrum PCV in the clinic, and has the potential to provide protection against both currently circulating and historically prevalent serotypes. VAX-31 was designed to increase coverage, in a single vaccine, to more than 95% of IPD circulating in adults in the United States aged 50 and older, with the potential to provide an incremental 12-40% of coverage over current standard-of-care adult PCVs.

•In September 2024, we announced positive topline results from a Phase 1/2 study of VAX-31 in adults. The VAX-31 Phase 1/2 clinical study was a randomized, observer-blind, active-controlled, dose-finding clinical study designed to evaluate the safety, tolerability and immunogenicity of a single injection of VAX-31 at three dose levels (low, middle and high) and compared to Prevnar 20® ("PCV20") in 1,015 healthy adults aged 50 and older. In the low, middle and high doses, all serotypes were dosed at 1.1mcg, 2.2mcg and 3.3mcg, respectively, except serotypes 1, 5 and 22F, which were dosed at 1.65mcg, 3.3mcg, and 4.4mcg, respectively. The Phase 1 portion of the study included 64 healthy adults 50 to 64 years of age and the Phase 2 portion included 951 healthy adults 50 years of age and older. The immunogenicity objectives of the study included an assessment of the induction of antibody responses at Month 1, based on opsonophagocytic activity (“OPA”) and immunoglobulin G ("IgG"), at each of the

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three VAX-31 doses and compared to PCV20 for the 20 serotypes in common, as well as for the additional 11 serotypes contained in VAX-31, but not in PCV20.

In the Phase 1/2 study, VAX-31 was observed to be well tolerated and demonstrated a safety profile at all doses studied through the full six-month evaluation period similar to PCV20. VAX-31 showed robust OPA immune responses for all 31 serotypes at all doses studied. At the middle and high doses, VAX-31 met or exceeded the regulatory immunogenicity criteria for all 31 serotypes and, at the low dose, for 29 of 31 serotypes. At the VAX-31 high dose, average OPA immune responses were greater for 18 of 20 serotypes compared to PCV20 (geometric mean ratio (“GMR”) greater than 1.0), with seven of these serotypes achieving statistically higher immune responses compared to PCV20. At the middle dose, 13 of 20 serotypes had a GMR greater than 1.0 and five serotypes achieved statistically higher immune responses compared to PCV20. At the low dose, 18 of 20 serotypes met the OPA response non-inferiority criteria, 8 of 20 serotypes had a GMR greater than 1.0 and three serotypes achieved statistically higher immune responses. For all 11 incremental serotypes unique to VAX-31, and not in PCV20, all three doses met the superiority criteria.

Based on these positive results, we selected VAX-31 to advance to an adult Phase 3 program, and plan to select the dose prior to the initiation of such program. Following an FDA End-of-Phase 2 meeting, we plan to initiate a Phase 3 pivotal, non-inferiority study by mid-2025 and announce topline safety, tolerability and immunogenicity data from this study in 2026. We plan to initiate the remaining Phase 3 studies in 2025 and 2026 and announce data from those studies in 2026 and 2027.

•In November 2024, we announced that the FDA granted a breakthrough therapy designation ("BTD") for VAX-31 in adults.

◦PCV Franchise Pediatric Indication:

▪VAX-24 is a 24-valent, broad-spectrum, carrier-sparing investigational PCV being developed for the prevention of IPD in infants, and it covers more serotypes than any pneumococcal infant vaccine on the market today.

•In March 2023, we announced that the first participants were dosed in the first stage of a Phase 2 study of VAX-24 in healthy infants. The Phase 2 infant study is being conducted in two stages and compares VAX-24 to the broadest-spectrum standard-of-care PCVs currently available. Stage 1 of the study evaluated the safety and tolerability of a single injection of VAX-24 at three dose levels, 1.1mcg, 2.2mcg and 2.2mcg/4.4mcg, and compared to VAXNEUVANCETM (“PCV15”), the broadest-spectrum standard-of-care PCV at that time, in 48 infants in a dose-escalation approach.

•In July 2023, we announced that the Phase 2 study of VAX-24 in healthy infants had advanced to the second and final stage of the study. An independent data safety monitoring board ("DSMB") approved advancing to the second stage of the study following the review of the safety and tolerability results from the first stage. Additionally, in agreement with the FDA, we amended the study protocol for Stage 2 of the study, changing the study comparator to PCV20, which became the broadest-spectrum PCV recommended by the Advisory Committee on Immunization Practices (“ACIP”) in June 2023. This Phase 2 study is evaluating the safety, tolerability and immunogenicity of VAX-24 in healthy infants at the same three dose levels, 1.1mcg, 2.2mcg and 2.2mcg/4.4mcg, that were evaluated in Stage 1. Per ACIP guidelines, the primary immunization series includes three doses given at two months, four months and six months of age, followed by a booster dose at 12-15 months of age.

•In March 2024, we announced the completion of enrollment in the VAX-24 Phase 2 study in infants. A total of 802 healthy infants (48 from stage 1 and 754 from Stage 2) were enrolled. We expect to announce topline safety, tolerability and immunogenicity data from the Phase 2 primary three-dose immunization series by the end of the first quarter 2025, followed by topline data from the booster dose by the end of 2025.

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▪VAX-31 is a 31-valent, broad-spectrum, carrier-sparing investigational PCV being developed for the prevention of IPD in not only adults, but also in children. VAX-31 is the broadest-spectrum PCV in the clinic designed to cover approximately 94% of IPD and 93% of acute otitis media due to streptococcus pneumonia in children under five years of age in the United States.

•In December 2024, we announced that the first participants were dosed in the first stage of a Phase 2 study of VAX-31 in infants. Stage 1 of the study evaluated the safety and tolerability of VAX-31 at three dose levels (low, middle and high) and compared to PCV20 in 48 infants in a dose-escalation approach. In the low, middle and high doses, all serotypes were dosed at 1.1mcg, 2.2mcg and 3.3mcg, respectively, except serotypes 1, 5 and 22F, which were dosed at 1.65mcg, 3.3mcg, and 4.4mcg, respectively. Participants who received VAX-31 in Stage 1 will continue the standard dosing regimen as part of Stage 2 and will be included in the safety, tolerability and immunogenicity analysis of the study.

•In February 2025, we announced that the Phase 2 study of VAX-31 in healthy infants had advanced to the second and final stage of the study. Stage 2 of the study is evaluating the safety, tolerability and immunogenicity of VAX-31 at the same three dose levels evaluated in Stage 1 and compared to PCV20 in approximately 750 infants. In line with recommendations from the ACIP, the study design includes a primary immunization series consisting of three doses given at two months, four months and six months of age, followed by a subsequent booster dose at 12-15 months of age. We expect to share topline data from the primary three-dose immunization series of the study in mid-2026, followed by topline data from the booster dose approximately nine months later.

•VAX-A1, a novel conjugate vaccine candidate designed to prevent disease caused by Group A Streptococcus (“Group A Strep”). Group A Strep is pervasive globally and causes an estimated 800 million cases of illness annually, including pharyngitis, or strep throat, and certain severe invasive infections and sequelae. There is currently no vaccine against Group A Strep, which is one of the leading infectious disease-related causes of death and disability worldwide and a significant contributor to the prescription of antibiotics in children. We believe we have demonstrated preclinical proof of concept for VAX-A1, the data for which were published in December 2020. We nominated the final vaccine candidate for VAX-A1 in the first quarter of 2021 and initiated Investigational New Drug ("IND")-enabling activities in the second half of 2021. We continue to advance the development of VAX-A1 and we intend to provide further information about the anticipated timing of an IND application as the program progresses.

•VAX-PG, a novel protein vaccine candidate targeting the keystone pathogen responsible for periodontitis, a chronic oral inflammatory disease affecting an estimated 65 million adults in the United States. We believe we have generally demonstrated preclinical proof of concept for a periodontitis protein vaccine, the data for which was published in February 2019. We nominated a final vaccine candidate for VAX-PG in 2022 and are conducting large-animal confirmatory studies prior to advancing the program to potential IND-enabling activities. Our initial goal is to develop a therapeutic vaccine to slow or stop disease progression; however, the results from clinical trials may inform the potential adoption of prophylactic immunization.

•VAX-GI, a novel preclinical vaccine candidate being developed as a preventative treatment for dysentery and shigellosis, which is caused by Shigella bacteria. Shigella is a bacterial illness estimated to cause 80 million to 165 million cases of disease and 600,000 deaths annually, mostly among children. The central antigen in VAX-GI is IpaB, a well-appreciated antigen that other developers have been unable to produce in an amount sufficient to enable a commercial product. With our cell-free technology, we believe we can produce this antigen at substantially improved yields, allowing for commercial-scale production. VAX-GI is being developed in collaboration with the University of Maryland, Baltimore as well as with partial funding from two research grants awarded by the National Institutes of Health (“NIH”).

•Other discovery-stage programs that leverage our cell-free protein synthesis platform, which, if proven successful in preclinical studies, could also be advanced into IND-enabling activities and clinical studies.

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Since January 1, 2024, key developments affecting our business include the following:

PCV Franchise Adult Indication:

•Reported Positive Topline Data from Phase 1/2 Study of VAX-31 in Adults Aged 50 and Older: In September 2024, we announced positive topline results from the Phase 1/2 clinical study evaluating the safety, tolerability and immunogenicity of VAX-31 in 1,015 healthy adults aged 50 and older. Based on the strength of the results from this study, we selected VAX-31 to exclusively advance to an adult Phase 3 program and plan to determine the VAX-31 dose prior to the initiation of the adult Phase 3 program.

Following an FDA VAX-31 End-of-Phase 2 meeting, we plan to initiate a Phase 3 pivotal, non-inferiority study by mid-2025 and announce topline safety, tolerability and immunogenicity data in 2026. We plan to initiate remaining VAX-31 Phase 3 studies in 2025 and 2026 and announce data from these studies in 2026 and 2027.

•VAX-31 Granted Breakthrough Therapy Designation from the FDA for the Prevention of IPD in Adults: In November 2024, we announced that the FDA granted Breakthrough Therapy designation ("BTD") for VAX-31 for the prevention of IPD in adults. With BTD, Vaxcyte has access to all the elements of the FDA’s Fast Track program, as well as the ability to receive guidance and support from the FDA on an efficient drug development program and an organizational commitment from senior managers within the FDA.

•Positive Results from VAX-24 Phase 2 Study in Adults Aged 65 and Older Published in the Journal Vaccine Adds to Body of Evidence Validating the Potential of Our Carrier-Sparing Platform: In July 2024, the safety, tolerability and immunogenicity results from the VAX-24 Phase 2 study in adults aged 65 and older were published in the journal Vaccine.

PCV Franchise Infant Indication:

•Completed Enrollment of Phase 2 Study Evaluating VAX-24 for the Prevention of IPD in Infants: In March 2024, we announced the completion of enrollment in the Phase 2 clinical study evaluating VAX-24 in healthy infants.

We plan to announce topline safety, tolerability and immunogenicity data from the primary three-dose immunization series of the Phase 2 study, which is fully enrolled with 802 healthy infants, by the end of the first quarter 2025, followed by topline data from the booster dose by the end of 2025.

•Initiated Phase 2 Study Evaluating VAX-31 for the Prevention of IPD in Infants: In December 2024, we announced the initiation of the Phase 2 study of VAX-31 in healthy infants and that the first study participants have been dosed. In February 2025, we announced that the Phase 2 study of VAX-31 in healthy infants had advanced to the second and final stage of the study.

We plan to announce topline safety, tolerability and immunogenicity data from the ongoing VAX-31 infant Phase 2 study primary three-dose immunization series in mid-2026, followed by topline data from the booster dose approximately nine months later.

Equity Financing:

Completed two Follow-On Financings Totaling $2.4 Billion in Gross Proceeds

•In February 2024, we completed an underwritten public offering of 12,695,312 shares of our common stock, which included the full exercise of the underwriters’ option to purchase an additional 1,757,812 shares, at a public offering price of $64.00 per share and pre-funded warrants to purchase 781,250 shares of our common stock at a public offering price of $63.999 per underlying share. The aggregate gross proceeds to us from the offering were $862.5 million, before deducting underwriting discounts and commissions and other estimated offering expenses payable by us, and excluding the exercise of any pre-funded warrants.

•In September 2024, we completed an underwritten public offering of 12,087,378 shares of our common stock, which included the full exercise of the underwriters’ option to purchase an additional 1,893,203 shares, at a public offering price of $103.00 per share and pre-funded warrants to purchase 2,427,184 shares of our common stock at a public offering price of $102.999 per pre-funded warrant. The aggregate gross proceeds to us from the offering

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were $1.5 billion, before deducting underwriting discounts and commissions and other estimated offering expenses payable by us, and excluding the exercise of any pre-funded warrants.

Other Business:

•National Institute of Allergy and Infectious Diseases (“NIAID”) Grant Awarded for Preclinical Chlamydia Vaccine Development Program: In July 2024, the NIAID awarded a five-year, $9.5 million grant to the University of North Carolina at Chapel Hill, Vaxcyte and the University of Chicago to develop a vaccine candidate for the prevention of Chlamydia. There is a significant need for a vaccine to protect against Chlamydia. It is the most common bacterial sexually transmitted infection worldwide, with nearly 130 million new cases per year. While it is treatable when detected early, it can cause permanent damage to the female reproductive system, potentially leading to complications such as infertility and ectopic pregnancy.

•Appointed John Furey to Board of Directors: In July 2024, we appointed John Furey to our Board of Directors. Mr. Furey is an accomplished biopharmaceutical executive with over 30 years of experience developing and implementing operational strategies and leading commercial and technical teams, including senior leadership roles in the U.S., Europe and Asia. He currently serves as Chief Executive Officer of Imvax, a clinical-stage biotechnology company developing novel immunotherapies for cancer.

Since our inception in November 2013, we have devoted substantially all of our resources to performing research and development, undertaking preclinical studies, advancing our vaccine candidates through clinical trials, enabling manufacturing activities in support of our product development efforts, acquiring and developing our technology and vaccine candidates, organizing and staffing our company, performing business planning, establishing our intellectual property portfolio and raising capital to support and expand such activities. We do not have any products approved for sale and have not generated any revenue from product sales. To date, we have financed our operations primarily with proceeds from the sales of our common stock, pre-funded warrants to purchase our common stock and, prior to our initial public offering (“IPO”) in June 2020, redeemable convertible preferred stock. We will continue to require additional capital to develop and commercialize our vaccine candidates and fund operations for the foreseeable future. Accordingly, until such time as we can generate significant revenue from sales of our vaccine candidates, if ever, we expect to finance our cash needs through public or private equity or debt financings, third-party (including government) funding and marketing and distribution arrangements, as well as other collaborations, strategic alliances and licensing arrangements, or any combination of these approaches.

We have incurred net losses in each year since inception and expect to continue to incur net losses in the foreseeable future. Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year, depending in large part on the timing of our preclinical studies, clinical trials and manufacturing activities, and our expenditures on other research and development activities. Our net losses were $463.9 million, $402.3 million and $223.5 million for the years ended December 31, 2024, 2023 and 2022, respectively. As of December 31, 2024, we had an accumulated deficit of $1,388.3 million and cash, cash equivalents and investments of $3,134.7 million. We believe our cash, cash equivalents and investments will be sufficient to fund our operating expenses and capital expenditure requirements through at least 12 months from the filing date of this Annual Report on Form 10-K.

We do not expect to generate any revenue from commercial product sales unless and until we successfully complete development and obtain regulatory approval for one or more of our vaccine candidates, which we expect will take a number of years. We expect our expenses and capital expenditures will increase substantially in connection with our ongoing activities, as we:

•advance our vaccine candidates through preclinical studies and clinical trials;

•progress in the scale-up of our manufacturing capabilities, in particular to prepare for the potential commercial launches of VAX-31 in the adult population and VAX-31 and/or VAX-24 in the pediatric population;

•incur additional costs that may be required for secondary supply sources;

•require the manufacture of supplies for our clinical trials;

•conduct clinical trials, in particular VAX-31 and VAX-24;

•pursue regulatory approval of our vaccine candidates;

•establish additional manufacturing capacity to meet potential incremental supply requirements following the potential initial commercial launch of VAX-31 in adults;

•hire additional personnel;

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•expand our facilities to support our growing workforce and lab activities;

•acquire, discover, validate and develop additional vaccine candidates; and

•obtain, maintain, expand and protect our intellectual property portfolio.

We rely and will continue to rely on third parties to conduct our preclinical studies and clinical trials and for manufacturing and supply of our vaccine candidates. We have no internal manufacturing capabilities, and we will continue to rely on third parties, of which the main suppliers are single-source suppliers, for our preclinical and clinical trial materials. Given our stage of development, we do not yet have a marketing or sales organization or commercial infrastructure. Accordingly, if we obtain regulatory approval for any of our vaccine candidates, we also would expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution.

Because of the numerous risks and uncertainties associated with vaccine development, we are unable to predict the timing or amount of increased expenses or when or if we will be able to achieve or maintain profitability. Even if we are able to generate revenue from the sale of our vaccines, we may not become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and may be forced to reduce our operations.

Certain Significant Relationships

Lonza

Development and Manufacturing Services Agreements

In April 2022, we entered into a non-exclusive development and manufacturing services agreement with Lonza effective as of March 22, 2022, which was subsequently amended on May 12, 2022, November 21, 2022 and October 31, 2023 (as amended, the “2022 Lonza DMSA”). Pursuant to the 2022 Lonza DMSA, Lonza is obligated to perform services, including manufacturing process development and clinical manufacture and supply of our proprietary PCV candidates.

In February 2023, we entered into another non-exclusive development and manufacturing services agreement with Lonza, effective as of March 1, 2023 (the “2023 Lonza DMSA”). Pursuant to the 2023 Lonza DMSA, Lonza will perform manufacturing process development and the manufacture of components for VAX-31 and VAX-24, including the polysaccharide antigens, our proprietary eCRM protein carrier and conjugated drug substances.

Under each of the 2022 Lonza DMSA and 2023 Lonza DMSA (collectively, the “Lonza Agreements”), we pay Lonza agreed-upon fees for their performance of development and manufacturing services and pass-through expenses incurred by Lonza for raw materials, as well as customary procurement and handling fees. Under each Lonza Agreement, we own all rights, title and interest in and to any and all New Customer Intellectual Property (as defined in each Lonza Agreement), and Lonza owns all rights, title and interest in New General Application Intellectual Property (as defined in each Lonza Agreement). For additional information about the Lonza Agreements, see “Manufacturing and Supply—Lonza Agreements—Development and Manufacturing Services Agreements” included in Part I, Item 1. Business of this Annual Report on Form 10-K.

Commercial Manufacturing and Supply Agreement

In October 2023, we entered into a pre-commercial services and commercial manufacturing supply agreement with Lonza (the “Commercial Manufacturing and Supply Agreement”), pursuant to which Lonza will (i) construct and build out a dedicated suite (the “Suite”) at Lonza’s facilities in Visp, Switzerland to manufacture certain key components (including drug substance) for our proprietary PCV franchise and any other products or intermediates we may choose (collectively, the “Products”) and (ii) maintain and operate the Suite (utilizing Lonza’s employees) to manufacture the Products as a service provided to us, including conducting related quality control and quality assurance operations. Pursuant to the Commercial Manufacturing and Supply Agreement, Lonza will be a preferred, non-exclusive, supplier of the Products to us, and we retain the right to procure the Products from one or more alternate and/or backup manufacturers of the Products (including at our own facilities).

For additional details regarding our relationship with Lonza and the Commercial Manufacturing and Supply Agreement, see “Manufacturing and Supply—Lonza Agreements—Commercial Manufacturing and Supply Agreement” included in Part I, Item 1. Business of this Annual Report on Form 10-K, Note 7, “Commitments and Contingencies,” and Note 4, “Commercial Manufacturing and Supply Agreement” to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.

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Sutro Biopharma

Amended and Restated License Agreement with Sutro Biopharma

We are party to an amended and restated license agreement with Sutro Biopharma, dated October 12, 2015, which was subsequently amended on May 9, 2018, May 29, 2018, September 28, 2023 and November 21, 2023 (as amended, the “Sutro Biopharma License Agreement”). Under the Sutro Biopharma License Agreement, we received an exclusive, worldwide, royalty-bearing, sublicensable license under Sutro Biopharma’s patents and know-how relating to cell-free expression of proteins to (i) research, develop, use, sell, offer for sale, export, import and otherwise exploit specified vaccine compositions, such rights being sublicensable, for the treatment or prophylaxis of infectious diseases, excluding cancer vaccines, and (ii) manufacture, or have manufactured by an approved contract manufacturing organization, such vaccine compositions from extracts supplied by Sutro Biopharma pursuant to the Sutro Biopharma Supply Agreement (as described below).

On September 28, 2023, we and Sutro Biopharma amended certain terms of the Sutro Biopharma License Agreement, including with respect to (i) royalty reduction provisions applicable in the event of expiration of relevant patent claims, which would result in lower royalties payable by us to Sutro Biopharma under certain circumstances, (ii) the ownership, prosecution, maintenance and enforcement of certain intellectual property rights licensed or arising under the Sutro Biopharma License Agreement (including as agreed to be amended in the Option Agreement (as defined below), and (iii) the timing and form for financial reporting of royalty payment calculations. For additional information about the Sutro Biopharma License Agreement, see “Manufacturing and Supply—Sutro Biopharma Agreements—Amended and Restated License Agreement with Sutro Biopharma” included in Part I, Item 1. Business of this Annual Report on Form 10-K.

Supply Agreement with Sutro Biopharma

In May 2018, we entered into a supply agreement with Sutro Biopharma, which was subsequently amended on February 22, 2021 and November 21, 2023 (as amended, the “Sutro Biopharma Supply Agreement”) pursuant to which we purchase from Sutro Biopharma extract and custom reagents for use in manufacturing non-clinical and certain clinical supply of vaccine compositions utilizing the technology licensed under the Sutro Biopharma License at prices not to exceed a specified percentage above Sutro Biopharma’s fully burdened manufacturing cost. If any extracts or custom reagents do not meet the specifications and warranties provided, then we will not have an obligation to pay for the non-conforming product, and Sutro Biopharma will be obligated to replace the non-conforming product within the shortest possible time with conforming product at our cost. In December 2019, we exercised our right to require Sutro Biopharma to establish a second supplier for extract and custom reagents to support our anticipated clinical and commercial needs. For additional information about the Sutro Biopharma Supply Agreement, see “Manufacturing and Supply—Sutro Biopharma Agreements—Supply Agreement with Sutro Biopharma” included in Part I, Item 1. Business of this Annual Report on Form 10-K.

Option Agreement with Sutro Biopharma

In December 2022, we entered into an option grant agreement with Sutro Biopharma (the “Option Agreement”). Pursuant to the Option Agreement, we acquired from Sutro Biopharma (i) authorization to enter into an agreement with an independent alternate contract manufacturing organization (“CMO”) to directly source Sutro Biopharma’s cell-free extract, allowing us to have direct oversight over financial and operational aspects of the relationship with the CMO; and (ii) a right, but not an obligation, to obtain certain exclusive rights to internally manufacture and/or source extract from certain CMOs and the right to independently develop and make improvements to extract (including the right to make improvements to the extract manufacturing process as well as cell lines) for use in connection with the exploitation of certain vaccine compositions (the “Option”). We and Sutro Biopharma agreed to negotiate the terms and conditions of a form definitive agreement to be entered into in the event we exercise the Option, which would include the terms and conditions set forth in an executed term sheet between us (the “Term Sheet”) and such terms that were necessary to give effect to each of the terms and conditions set forth in the Term Sheet (the “Form Definitive Agreement”). On September 28, 2023, we and Sutro Biopharma mutually agreed in writing upon the Form Definitive Agreement to become effective in the event that we exercise the Option, and on October 2, 2023, we paid the $5.0 million accrued commitment.

On November 21, 2023 (the “Option Exercise Date”), we exercised the Option by submitting written notice thereof to Sutro Biopharma and concurrently paid Sutro Biopharma $50.0 million in cash as the first of two installment payments for the Option exercise price, followed by the second and final installment of $25.0 million in cash on May 13, 2024. Upon the occurrence of certain regulatory milestones, certain additional milestone payments may total up to $60.0 million in cash. In the event that we undergo a change of control, certain rights and payments may be accelerated. For additional information about the Option Agreement, see “Manufacturing and Supply—Sutro Biopharma Agreements—Option Agreement with Sutro Biopharma” included in Part I, Item 1. Business of this Annual Report on Form 10-K.

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Manufacturing Rights Agreement with Sutro Biopharma

Concurrent with the payment of the first installment of the Option exercise price pursuant to the Option Agreement, on November 21, 2023, the manufacturing rights agreement (in the form of the Form Definitive Agreement) between us and Sutro Biopharma (the “Manufacturing Rights Agreement”) became effective. Pursuant to the Manufacturing Rights Agreement, we obtained exclusive rights to independently, or through certain third parties, develop, improve and manufacture cell-free extract for use in connection with our vaccine candidates.

For additional details regarding our relationship with Sutro Biopharma and the Manufacturing Rights Agreement, see “Manufacturing and Supply—Sutro Biopharma Agreements—Manufacturing Rights Agreement with Sutro Biopharma” included in Part I, Item 1. Business of this Annual Report on Form 10-K and Note 7, “Commitments and Contingencies,” to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.

Impact of Certain Trends and Macroeconomic Environment

The Company operates in an industry that is subject to significant government regulation. The Company’s operations are subject to significant risk and uncertainties, including financial, operational, technological, regulatory and political. Such factors include, but are not necessarily limited to, the results of clinical testing and trial activities; our ability to adequately demonstrate sufficient safety and immunogenicity or efficacy of our vaccine candidates; our ability to enroll subjects in our ongoing and future clinical trials; our ability to successfully manufacture and supply our vaccine candidates for clinical trials or for future potential commercialization; our ability to obtain additional capital to finance our operations; our ability to obtain, maintain and protect our intellectual property rights; developments relating to our competitors and our industry, including competing vaccine candidates; the ability to obtain regulatory approval; the necessary requirements for regulatory approval; the ability to obtain favorable licensing, manufacturing or other agreements; the political and regulatory environment with the change in the U.S. administration in 2025; general and market conditions; and other risks and uncertainties, including those more fully described in the “Risk Factors” section of this Annual Report on Form 10-K.

The trends towards rising inflation may materially adversely affect our business and corresponding financial position and cash flows. Inflationary factors, such as increases in the cost of our clinical trial materials and supplies, fluctuating interest rates and increases in overhead costs may adversely affect our operating results. Fluctuating interest rates and rising inflation rates have in the past and may in the future present a challenge impacting the U.S. economy and could make it more difficult for us to obtain traditional financing on acceptable terms, if at all, in the future.

We may experience increases in our operating costs in the near future, including our labor costs and research and development costs, due to rising inflation, tariffs, supply chain constraints, and civil and political unrest in certain countries and regions.

Components of Results of Operations

Operating Expenses

Research and Development

Research and development expenses represent costs incurred in performing research, development and manufacturing activities in support of our own product development efforts. These include internal personnel-related costs (including salaries, employee benefits and stock-based compensation) for our personnel in research and development functions, and external costs related to (i) acquiring, developing and manufacturing supplies for preclinical studies, clinical trials and other studies, including fees paid to CMOs; (ii) agreements with contract research organizations (“CROs”), investigative sites and consultants to conduct non-clinical and preclinical studies and clinical trials; (iii) professional and consulting services; (iv) research and development consumables; (v) laboratory supplies and equipment; and (vi) facility and other allocated shared services.

Research and development expenses, including costs related to acquired manufacturing rights, are expensed as incurred if it is determined there is no alternative future use. Non-refundable advance payments for services that will be used or rendered for future research and development activities are recorded as prepaid expenses and recognized as expenses as the related services are performed. We do not allocate all of our costs by vaccine candidates, as our research and development expenses include internal costs, such as payroll and other personnel expenses, which are not tracked by vaccine candidate. In particular, with respect to internal costs, several of our departments support multiple vaccine candidate research and development programs.

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We expect our research and development expenses to increase substantially as we advance our vaccine candidates into and through preclinical studies and clinical trials, manufacture drug product for our clinical trials, scale up our manufacturing activities, establish additional manufacturing capacity to meet potential incremental supply requirements following the potential initial commercial launch of VAX-31 for adults, pursue regulatory approval of our vaccine candidates and expand our pipeline of vaccine candidates. The process of conducting the necessary preclinical and clinical research and completing the manufacturing requirements to obtain regulatory approval is costly and time-consuming. The actual probability of success for our vaccine candidates may be affected by a variety of factors, including the safety and efficacy or immunogenicity of our vaccine candidates, clinical data, investment in our clinical programs, competition, manufacturing capabilities and commercial viability. We may never succeed in achieving regulatory approval for any of our vaccine candidates. As a result of the uncertainties discussed above, we are unable to determine the duration and completion costs of our research and development projects or if, when and to what extent we will generate revenue from the commercialization and sale of our vaccine candidates.

We accrue for costs related to research and development activities based on our estimates of the services received and efforts expended pursuant to quotes and contracts with vendors, including CMOs and CROs, that conduct research, development and manufacturing activities on our behalf. The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows. There may be instances in which payments made to our vendors exceed the level of services provided and result in a prepayment of the research and development expense. Advance payments for goods and services to be used in future research and development activities are expensed when the activity has been performed or when the goods have been received. We make significant judgments and estimates in determining accrued research and development liabilities as of each reporting period based on the estimated time period over which services will be performed and the level of effort to be expended. If the actual timing of the performance of services or the level of effort varies from our estimate, we adjust the accrual or prepaid expense accordingly.

Although we do not expect our estimates to be materially different from amounts actually incurred, if our estimates of the status and timing of services performed differ from the actual status and timing of services performed, it could result in us reporting amounts that are too high or too low in any particular period.

Our research and development costs may vary significantly based on factors such as:

•the costs and timing of our CMC activities, including fulfilling good manufacturing practice (“GMP”) related standards and compliance, and identifying and qualifying second suppliers;

•the costs related to raw materials we purchase directly or through our third-party manufacturing and supply partners;

•the cost of clinical trials of our vaccine candidates;

•changes in the standard-of-care on which a clinical development plan was based, which may require new or additional trials;

•the number of sites included in the trials;

•the countries in which the trials are conducted;

•delays in adding a sufficient number of trial sites and recruiting suitable volunteers to participate in our clinical trials;

•the number of subjects that participate in the trials;

•the number of doses that subjects receive;

•subjects dropping out of a study or lost in follow-up;

•potential additional safety monitoring requested by regulatory agencies;

•the duration of subject participation in the trials and follow-up;

•the cost and timing of manufacturing our vaccine candidates;

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•the phase of development of our vaccine candidates;

•the costs of establishing additional manufacturing capacity to meet potential incremental supply requirements following the potential initial commercial launch of VAX-31 for adults;

•the costs that may be required for secondary supply sources; and

•the immunogenicity or efficacy and safety and tolerability profile of our vaccine candidates.

General and Administrative

General and administrative expenses consist primarily of costs and expenses related to personnel (including salaries, employee benefits and stock-based compensation) in our executive, legal, finance and accounting, human resources and other administrative functions; legal services relating to intellectual property and corporate matters; accounting, auditing, consulting and tax services; insurance; and facility and other allocated shared costs not otherwise included in research and development expenses. We expect our general and administrative expenses to continue to increase as we increase our headcount and expand our services to support our continued research and development activities and grow our business.

Other Income (Expense), Net

Other income (expense), net includes interest income earned from our cash and cash equivalents and investments, grant income, foreign currency transaction gains (losses) related to our Swiss Franc and Euro cash and liability balances, loss on disposals of fixed assets and interest expense.

Interest Income

Interest income is earned from our cash and cash equivalent balances and short- and long-term investments. The cost of investment securities is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization and accretion are included in other income (expense), net. Realized gains and losses are also included in other income (expense), net. When the fair value of a debt security declines below its amortized cost basis, any portion of that decline attributable to credit losses, to the extent expected to be nonrecoverable before the sale of the security, is recognized in our consolidated statements of operations. When the fair value of a debt security declines below its amortized cost basis due to changes in interest rates, such amounts are recorded in other comprehensive loss, and are recognized in our consolidated statements of operations only if we sell or intend to sell the security before recovery of its cost basis.

Grant Income

Our vaccine development program for VAX-A1, a novel conjugate vaccine candidate designed to prevent disease caused by Group A Streptococcus, has been funded in part by a grant obtained from Combating Antibiotic Resistant Bacteria Biopharmaceutical Accelerator (“CARB-X”), a global non-profit partnership dedicated to accelerating antibacterial innovation to tackle the rising global threat of drug-resistant bacteria. The CARB-X grant provided funding of $11.7 million upon the achievement of VAX-A1 development milestones through June 2024. As of the second quarter of 2024, all of these milestones had been successfully achieved, and no further amounts will be funded under this CARB-X grant.

Our vaccine development program for VAX-GI, a novel preclinical vaccine candidate being developed as a preventative treatment for dysentery and shigellosis, which is caused by Shigella bacteria, is currently funded in part by two grants obtained from the NIH administered by the University of Maryland, Baltimore. Our first grant from the NIH was awarded in April 2021 and provides for potential funding up to five years totaling approximately $0.5 million. In June 2023, we received another grant from the NIH that provides for potential funding up to five years totaling approximately $4.6 million. We have received and expect to continue to receive funding under each of these grants.

We recognized $1.0 million, $4.8 million and $1.9 million in grant income for funding research and development under these awards during the years ended December 31, 2024, 2023 and 2022, respectively. Grant income is included as a component of Other income (expense), net in the consolidated statements of operations.

We are currently working on a discovery program with the University of North Carolina at Chapel Hill and the University of Chicago to develop a vaccine candidate for the prevention of Chlamydia, which is funded in part by a grant from the NIAID that provides potential funding up to five years totaling approximately $9.5 million. As of December 31, 2024, we have not yet received funding under this award.

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Results of Operations

The following table summarizes our results of operations for the periods presented:

Operating Expenses

Research and Development Expenses

Research and development expenses increased by $144.3 million, or 43.4%, in 2024 compared to 2023. The increase was driven by (i) external costs, which grew by $87.5 million largely due to increased development and manufacturing activities in connection with the adult and infant PCV programs, including to support the potential future commercial launches, and (ii) internal personnel-related costs, which grew by $56.8 million largely due to headcount growth.

Acquired Manufacturing Rights

In December 2022, we entered into the Option Agreement with Sutro Biopharma, pursuant to which we acquired the Option. As consideration for the Option and other rights and authorizations granted to us under the Option Agreement, we paid Sutro Biopharma upfront consideration of $22.5 million, consisting of (i) $10.0 million in cash and $7.5 million worth of shares of our common stock (the number of shares to be calculated based on the arithmetic average of the daily volume weighted average price of our common stock as traded on Nasdaq in the three consecutive trading days immediately prior to the issuance thereof) in December 2022, and (ii) $5.0 million on October 2, 2023 within five business days after we and Sutro Biopharma mutually agree in writing upon the Form Definitive Agreement on September 28, 2023. The 167,780 shares of common stock issued was recorded at fair value of $8.0 million on the date of settlement, December 22, 2022.

In November 2023, we exercised the Option by submitting written notice thereof to Sutro Biopharma and concurrently paid Sutro Biopharma $50.0 million in cash as the first of two installment payments for the Option exercise price, followed by the second and final installment of $25.0 million in cash in May 2024. We determined there was no current alternative future use of the acquired manufacturing rights from the Option Agreement and, as a result, the amounts paid were expensed as incurred. No additional cost was incurred in the year ended December 31, 2024.

Upon the occurrence of certain regulatory milestones, we would be obligated to pay Sutro Biopharma certain additional milestone payments totaling up to $60.0 million in cash. In the event that we undergo a change of control, certain rights and payments may be accelerated.

General and Administrative Expenses

General and administrative expenses increased by $32.2 million, or 53.1%, in 2024 compared to 2023. The increase was due to primarily (i) personnel-related costs, which grew by $24.9 million largely due to headcount growth, and (ii) professional and consulting services, which grew by $4.6 million.

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Other Income (expense), Net

Other income (expense), net increased by $39.8 million, or 60.6%, in 2024 compared to 2023. The increase was primarily attributable to a $47.1 million increase in interest income as a result of higher cash and investment balances resulting from our follow-on equity and ATM financings combined with increases in interest rates resulting from a longer average investment portfolio duration, partially offset by a decrease in grant income and an increase in foreign currency losses.

Liquidity and Capital Resources

From inception through December 31, 2024, we have incurred losses and negative cash flows from operations and have funded our operations primarily through the issuance of common stock, pre-funded warrants to purchase our common stock and, prior to our IPO, redeemable convertible preferred stock, totaling approximately $4.7 billion in aggregate gross proceeds or $4.5 billion net of underwriting discounts, commissions and offering expenses. As of December 31, 2024, we had $387.9 million of cash and cash equivalents, $2,746.8 million in investments and an accumulated deficit of $1,388.3 million.

On July 2, 2021, we filed a shelf registration statement on Form S-3ASR (the “2021 Shelf Registration Statement”) under which we could, from time to time, sell securities in one or more offerings of our common stock, preferred stock, debt securities or warrants. The 2021 Shelf Registration Statement became automatically effective upon the filing of the Form S-3ASR on July 2, 2021, and was scheduled to expire on July 2, 2024. In anticipation of such expiration, we filed a new shelf registration statement on Form S-3ASR on May 24, 2024 solely to replace the 2021 Shelf Registration Statement (such replacement registration statement, the “2024 Shelf Registration Statement”). Pursuant to the 2024 Shelf Registration Statement, we may, from time to time, sell securities in one or more offerings of our common stock, preferred stock, debt securities or warrants. The 2024 Shelf Registration Statement became automatically effective upon the filing of the Form S-3ASR on May 24, 2024.

ATM Program

In July 2021, we entered into an Open Market Sales AgreementSM (the “Original ATM Sales Agreement”) with Jefferies LLC (“Jefferies”), which provided that, upon the terms and subject to the conditions and limitations set forth in the Original ATM Sales Agreement, we had the right to issue and sell, from time to time, shares of our common stock having an aggregate offering price of up to $150.0 million through Jefferies acting as our sales agent or principal. As of February 27, 2023, we had sold 4,995,709 shares of our common stock under the Original ATM Sales Agreement at a weighted average price of $27.57 per share for aggregate gross proceeds of $137.8 million. On February 27, 2023, we and Jefferies entered into an amendment to the Original ATM Sales Agreement (as amended, the “Amended ATM Sales Agreement”) pursuant to which we may offer and sell shares of our common stock having an aggregate offering price of up to $400.0 million. The material terms and conditions of the Original ATM Sales Agreement otherwise remain unchanged. As of December 31, 2024, we have sold 4,211,367 shares of our common stock under the Amended ATM Sales Agreement at a weighted average price of $64.19 per share for aggregate gross proceeds of $270.3 million, or $264.2 million net of commissions and offering expenses, with $129.7 million remaining for future sales under the Amended ATM Sales Agreement.

Underwritten Follow-on Public Offerings

In January 2022, we completed an underwritten public offering in which we issued 2,500,000 shares of common stock at a price of $20.00 per share and pre-funded warrants to purchase 2,500,000 shares of our common stock at a price of $19.999 per underlying share. In February 2022, the underwriters exercised their option to purchase an additional 750,000 shares of common stock. In aggregate, we received $107.6 million in net proceeds after deducting underwriting discounts and commissions and other offering expenses payable by us, and excluding the exercise of any pre-funded warrants.

In October 2022, we completed an underwritten public offering of 17,812,500 shares of our common stock, which included the full exercise of the underwriters' option to purchase an additional 2,812,500 shares, at a price of $32.00 per share and pre-funded warrants to purchase 3,750,000 shares of our common stock at a price of $31.999 per underlying share. In aggregate, we received $651.6 million in net proceeds after deducting underwriting discounts and commissions and other offering expenses payable by us, and excluding the exercise of any pre-funded warrants.

In April 2023, we completed an underwritten public offering of 13,030,000 shares of our common stock, which included the full exercise of the underwriters’ option to purchase an additional 1,830,000 shares, at a price of $41.00 per share and pre-funded warrants to purchase 1,000,000 shares of our common stock at a price of $40.999 per underlying share. In aggregate, we received $545.3 million in net proceeds after deducting underwriting discounts and commissions and other estimated offering expenses payable by us, and excluding the exercise of any pre-funded warrants.

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In February 2024, we completed an underwritten public offering of 12,695,312 shares of our common stock, which included the full exercise of the underwriters’ option to purchase an additional 1,757,812 shares, at a price of $64.00 per share and pre-funded warrants to purchase 781,250 shares of our common stock at a price of $63.999 per underlying share. In aggregate, we received approximately $816.5 million in net proceeds after deducting underwriting discounts and commissions and other estimated offering expenses payable by us, and excluding the exercise of any pre-funded warrants.

In September 2024, we completed an underwritten public offering of 12,087,378 shares of our common stock, which included the full exercise of the underwriters’ option to purchase an additional 1,893,203 shares, at a price of $103.00 per share and pre-funded warrants to purchase 2,427,184 shares of our common stock at a price of $102.999 per underlying share. In aggregate, we received $1.4 billion in net proceeds after deducting underwriting discounts and commissions and other offering expenses payable by us, and excluding the exercise of any pre-funded warrants.

Future Funding Requirements

Our primary uses of cash are to fund our operations, which consist primarily of research, development and manufacturing expenditures related to our programs and, to a lesser extent, capital expenditures for our commercial manufacturing facility build-out and general and administrative expenditures. We anticipate that we will continue to incur significant expenses and capital expenditures for the foreseeable future as we continue to advance our vaccine candidates, expand our corporate infrastructure, further our research and development initiatives for our vaccine candidates, build out and operate our commercial manufacturing facilities, and scale our laboratory and manufacturing operations. We are subject to all of the risks typically related to the development of new drug candidates, and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business. We anticipate that we will need substantial additional funding in connection with our continuing operations.

We believe that our existing cash, cash equivalents and investments as of the date of this Annual Report on Form 10-K will be sufficient to fund our operating expenses and capital expenditure requirements through at least 12 months from the filing date of this Annual Report on Form 10-K. We have raised substantial capital; however, we will need to raise substantial additional capital to complete development, manufacturing and commercialization of our drug candidates. Until we can generate sufficient revenue from the commercialization of our vaccine candidates or from collaboration agreements with third parties, if ever, we expect to finance our future cash needs through public or private equity or debt financings, third-party (including government) funding and marketing and distribution arrangements, as well as other collaborations, strategic alliances and licensing arrangements, or any combination of these approaches. The sale of equity, pre-funded warrants or convertible debt securities may result in dilution to our stockholders and, in the case of preferred equity securities or convertible debt, those securities could provide for rights, preferences or privileges senior to those of our common stock. Debt financings may subject us to covenant limitations or restrictions on our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. Our ability to raise additional funds may be adversely impacted by deteriorating global economic conditions, including higher inflation rates and changes in interest rates, and the recent disruptions to and volatility in the credit and financial markets in the United States and worldwide. There can be no assurance that we will be successful in acquiring additional funding at levels sufficient to fund our operations or on terms favorable or acceptable to us. If we are unable to obtain adequate financing when needed or on terms favorable or acceptable to us, we may be forced to delay, reduce the scope of or eliminate one or more of our research and development programs.

Our future capital requirements will depend on many factors, including:

•the timing, scope, progress, results and costs of research and development, testing, screening, manufacturing, preclinical development and clinical trials;

•the costs of establishing additional manufacturing capacity to meet potential incremental supply requirements following the potential initial commercial launch of VAX-31 for adults;

•the outcome, timing and cost of seeking and obtaining regulatory approvals from the FDA and comparable foreign regulatory authorities, which may require more studies than those that we currently expect or change their requirements regarding the data required to support a marketing application;

•the cost of building a sales force in anticipation of any product commercialization;

•the costs of future commercialization activities, including product manufacturing, marketing, sales, royalties and distribution, for any of our vaccine candidates for which we receive marketing approval;

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•our ability to maintain existing, and establish new, strategic collaborations, licensing or other arrangements and the financial terms of any such agreements, including the timing and amount of any future milestone, royalty or other payments due under any such agreement;

•exchange rate fluctuations due to exposure of foreign operations and foreign currency fluctuations and translations;

•any product liability or other lawsuits related to our products;

•the revenue, if any, received from commercial sales, or sales to foreign governments, of our vaccine candidates for which we may receive marketing approval;

•the costs to establish, maintain, expand, enforce and defend the scope of our intellectual property portfolio, including the amount and timing of any payments we may be required to make, or that we may receive, in connection with licensing, preparing, filing, prosecuting, defending and enforcing our patents or other intellectual property rights;

•expenses needed to attract, hire and retain skilled personnel; and

•the impact of macroeconomic factors, including potential effects of changes in federal government regulation, rising inflation which may impact labor costs, research and development costs, tariffs, and supply chain constraints, as well as civil and political unrest in certain countries and regions, which may exacerbate the magnitude of the factors discussed above.

A change in the outcome of any of these or other variables could significantly change the costs and timing associated with the development of our vaccine candidates. Furthermore, our operating plans may change in the future, and we may need additional funds to meet operational needs and capital requirements associated with such change.

Cash Flows

The following table summarizes our cash flows for the periods indicated:

Cash Flows from Operating Activities

Cash used in operating activities for the year ended December 31, 2024 was $452.6 million, an increase of $155.8 million compared to 2023. The increase was primarily due to higher cash expenditures to support our business growth and increased development and manufacturing activities in connection with the adult and infant PCV programs, including support for the potential future commercial launches, as well as timing of payments.

Cash Flows from Investing Activities

Cash used in investing activities for the year ended December 31, 2024 was $2,005.7 million, an increase of $1,232.4 million compared to 2023. The increase was primarily due to an increase of $1,756.8 million in purchases of investments and $44.9 million in payments related to manufacturing facility build-out and equipment construction-in-progress, partially offset by an increase of $521.4 million in maturities of investments and $54.4 million in sales of investments in 2024.

Cash Flows from Financing Activities

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Cash provided by financing activities for the year ended December 31, 2024 was $2,448.5 million, an increase of $1,808.7 million compared to 2023. The increase was primarily due to an increase in (i) net proceeds from our follow-on public offerings of $1,694.4 million, (ii) net proceeds from Amended ATM Sales Agreement of $105.2 million, and (iii) proceeds from the issuance of shares through employee equity incentive plans of $19.5 million, partially offset by taxes paid related to the net share settlement of equity awards of $10.4 million.

Contractual Obligations and Commitments

Our material cash requirements include the following contractual and other obligations.

Leases

We have operating lease agreements for our office spaces. As of December 31, 2024, we had lease payment obligations totaling $100.1 million, of which $10.9 million is payable within one year.

Option Agreement

On November 21, 2023 (the “Option Exercise Date”), we exercised the Option pursuant to the Option Agreement by submitting written notice thereof to Sutro Biopharma and concurrently paid Sutro Biopharma $50.0 million in cash as the first of two installment payments for the Option exercise price, followed by the second and final installment of $25.0 million in cash on May 13, 2024. Upon the occurrence of certain regulatory milestones, we would be obligated to pay Sutro Biopharma certain additional milestone payments totaling up to $60.0 million in cash. In the event that we undergo a change of control, certain rights and payments may be accelerated.

Purchase Commitments

We have certain payment obligations under various license agreements. Under these agreements, we are required to make milestone payments upon successful completion and achievement of certain intellectual property, clinical, regulatory and sales milestones. The payment obligations under the license agreements are contingent upon future events such as our achievement of specified development, clinical, regulatory and commercial milestones, and we will be required to make development milestone payments and royalty payments in connection with the sale of products developed under these agreements. As the achievement and timing of these future milestone payments are not probable or estimable, such amounts have not been included in our balance sheets as of December 31, 2024.

We enter into agreements in the normal course of business with CMOs and other vendors for manufacturing services and raw materials purchases. We rely on several third-party manufacturers for our manufacturing requirements. As of December 31, 2024, we had the following amounts of non-cancelable purchase commitments related to manufacturing services and raw materials purchased due to our key manufacturing partners. These amounts represent our minimum contractual obligations, including termination fees. If we terminate certain firm orders with our key manufacturing partners, we will be required to pay for the manufacturing services scheduled or raw materials purchased under our arrangements. The actual amounts we pay in the future to the vendors under such agreements may differ from the purchase order amounts.

Critical Accounting Policies and Significant Judgments and Estimates

Our management’s discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses and the disclosure of contingent assets and liabilities in our consolidated financial statements. On an ongoing basis, we evaluate our estimates and judgments, including those related to accrued research and development expenses, stock-based compensation and leases. We base our estimates on historical experience, known trends and events and various other factors that are believed to be reasonable

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under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

While our significant accounting policies are described in the notes to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K, we believe that the following critical accounting policies are most important to understanding and evaluating our reported financial results:

Accrued Research and Development Expenses

We have entered into various agreements with CMOs and CROs. As part of the process of preparing our consolidated financial statements, we are required to estimate our accrued research and development expenses, including accrued contract manufacturing expenses, as of each balance sheet date. This process involves reviewing open contracts and purchase orders, communicating with our personnel and third parties to identify services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of the actual cost. We make estimates of our accrued research and development expenses as of each balance sheet date based on facts and circumstances known to us at that time. We periodically confirm the accuracy of our estimates with the service providers and make adjustments, if necessary. The significant estimates in our accrued research and development expenses include the costs incurred for services performed by our vendors in connection with research and development activities for which we have not yet been invoiced.

We accrue for costs related to research and development activities based on our estimates of the services received and efforts expended pursuant to quotes and contracts with vendors, including CMOs and CROs, that conduct research, development and manufacturing on our behalf. The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows. There may be instances in which payments made to our vendors will exceed the level of services provided and result in a prepayment of the research and development expense. Advance payments for goods and services that will be used in future research and development activities are expensed when the activity has been performed or when the goods have been received. We make significant judgments and estimates in determining accrued research and development liabilities as of each reporting period based on the estimated time period over which services will be performed and the level of effort to be expended. If the actual timing of the performance of services or the level of effort varies from our estimate, we adjust the accrual or prepaid expense accordingly.

Although we do not expect our estimates to be materially different from amounts actually incurred, if our estimates of the status and timing of services performed differ from the actual status and timing of services performed, it could result in us reporting amounts that are too high or too low in any particular period. To date, there have been no material differences between our estimates of such expenses and the amounts actually incurred.

Stock-Based Compensation Expense

Our use of the Monte Carlo simulation model and Black-Scholes option-pricing model requires the input of subjective assumptions, such as expected volatility. In addition to expected volatility, the assumptions, including expected term and risk-free interest rate, used in our option pricing model and simulation model represent management’s best estimates. These estimates involve inherent uncertainties and the application of management’s judgment. If factors change and different assumptions are used, our stock-based compensation expense could be materially different in the future.

Refer to Note 2, “Basis of Presentation and Summary of Significant Accounting Policies,” and Note 10, “Equity Incentive Plans,” to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for more information on assumptions used in estimating stock-based compensation expense.

Recently Adopted Accounting Pronouncements

See Note 2, “Basis of Presentation and Summary of Significant Accounting Policies,” to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional information.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes and other financial information included elsewhere in this Annual Report on Form 10-K. This discussion and analysis contain forward-looking statements based upon our current beliefs, plans and expectations that involve risks, uncertainties and assumptions, such as statements regarding our plans, objectives, expectations, intentions and beliefs. Our actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under the section titled “Risk Factors” and elsewhere in this Annual Report on Form 10-K. You should carefully read the “Risk Factors” section of this Annual Report on Form 10-K to gain an understanding of the important factors that could cause actual results to differ materially from our forward-looking statements. Please also see the section titled “Special Note Regarding Forward-Looking Statements.”

Overview

We are a clinical-stage vaccine innovation company engineering high-fidelity vaccines to protect humankind from the consequences of bacterial diseases. We are developing broad-spectrum conjugate and novel protein vaccines to prevent or treat bacterial infectious diseases. We are re-engineering the way highly complex vaccines are made through modern synthetic techniques, including advanced chemistry and the XpressCF™ cell-free protein synthesis platform, exclusively licensed from Sutro Biopharma, Inc. (“Sutro Biopharma”). Unlike conventional cell-based approaches, our system for producing difficult-to-make proteins and antigens is intended to accelerate our ability to efficiently create and deliver high-fidelity vaccines with enhanced immunological benefits.

Our pipeline includes:

•
Pneumococcal conjugate vaccine (“PCV”) candidates that we believe are among the most broad-spectrum PCV candidates currently in development, targeting the approximately $8 billion global pneumococcal vaccine market. Pneumococcal disease is an infection caused by Streptococcus pneumoniae (“pneumococcus”) bacteria. It can result in invasive pneumococcal disease (“IPD”), including meningitis and bacteremia, and non-invasive pneumococcal disease, including pneumonia, otitis media and sinusitis. Our broad-spectrum, carrier-sparing PCV candidates, VAX-24 and VAX-31, are designed to improve upon the standard-of-care PCVs for both children and adults by covering the serotypes that are responsible for a significant portion of IPD in circulation and are associated with high case-fatality rates, antibiotic resistance and meningitis, while maintaining coverage of previously circulating strains that are currently contained through continued vaccination practice.

o
Our lead vaccine candidate, VAX-24, is a 24-valent, broad-spectrum, carrier-sparing investigational PCV being developed for the prevention of IPD.

▪
VAX-24 Adult Indication:

•
In October 2022, we announced positive topline results from both the Phase 1 and Phase 2 portions of a clinical proof-of-concept study evaluating the safety, tolerability and immunogenicity of VAX-24 in 835 healthy adults aged 18-64. The Phase 1 portion of the study evaluated the safety and tolerability of a single injection of VAX-24 at three dose levels, 1.1mcg, 2.2mcg and 2.2mcg/4.4mcg, and compared to Prevnar 20® (“PCV20”) in 64 healthy adults aged 18-49. The Phase 2 portion evaluated the safety, tolerability and immunogenicity of a single injection of VAX-24 at the same three dose levels and compared to a single injection of PCV20 in 771 healthy adults aged 50-64. In this study, VAX-24 met the primary safety and tolerability objectives, demonstrating a safety profile similar to PCV20, for all doses studied. In the study, VAX-24 met or exceeded the established regulatory immunogenicity standards for all 24 serotypes at the conventional 2.2mcg dose, which is the dose selected for a potential Phase 3 program. At this dose, VAX-24 met the standard opsonophagocytic activity (“OPA”) response non-inferiority criteria for all 20 serotypes common with PCV20, of which 16 achieved higher immune responses. Additionally, at all three doses, VAX-24 met the standard superiority criteria for all four serotypes unique to

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VAX-24. VAX-24 has the potential to cover an additional 14-26 percent of strains causing IPD in adults over the current standard-of-care PCVs.

•
In April 2023, we announced positive results from a Phase 2 study of VAX-24 in adults aged 65 and older, as well as data from the full six-month safety assessment and prespecified pooled immunogenicity analyses from both the Phase 2 study in adults aged 65 and older and the prior Phase 1/2 study in adults aged 18-64. The Phase 2 study in adults aged 65 and older evaluated the safety, tolerability and immunogenicity of a single injection of VAX-24 at three dose levels, 1.1mcg, 2.2mcg and 2.2mcg/4.4mcg, and compared to a single injection of PCV20 in 207 healthy adults aged 65 and older. In this Phase 2 study, VAX-24 demonstrated robust OPA immune responses across all 24 serotypes at all doses studied, confirming the prior Phase 2 adult study results. The VAX-24 2.2mcg dose, which is the dose selected for a potential Phase 3 program, showed an overall improvement in immune responses compared to PCV20 relative to the results from the prior Phase 2 study in adults aged 50-64. The six-month safety data from both adult studies showed safety and tolerability results for VAX-24 similar to PCV20 at all doses studied. Additionally, the prespecified pooled immunogenicity analyses of data from both adult Phase 2 studies showed the VAX-24 2.2mcg dose met the OPA non-inferiority criteria for all 20 serotypes common with PCV20 and the superiority criteria for the four additional serotypes unique to VAX-24.

•
The U.S. Food and Drug Administration (“FDA”) has granted Fast Track designation and Breakthrough Therapy designation for VAX-24 in adults.

•
In October 2023, we completed a successful End-of-Phase 2 meeting with the FDA. The meeting focused on the VAX-24 adult Phase 3 clinical program, including the design of the pivotal, non-inferiority study and other Phase 3 studies needed to support a Biologics License Application (“BLA”) submission. Based on the End-of-Phase 2 meeting, we believe there is agreement with the FDA on the clinical design of a potential adult Phase 3 program, including the approximate overall number of subjects, the primary and secondary endpoints for the pivotal, non-inferiority study as well as confirmation that the planned immunogenicity analyses are sufficient to support licensure and a separate efficacy study is therefore not required.

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In January 2024, we announced that we received encouraging input from ongoing discussions with the FDA about the VAX-24 adult program to further inform our chemistry, manufacturing and controls (“CMC”) licensure requirements and that we expect to seek additional CMC-focused input from the FDA as we prepare for and potentially conduct our VAX-24 adult Phase 3 program. Following the topline data from the VAX-31 adult Phase 1/2 study, which is expected in the third quarter of 2024, we expect to determine whether to advance VAX-24 or VAX-31 to an adult Phase 3 program. If we move forward with the VAX-24 adult Phase 3 program, we expect to initiate the pivotal, non-inferiority study in adults aged 50 and older in the second half of 2024 and announce topline safety, tolerability and immunogenicity data from this study in the second half of 2025. We would expect to initiate the remaining Phase 3 studies, which are shorter in duration than the non-inferiority study, for VAX-24 in the adult population in 2025 and 2026. If we move forward with the VAX-31 adult Phase 3 program, we expect to initiate the full complement of potential Phase 3 studies in 2025 and 2026. Subject to the results of the adult Phase 3 studies, we would expect to submit a BLA for VAX-24 or VAX-31 shortly following the completion of the last Phase 3 study.

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VAX-24 Pediatric Indication:

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In March 2023, we announced that the first participants were dosed in the first stage of a Phase 2 study of VAX-24 in healthy infants. The Phase 2 infant study is being conducted in two stages and compares VAX-24 to the broadest-spectrum

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standard-of-care PCVs currently available. Stage 1 of the study evaluated the safety and tolerability of a single injection of VAX-24 at three dose levels, 1.1mcg, 2.2mcg and 2.2mcg/4.4mcg, and compared to VAXNEUVANCETM (“PCV15”), the broadest-spectrum standard-of-care PCV at that time, in 48 infants in a dose-escalation approach.

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In July 2023, we announced that the ongoing Phase 2 study of VAX-24 in healthy infants had advanced to the second and final stage of the study in which we continue to enroll participants. The independent Data Safety Monitoring Board approved advancing to the second stage of the study following the review of the safety and tolerability results from the first stage. Additionally, in agreement with the FDA, we amended the study protocol for Stage 2 of the study, changing the study comparator to PCV20, which became the broadest-spectrum PCV recommended by the Advisory Committee on Immunization Practices in June 2023. This Phase 2 study is evaluating the safety, tolerability and immunogenicity of VAX-24 in healthy infants at the same three dose levels, 1.1mcg, 2.2mcg and 2.2mcg/4.4mcg, that were evaluated in Stage 1. We expect to share topline data from the primary three-dose immunization series of the study by the end of the first quarter of 2025, followed by topline data from the booster dose by the end of 2025.

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Our second PCV candidate, VAX-31, is the broadest-spectrum PCV to enter the clinic. VAX-31 builds on what has been established with VAX-24 and is designed to expand the breadth of coverage to 31 strains, inclusive of the 24 strains in VAX-24, without compromising immunogenicity due to carrier suppression, and to cover approximately 95% of IPD circulating in the U.S. adult population.

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In October 2023, we announced the FDA clearance of the investigational new drug (“IND”) application for VAX-31 for the prevention of IPD in adults. In November 2023, we announced that the first participants were dosed in a Phase 1/2 clinical study for VAX-31 in adults. The VAX-31 Phase 1/2 clinical study is a randomized, observer-blind, active-controlled, dose-finding clinical study designed to evaluate the safety, tolerability and immunogenicity of VAX-31 at three dose levels (low, middle and high) and compared to PCV20 in 1,015 healthy adults aged 50 and older. The Phase 1 portion of the study evaluated the safety and tolerability of a single injection of VAX-31 at three dose levels and compared to PCV20 in 64 healthy adults 50 to 64 years of age. An independent Data Monitoring Committee conducted an assessment of the Phase 1 safety and tolerability results and recommended that the study proceed as planned to Phase 2. Phase 1 participants will also be evaluated for immunogenicity, and the Phase 1 safety, tolerability and immunogenicity data will be pooled with the participants in the Phase 2 portion of the study. The Phase 2 portion of the study will evaluate the safety, tolerability and immunogenicity of a single injection of VAX-31 at the same three dose levels and compared to PCV20 in 951 healthy adults 50 years of age and older. Participants were randomized equally in four separate arms and, 30 days after dosing, serology samples will be collected to assess immunogenicity. The immunogenicity objectives of the study include an assessment of the induction of antibody responses, using OPA and immunoglobulin G (“IgG”), at each of the three VAX-31 doses and compared to PCV20 for the 20 serotypes in common, as well as for the additional 11 serotypes contained in VAX-31, but not in PCV20. Participants in the study are being evaluated for safety through six months after vaccination. The study is being conducted at approximately 25 sites in the United States.

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In January 2024, we announced the completion of enrollment in the Phase 1/2 clinical study evaluating VAX-31 in healthy adults aged 50 and older. We expect to announce topline safety, tolerability and immunogenicity data from the Phase 1/2 study in the third quarter of 2024, following which we expect to determine whether to advance VAX-24 or VAX-31 to an adult Phase 3 program as discussed above.

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VAX-A1, a novel conjugate vaccine candidate designed to prevent disease caused by Group A Streptococcus (“Group A Strep”). Group A Strep is pervasive globally and causes an estimated 800

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million cases of illness annually, including pharyngitis, or strep throat, and certain severe invasive infections and sequelae. There is currently no vaccine against Group A Strep, which is one of the leading infectious disease-related causes of death and disability worldwide and a significant contributor to the prescription of antibiotics in the very young. We believe we have demonstrated preclinical proof of concept for VAX-A1, the data for which were published in December 2020. We nominated the final vaccine candidate for VAX-A1 in the first quarter of 2021 and initiated IND-enabling activities in the second half of 2021. We continue to advance the development of VAX-A1 and we intend to provide further information about the anticipated timing of an IND application as the program progresses.

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VAX-PG, a novel protein vaccine candidate targeting the keystone pathogen responsible for periodontitis, a chronic oral inflammatory disease affecting an estimated 65 million adults in the United States. We believe we have generally demonstrated preclinical proof of concept for a periodontitis protein vaccine, the data for which was published in February 2019. We nominated a final vaccine candidate for VAX-PG in 2022 and are conducting large-animal confirmatory studies prior to advancing the program to potential IND-enabling activities. Our initial goal is to develop a therapeutic vaccine to slow or stop disease progression; however, the results from clinical trials may inform the potential adoption of prophylactic immunization.

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VAX-GI, a novel preclinical vaccine candidate being developed as a preventative treatment for dysentery and shigellosis, which is caused by Shigella bacteria. Shigella, a bacterial illness that affects an estimated 188 million people worldwide each year and results in approximately 164,000 deaths annually, mostly among children under five years of age in low- and middle-income settings. The central antigen in VAX-GI is IpaB, a well-appreciated antigen that other developers have been unable to produce in an amount sufficient to enable a commercial product. With our cell-free technology, we believe we can produce this antigen at substantially improved yields, allowing for commercial-scale production. VAX-GI is being developed in collaboration with the University of Maryland, Baltimore as well as with partial funding from two research grants awarded by the National Institutes of Health.

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Other discovery-stage programs that leverage our cell-free protein synthesis platform, which, if proven successful in preclinical studies, could also be advanced into IND-enabling activities and clinical studies.

Since January 1, 2023, key developments affecting our business include the following:

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Completed Successful $863 Million Follow-On Financing: In February 2024, we completed an underwritten public offering of 12,695,312 shares of our common stock, which included the full exercise of the underwriters’ option to purchase an additional 1,757,812 shares, at a public offering price of $64.00 per share and pre-funded warrants to purchase 781,250 shares of our common stock at a public offering price of $63.999 per underlying share. The aggregate gross proceeds to us from the offering were approximately $862.5 million, before deducting underwriting discounts and commissions and other estimated offering expenses payable by us, and excluding the exercise of any pre-funded warrants.

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Completed Enrollment of Phase 1/2 Study Evaluating VAX-31 for the Prevention of IPD in Adults Aged 50 and Older: In January 2024, we announced the completion of enrollment in the Phase 1/2 clinical study evaluating VAX-31 in healthy adults aged 50 and older. The VAX-31 Phase 1/2 clinical study is a randomized, observer-blind, active-controlled, dose-finding study designed to evaluate the safety, tolerability and immunogenicity of VAX-31 at three dose levels (low, middle and high) compared to PCV20 in 1,015 healthy adults aged 50 and older.

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VAX-24 Adult Phase 1/2 Proof-of-Concept Data Published in The Lancet Infectious Diseases Highlighting Best-in-Class Potential of VAX-24: In December 2023, the results from the VAX-24 Phase 1/2 clinical POC study were published in the journal The Lancet Infectious Diseases.

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Exercised Option and Entered into Manufacturing Rights Agreement with Sutro Biopharma to Obtain Control Over Manufacturing and Development of Cell-Free Extract: In November 2023, we exercised the option and entered into a manufacturing rights agreement with Sutro Biopharma to obtain control over the development and manufacture of cell-free extract, a key component of our PCV candidates. Pursuant to the manufacturing rights agreement, we obtained

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exclusive rights to independently, or through certain third parties, develop, improve and manufacture cell-free extract for use in connection with our vaccine candidates.

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Dosed First Participants in Phase 1/2 Clinical Study Evaluating VAX-31 for the Prevention of IPD in Adults: In November 2023, following FDA clearance of the IND application, we announced that the first participants were dosed in a Phase 1/2 clinical study for VAX-31 in adults.

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Expanded Collaboration with Lonza for Global Commercial Manufacturing of Our PCV Candidates: In October 2023, we and Lonza Ltd. (“Lonza”) entered into a new commercial manufacturing agreement, expanding our existing collaboration. This agreement supports the potential global commercialization of our PCV candidates in both the adult and pediatric populations and complements our plans to utilize existing Lonza infrastructure to advance clinical development and support the anticipated initial U.S. launch of VAX-24 or VAX-31 for the adult population. Under the terms of the new agreement, Lonza will provide us with a custom-built manufacturing suite as part of Lonza’s Ibex® facility in Visp, Switzerland to support the manufacture of key components, including the drug substances, for our PCV franchise.

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Completed End-of-Phase 2 Meeting with FDA and Held CMC Regulatory Discussions: In October 2023, we completed a successful End-of-Phase 2 meeting with the FDA. The meeting focused on the VAX-24 adult Phase 3 clinical program, including the design of the pivotal, non-inferiority study and other Phase 3 studies needed to support a BLA submission. Based on the End-of-Phase 2 meeting, we believe there is agreement with the FDA on the clinical design of the adult Phase 3 program, including the approximate overall number of subjects, the primary and secondary endpoints for the pivotal, non-inferiority study as well as confirmation that the planned immunogenicity analyses are sufficient to support licensure and an efficacy study is therefore not required. Additionally, as part of ongoing CMC-focused discussions, we received encouraging input from the FDA regarding the VAX-24 adult licensure requirements. We were granted these discussions under the VAX-24 adult Breakthrough Therapy designation and expect to seek additional CMC-focused input from the FDA as we continue to prepare for and potentially conduct the VAX-24 adult Phase 3 program.

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Advanced to Second and Final Stage of Phase 2 Study Evaluating VAX-24 for the Prevention of IPD in Infants and Dosed First New Participants: In July 2023, we announced that the ongoing Phase 2 study of VAX-24 in healthy infants advanced to the second and final stage of the study. The independent Data Safety Monitoring Board approved advancing to the second stage of the study following the review of the safety and tolerability results from the first stage. New participants began enrolling and dosing in Stage 2 of the study in July 2023. Additionally, in agreement with the FDA, we amended the study protocol for Stage 2, changing the study comparator to PCV20, which is currently the broadest-spectrum PCV recommended by the Advisory Committee on Immunization Practices for infants. Enrollment in the VAX-24 infant Phase 2 study is nearing completion.

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Reported Positive Data from Phase 2 Study of VAX-24 in Adults Aged 65 and Older and Full Six-Month Safety Data from Adult Phase 1/2 and Phase 2 Studies: In April 2023, we announced positive results from the VAX-24 Phase 2 study in adults aged 65 and older, as well as data from the full six-month safety assessment and prespecified pooled immunogenicity analyses from both the Phase 2 study in adults aged 65 and older and the prior Phase 1/2 proof-of-concept study in adults aged 18-64. (Phase 1 portion included adults aged 18-49 and the Phase 2 portion included adults aged 50-64). In the Phase 2 study in adults aged 65 and older, VAX-24 demonstrated robust OPA immune responses for all 24 serotypes at all doses studied, confirming the prior adult Phase 1/2 proof-of-concept study results. The six-month safety data from both studies showed safety and tolerability results for VAX-24 similar to PCV20 at all doses studied.

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Completed Successful $575 Million Follow-On Financing: In April 2023, we completed an underwritten public offering of 13,030,000 shares of our common stock, which included the full exercise of the underwriters’ option to purchase an additional 1,830,000 shares, at a public offering price of $41.00 per share and pre-funded warrants to purchase 1,000,000 shares of our

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common stock at a public offering price of $40.999 per underlying share. The aggregate gross proceeds to us from the offering were $575.2 million, before deducting underwriting discounts and commissions and other estimated offering expenses payable by us, and excluding the exercise of any pre-funded warrants.

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Announced New Vaccine Program VAX-GI: In February 2023, we announced that we added a new vaccine program, VAX-GI, designed to prevent Shigella, a bacterial illness that affects an estimated 188 million people worldwide each year and results in approximately 164,000 deaths annually, mostly among children under five years of age in low- and middle-income settings.

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Announced FDA Clearance of Investigational New Drug Application for VAX-24 for the Prevention of IPD in Infants: In late February 2023, we announced that the FDA cleared the VAX-24 IND application for the prevention of IPD in infants.

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VAX-24 Granted Breakthrough Therapy Designation from the FDA for the Prevention of IPD in Adults Aged 18 and Older: In January 2023, we announced that the FDA granted Breakthrough Therapy designation for VAX-24 for the prevention of IPD in adults. With Breakthrough Therapy designation, we have access to all of the elements of the FDA’s Fast Track program, as well as the ability to receive guidance and support from the FDA on an efficient drug development program and an organizational commitment from senior managers within the FDA. The Breakthrough Therapy designation process is designed to expedite the development and review of drugs and biologics that are intended to treat a serious or life-threatening condition, where preliminary clinical evidence indicates that the drug or biologic may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints.

Since our inception in November 2013, we have devoted substantially all of our resources to performing research and development, undertaking preclinical studies, advancing our vaccine candidates through clinical trials, enabling manufacturing activities in support of our product development efforts, acquiring and developing our technology and vaccine candidates, organizing and staffing our company, performing business planning, establishing our intellectual property portfolio and raising capital to support and expand such activities. We do not have any products approved for sale and have not generated any revenue from product sales. To date, we have financed our operations primarily with proceeds from the sales of our common stock, pre-funded warrants to purchase our common stock and, prior to our initial public offering (“IPO”) in June 2020, redeemable convertible preferred stock. We will continue to require additional capital to develop and commercialize our vaccine candidates and fund operations for the foreseeable future. Accordingly, until such time as we can generate significant revenue from sales of our vaccine candidates, if ever, we expect to finance our cash needs through public or private equity or debt financings, third-party (including government) funding and marketing and distribution arrangements, as well as other collaborations, strategic alliances and licensing arrangements, or any combination of these approaches.

We have incurred net losses in each year since inception and expect to continue to incur net losses in the foreseeable future. Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year, depending in large part on the timing of our preclinical studies, clinical trials and manufacturing activities, and our expenditures on other research and development activities. Our net losses were $402.3 million, $223.5 million and $100.1 million for the years ended December 31, 2023, 2022 and 2021, respectively. As of December 31, 2023, we had an accumulated deficit of $924.4 million and cash, cash equivalents and investments of $1,242.9 million. We believe our cash, cash equivalents and investments will be sufficient to fund our operating expenses and capital expenditure requirements through at least 12 months from the filing date of this Annual Report on Form 10-K.

We do not expect to generate any revenue from commercial product sales unless and until we successfully complete development and obtain regulatory approval for one or more of our vaccine candidates, which

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we expect will take a number of years. We expect our expenses will increase substantially in connection with our ongoing activities, as we:

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advance our vaccine candidates through preclinical studies and clinical trials;

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progress in the scale-up of our manufacturing capabilities, in particular to prepare for our adult Phase 3 program for VAX-24 or VAX-31, as well as the potential commercial launches of VAX-24 and/or VAX-31;

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incur additional costs that may be required for secondary supply sources;

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require the manufacture of supplies for our clinical trials, in particular our clinical trials for our PCV candidates, VAX-24 and VAX-31;

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pursue regulatory approval of our vaccine candidates;

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establish additional manufacturing capacity to meet potential incremental supply requirements following the potential initial commercial launch of VAX-24 or VAX-31 for adults;

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hire additional personnel;

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acquire, discover, validate and develop additional vaccine candidates; and

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obtain, maintain, expand and protect our intellectual property portfolio.

We rely and will continue to rely on third parties to conduct our preclinical studies and clinical trials and for manufacturing and supply of our vaccine candidates. We have no internal manufacturing capabilities, and we will continue to rely on third parties, of which the main suppliers are single-source suppliers, for our preclinical and clinical trial materials. Given our stage of development, we do not yet have a marketing or sales organization or commercial infrastructure. Accordingly, if we obtain regulatory approval for any of our vaccine candidates, we also would expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution.

Because of the numerous risks and uncertainties associated with vaccine development, we are unable to predict the timing or amount of increased expenses or when or if we will be able to achieve or maintain profitability. Even if we are able to generate revenue from the sale of our vaccines, we may not become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and may be forced to reduce our operations.

Certain Significant Relationships

Lonza

Development and Manufacturing Services Agreements

In April 2022, we entered into a non-exclusive development and manufacturing services agreement with Lonza effective as of March 22, 2022, which was subsequently amended on May 12, 2022, November 21, 2022 and October 31, 2023 (as amended, the “2022 Lonza DMSA”). Pursuant to the 2022 Lonza DMSA, Lonza is obligated to perform services including manufacturing process development and clinical manufacture and supply of our proprietary PCV candidates. Subject to the terms and conditions set forth in the 2022 Lonza DMSA, Lonza has granted to us a non-exclusive, worldwide, fully paid-up, irrevocable, transferable license, including the right to grant sublicenses, under the New General Application Intellectual Property, to research, develop, make, have made, use, sell and import the Product. Unless earlier terminated, the 2022 Lonza DMSA shall remain in place for a period of five years. Either party may terminate the 2022 Lonza DMSA for any reason on prior written notice to the other party, provided that Lonza may not exercise such right until a specified future date. In addition, either party may

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terminate the 2022 Lonza DMSA (i) within a given time period upon any material breach that is left uncured by the other party, or (ii) immediately if the other party becomes insolvent. We may also terminate the 2022 Lonza DMSA upon an extended force majeure event. Upon expiration and/or termination of the 2022 Lonza DMSA and/or any purchase order, we will pay Lonza for all service rendered, all costs incurred, all unreimbursed capital equipment and any cancellation fees (each term as defined in the 2022 Lonza DMSA).

In February 2023, we entered into another non-exclusive development and manufacturing services agreement with Lonza, effective as of March 1, 2023 (the “2023 Lonza DMSA”). Pursuant to the 2023 Lonza DMSA, Lonza will perform manufacturing process development and the manufacture of components for VAX-24 and VAX-31, including the polysaccharide antigens, our proprietary eCRM protein carrier and conjugated drug substances. Subject to the terms and conditions set forth in the 2023 Lonza DMSA, Lonza has granted to us a non-exclusive, worldwide, fully paid-up, transferable license, including the right to grant sublicenses (subject to the prior written consent of Lonza), under the New General Application Intellectual Property, to use, sell and import the Product manufactured under the 2023 Lonza DMSA (but no other products). Unless earlier terminated, the 2023 Lonza DMSA shall remain in place for a period of five years and shall automatically renew for one additional two-year period unless either party provides written notice of non-renewal at least two years prior to the fifth anniversary of the effective date. We may terminate the 2023 Lonza DMSA for any reason on prior written notice to the other party on a Project Plan-by-Project Plan basis. Either party may terminate the 2023 Lonza DMSA (i) within a given time period upon any material breach that is left uncured by the other party, (ii) immediately if the other party becomes insolvent, is dissolved or liquidated, makes a general assignment for the benefit of its creditors, or files or has filed against it, a petition in bankruptcy or has a receiver appointed for a substantial part of its assets, (iii) upon an extended force majeure event, or (iv) if it becomes apparent to either party at any stage in the provision of the Services that it will be impossible to complete the Services for scientific or technical reasons despite exercise of best commercial efforts by both parties. Pursuant to the reason for termination and the party initiating the termination, we will pay Lonza for some combination of services rendered, costs incurred, unreimbursed capital equipment and/or any cancellation fees. Upon an extended force majeure event, neither party shall have any further liability to the other party (each term as defined in the 2023 Lonza DMSA).

Under each of the 2022 Lonza DMSA and 2023 Lonza DMSA (collectively, the “Lonza Agreements”) we pay Lonza agreed-upon fees for their performance of development and manufacturing services and pass through expenses incurred by Lonza for raw materials, as well as customary procurement and handling fees. Under each Lonza Agreement, we own all rights, title and interest in and to any and all New Customer Intellectual Property (as defined in each Lonza Agreement), and Lonza owns all right, title and interest in New General Application Intellectual Property (as defined in each Lonza Agreement).

Commercial Manufacturing and Supply Agreement

On October 13, 2023, Vaxcyte Switzerland GmbH (“Vaxcyte GmbH”), a Swiss limited liability company and wholly owned subsidiary of ours, entered into a pre-commercial services and commercial manufacturing supply agreement with Lonza (the “Commercial Manufacturing and Supply Agreement”).

Pursuant to the Commercial Manufacturing and Supply Agreement, Lonza will (i) construct and build out a dedicated suite (the “Suite”) at Lonza’s facilities in Visp, Switzerland to manufacture certain key components (including drug substance) for our proprietary PCV franchise and any other products or intermediates Vaxcyte GmbH may choose (collectively, the “Products”) and (ii) maintain and operate the Suite (utilizing Lonza’s employees) to manufacture the Products as a service provided to Vaxcyte GmbH, including conducting related quality control and quality assurance operations. Lonza will be a preferred, non-exclusive, supplier of the Products to Vaxcyte GmbH, and Vaxcyte GmbH retains the right to procure the Products from one or more alternate and/or backup manufacturers of the Products (including at our own facilities).

Under the Commercial Manufacturing and Supply Agreement, prior to completion of construction and certification of the Suite for commercial operation, Vaxcyte GmbH will contribute to the capital expenditure costs to construct the Suite (and will own certain equipment in the Suite to be purchased or otherwise acquired by Vaxcyte GmbH), and will pay Lonza a fixed-rate monthly service fee for Lonza’s pre-commercial services prior to commencement of commercial operations (which monthly service fee amount is subject to increases in subsequent years). Following commencement of commercial operations of the Suite to manufacture the Products, Vaxcyte GmbH will pay Lonza (i) Suite fees based on allocations of certain of Lonza’s costs to maintain the facility in which

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the Suite is located and to provide shared services to Vaxcyte GmbH and Lonza’s other customers in such facility, (ii) service fees based upon Lonza’s actual full-time equivalent employee (“FTE”) costs to operate the Suite to manufacture the Products, and (iii) certain other pass-through costs, including for raw materials. In addition, Vaxcyte GmbH may be obligated to pay or reimburse Lonza for certain other fees and expenses under the Commercial Manufacturing and Supply Agreement. Lonza will be eligible for certain financial bonuses, and subject to certain financial penalties, as incentives for the timely completion of certain scale-up activities, receipt of certain regulatory approvals for the Suite and manufacture of the Products in accordance with Vaxcyte GmbH’s commercial requirements.

Unless earlier terminated, the Commercial Manufacturing and Supply Agreement will remain in effect until December 31, 2038, subject to automatic renewal for up to three additional renewal periods of five years each, unless Vaxcyte GmbH elects not to renew (with 24 months advanced notice to Lonza). Vaxcyte GmbH is permitted to terminate the Commercial Manufacturing and Supply Agreement for convenience or for Lonza’s uncured material breach, in each case subject to certain notice obligations. Lonza is permitted to terminate the Commercial Manufacturing and Supply Agreement in the event that Vaxcyte GmbH commits certain specified material breaches, including uncured failure to pay material, undisputed amounts of money due to Lonza, subject to certain notice obligations. Either party may terminate the Commercial Manufacturing and Supply Agreement in certain circumstances in the event of the other party’s bankruptcy. In the event that Vaxcyte GmbH terminates the agreement for convenience, or Lonza terminates the agreement in the event that Vaxcyte GmbH commits certain specified material breaches, then certain termination consequences may be triggered, including that (i) Vaxcyte GmbH would forfeit any outstanding entitlement to credit from Lonza of the Repurposing Fee (as defined below), and (ii) Vaxcyte GmbH would be obligated to pay Lonza a termination penalty equal to the greater of (a) CHF 70,000,000, or (b) a prespecified number of months’ FTE fees for the actual FTEs assigned to Vaxcyte GmbH as of the date of termination. Within 30 days of the Effective Date, Vaxcyte GmbH paid Lonza a repurposing fee (the “Repurposing Fee”) of CHF 27,000,000 that will be credited back to Vaxcyte GmbH over a 10-year period starting upon commencement of commercial production. In the event of a termination under certain circumstances, Lonza shall be obligated to provide certain wind-down and transition services to Vaxcyte GmbH for up to 12 and 24 months, respectively.

For additional details regarding our relationship with Lonza, see Note 7, “Commitments and Contingencies,” and Note 4, “Commercial Manufacturing and Supply Agreement” to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.

Sutro Biopharma

Sutro Biopharma is a clinical stage, publicly traded drug discovery, development and manufacturing company using precise protein engineering and rational design (enabled by Sutro Biopharma’s proprietary XpressCF platform technology) to advance next-generation oncology therapeutics. Following our corporate formation, we acquired an exclusive license to Sutro Biopharma’s proprietary cell-free protein synthesis platform, XpressCF, for the discovery, development and sale of vaccines for the treatment or prevention of infectious diseases, excluding cancer vaccines. Under a related supply agreement with Sutro Biopharma, we have an exclusive relationship in our field to buy extract and certain custom reagents for use in manufacturing the vaccine compositions covered by the exclusive license, which we use to produce our protein carriers and certain of our antigens. Under a separate agreement with Sutro Biopharma, we enhanced our rights with respect to access to a second supplier of extract and acquired an option to access expanded rights to develop and manufacture extract, among other rights. In November 2023, we exercised this option and entered in a manufacturing rights agreement to obtain control over manufacturing and development of cell-free extract for our vaccine candidates.

Amended and Restated License Agreement with Sutro Biopharma

We are party to an amended and restated license agreement with Sutro Biopharma, dated October 12, 2015, which was subsequently amended on May 9, 2018, May 29, 2018, September 28, 2023 and November 21, 2023 (as amended, the “Sutro Biopharma License Agreement”). Under the Sutro Biopharma License Agreement, we received an exclusive, worldwide, royalty-bearing, sublicensable license under Sutro Biopharma’s patents and know-how relating to cell-free expression of proteins to (i) research, develop, use, sell, offer for sale, export, import

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and otherwise exploit specified vaccine compositions, such rights being sublicensable, for the treatment or prophylaxis of infectious diseases, excluding cancer vaccines, and (ii) manufacture, or have manufactured by an approved contract manufacturing organization, such vaccine compositions from extracts supplied by Sutro Biopharma pursuant to the Sutro Biopharma Supply Agreement (as described below). We are obligated to use commercially reasonable efforts to develop, obtain regulatory approval for and commercialize the vaccine compositions. In consideration of the rights granted under the Sutro Biopharma License Agreement, we are obligated to pay Sutro Biopharma a 4% royalty on worldwide aggregate annual net sales of our vaccine products for human health and a 2% royalty on such net sales of vaccine products for animal health. Such royalty rates are subject to specified reductions, including standard reductions for third-party payments and for expiration of relevant patent claims. We are also obligated to pay Sutro Biopharma any royalties due to Stanford University (the upstream licensor of Sutro Biopharma), to the extent the royalties payable by Sutro Biopharma to Stanford University are greater than the royalties payable by us to Sutro Biopharma. Royalties are payable on a vaccine composition-by-vaccine composition and country-by-country basis until the later of expiration of the last valid claim in the licensed patents covering such vaccine composition in such country and ten years after the first commercial sale of such vaccine composition. The latest expiration date of a licensed Sutro Biopharma patent application, if issued, would be 2036, subject to any adjustment or extension of patent term that may be available in a particular country. In addition, we are obligated to pay Sutro Biopharma a percentage of net sublicensing revenue received in the low teen percentages. In addition, in the event we sublicense our non-manufacturing rights under the Sutro Biopharma License Agreement before a specified date, we are obligated to pay Sutro Biopharma a percentage, in the low double-digits, of the sublicensing revenue we receive under such agreement.

On September 28, 2023, we and Sutro Biopharma amended certain terms of the Sutro Biopharma License Agreement, including with respect to (i) royalty reduction provisions applicable in the event of expiration of relevant patent claims, which would result in lower royalties payable by us to Sutro Biopharma under certain circumstances, (ii) the ownership, prosecution, maintenance and enforcement of certain intellectual property rights licensed or arising under the Sutro Biopharma License Agreement (including as agreed to be amended in the Option Agreement (as defined below), and (iii) the timing and form for financial reporting of royalty payment calculations.

The Sutro Biopharma License Agreement will remain in effect until terminated. The agreement may be terminated by either party for the other party’s material breach uncured within 60 days’ notice, by us at will with 60 days’ notice, or by Sutro Biopharma if we challenge Sutro Biopharma’s patents or if we undergo a change of control with a specified competitor of Sutro Biopharma.

Supply Agreement with Sutro Biopharma

In May 2018, we entered into a supply agreement with Sutro Biopharma, which was subsequently amended on February 22, 2021 and November 21, 2023 (as amended, the “Sutro Biopharma Supply Agreement”) pursuant to which we purchase from Sutro Biopharma extract and custom reagents for use in manufacturing non-clinical and certain clinical supply of vaccine compositions utilizing the technology licensed under the Sutro Biopharma License at prices not to exceed a specified percentage above Sutro Biopharma’s fully burdened manufacturing cost. If any extracts or custom reagents do not meet the specifications and warranties provided, then we will not have an obligation to pay for the non-conforming product, and Sutro Biopharma will be obligated to replace the non-conforming product within the shortest possible time with conforming product at our cost. The term of the Sutro Biopharma Supply Agreement is from execution until the later of (i) July 31, 2022, or (ii) or the date that we and Sutro Biopharma enter into the Phase 3/Commercial Supply Agreement and Sutro is supplying to us each Product under the Phase 3/Commercial Supply Agreement (each term as defined in the Sutro Biopharma Supply Agreement). The Sutro Biopharma Supply Agreement may be terminated by either party for the other party’s material breach uncured within 60 days’ notice, by us at will with 60 days’ notice, or by mutual agreement of the parties. In December 2019, we exercised our right to require Sutro Biopharma to establish a second supplier for extract and custom reagents to support our anticipated clinical and commercial needs.

Option Agreement with Sutro Biopharma

In December 2022, we entered into an option grant agreement with Sutro Biopharma (the “Option Agreement”). Pursuant to the Option Agreement, we acquired from Sutro Biopharma (i) authorization to enter into an agreement with an independent alternate contract manufacturing organization (“CMO”) to directly source Sutro

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Biopharma’s cell-free extract, allowing us to have direct oversight over financial and operational aspects of the relationship with the CMO; and (ii) a right, but not an obligation, to obtain certain exclusive rights to internally manufacture and/or source extract from certain CMOs and the right to independently develop and make improvements to extract (including the right to make improvements to the extract manufacturing process as well as cell lines) for use in connection with the exploitation of certain vaccine compositions (the “Option”). We and Sutro Biopharma agreed to negotiate the terms and conditions of a form definitive agreement to be entered into in the event we exercise the Option, which would include the terms and conditions set forth in an executed term sheet between us (the “Term Sheet”) and such terms that were necessary to give effect to each of the terms and conditions set forth in the Term Sheet (the “Form Definitive Agreement”). The Option period was five years from the date of the Option Agreement, subject to potential acceleration in the event we undergo a change of control.

As consideration for the Option and other rights and authorizations granted to us under the Option Agreement, we paid Sutro Biopharma upfront consideration of $22.5 million, consisting of (i) $10.0 million in cash and $7.5 million worth of shares of our common stock (the number of shares to be calculated based on the arithmetic average of the daily volume weighted average price of our common stock as traded on Nasdaq in the three consecutive trading days immediately prior to the issuance thereof), and (ii) $5.0 million payable within five business days after we and Sutro Biopharma mutually agree in writing upon the Form Definitive Agreement. The 167,780 shares of common stock issued was recorded at fair value of $8.0 million on the date of settlement, December 22, 2022. In the event that we elected to exercise the Option, we agreed to pay Sutro Biopharma an aggregate Option exercise price of $75.0 million in cash in two installments and, upon the occurrence of certain regulatory milestones, certain additional milestone payments totaling up to $60.0 million in cash.

On September 28, 2023, we and Sutro Biopharma mutually agreed in writing upon the Form Definitive Agreement to become effective in the event that we exercise the Option, and on October 2, 2023, we paid the $5.0 million accrued commitment.

On November 21, 2023 (the “Option Exercise Date”), we exercised the Option by submitting written notice thereof to Sutro Biopharma and concurrently paid Sutro Biopharma $50.0 million in cash as the first of two installment payments for the Option exercise price. Under the Option Agreement, we are obligated to pay Sutro an additional $25.0 million in cash within six months of the Option Exercise Date as the second of two installment payments for the Option exercise. Upon the occurrence of certain regulatory milestones, we would be obligated to pay Sutro Biopharma certain additional milestone payments totaling up to $60.0 million in cash. In the event that we undergo a change of control, certain rights and payments may be accelerated.

Manufacturing Rights Agreement with Sutro Biopharma

Concurrent with the payment of the first installment of the Option exercise price pursuant to the Option Agreement, on November 21, 2023, the manufacturing rights agreement (in the form of the Form Definitive Agreement) between us and Sutro Biopharma (the “Manufacturing Rights Agreement”) became effective. Under the Manufacturing Rights Agreement, we received an exclusive (except as to Sutro Biopharma), perpetual (subject to termination), worldwide license, for no additional royalty (i.e., royalty-free, other than any royalties due under the Sutro Biopharma License Agreement), under Sutro Biopharma’s relevant patents and know-how, to manufacture or have manufactured extract and improvements to extract (in any form) solely for use in the research, development, use, production, sale, offering for sale, export, import, commercialization or other exploitation of Vaccine Compositions (as defined in the Sutro Biopharma License Agreement) (as well as certain rights with respect to certain regulatory matters related to extract and its use in connection with such Vaccine Compositions). We have the right to extend our rights and obligations under the Manufacturing Rights Agreement to our affiliates and to sublicense our rights to manufacture extract and improvements to extract to certain third-party CMOs and other contractors (for our benefit and not for such third party’s independent commercial use). For clarity, we are not permitted to manufacture extract for sale to third parties for the independent use of such third parties. Under the Manufacturing Rights Agreement, we have the obligation to protect the confidentiality of the extract manufacturing technology, and Sutro Biopharma has certain audit rights in connection therewith.

Under the Manufacturing Rights Agreement, upon our request and at our cost, Sutro Biopharma will support up to two technology transfers to us (or to an affiliate of ours or certain third-party CMOs designated by us) of certain Sutro Biopharma know-how, materials and information to enable us to manufacture or have manufactured

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extract. Under certain circumstances, Sutro Biopharma may source extract from us or certain third-party CMOs, subject to reimbursement for technology transfer costs.

The Manufacturing Rights Agreements contains certain terms with respect to the ownership, prosecution, maintenance and enforcement of certain intellectual property rights licensed or arising under the Manufacturing Rights Agreement, which are generally consistent with the Sutro Biopharma License Agreement.

Unless earlier terminated, the Manufacturing Rights Agreement will remain in effect in perpetuity. Sutro Biopharma may only terminate the Manufacturing Rights Agreement in the event of our (i) uncured, intentional, material breach of certain confidentiality provisions resulting in actual, material harm to Sutro Biopharma’s business, (ii) uncured, intentional material breach of certain provisions relating to the use of certain of Sutro Biopharma’s know-how outside of the Vaccine Field, (iii) unintentional, material breach of certain provisions relating to the use of certain of Sutro Biopharma’s know-how outside of the Vaccine Field that we do not use reasonable best efforts to cease and (to the extent reasonably curable) cure in a timely fashion, or (iv) uncured failure to pay the Option exercise price or any undisputed milestone payment under the Option Agreement when due. We may terminate the Manufacturing Rights Agreement at our discretion upon 60 days’ written notice, and both parties may terminate the Manufacturing Rights Agreement upon mutual written consent.

For additional details regarding our relationship with Sutro Biopharma, see Note 7, “Commitments and Contingencies,” and Note 15, “Related Party Transactions,” to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.

Impact of Certain Trends

The recent trends towards rising inflation may materially adversely affect our business and corresponding financial position and cash flows. Inflationary factors, such as increases in the cost of our clinical trial materials and supplies, interest rates and overhead costs may adversely affect our operating results. Rising interest and inflation rates also present a recent challenge impacting the U.S. economy and could make it more difficult for us to obtain traditional financing on acceptable terms, if at all, in the future.

We may experience increases in our operating costs in the near future including our labor costs and research and development costs, due to rising inflation, supply chain constraints, and civil and political unrest in certain countries and regions.

Components of Results of Operations

Operating Expenses

Research and Development

Research and development expenses represent costs incurred in performing research, development and manufacturing activities in support of our own product development efforts and include personnel-related costs (including salaries, employee benefits and stock-based compensation) for our personnel in research and development functions; costs related to acquiring, developing and manufacturing supplies for preclinical studies, clinical trials and other studies, including fees paid to CMOs; costs and expenses related to agreements with contract research organizations (“CROs”), investigative sites and consultants to conduct non-clinical and preclinical studies and clinical trials; professional and consulting services costs; research and development consumables costs; laboratory supplies and equipment costs; and facility and other allocated costs.

Research and development expenses are expensed as incurred. Non-refundable advance payments for services that will be used or rendered for future research and development activities are recorded as prepaid expenses and recognized as expenses as the related services are performed. We do not allocate all of our costs by vaccine candidates, as our research and development expenses include internal costs, such as payroll and other personnel expenses, which are not tracked by vaccine candidate. In particular, with respect to internal costs, several of our departments support multiple vaccine candidate research and development programs.

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We expect our research and development expenses to increase substantially in absolute dollars for the foreseeable future as we advance our vaccine candidates into and through preclinical studies and clinical trials, manufacture drug product for our clinical trials, scale up our manufacturing activities, establish additional manufacturing capacity to meet potential incremental supply requirements following the potential initial commercial launch of VAX-24 or VAX-31 for adults, pursue regulatory approval of our vaccine candidates and expand our pipeline of vaccine candidates. The process of conducting the necessary preclinical and clinical research and completing the manufacturing requirements to obtain regulatory approval is costly and time-consuming. The actual probability of success for our vaccine candidates may be affected by a variety of factors, including the safety and efficacy or immunogenicity of our vaccine candidates, clinical data, investment in our clinical programs, competition, manufacturing capabilities and commercial viability. We may never succeed in achieving regulatory approval for any of our vaccine candidates. As a result of the uncertainties discussed above, we are unable to determine the duration and completion costs of our research and development projects or if, when and to what extent we will generate revenue from the commercialization and sale of our vaccine candidates.

We accrue for costs related to research and development activities based on our estimates of the services received and efforts expended pursuant to quotes and contracts with vendors, including CMOs and CROs, that conduct research, development and manufacturing activities on our behalf. The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows. There may be instances in which payments made to our vendors exceed the level of services provided and result in a prepayment of the research and development expense. Advance payments for goods and services to be used in future research and development activities are expensed when the activity has been performed or when the goods have been received. We make significant judgments and estimates in determining accrued research and development liabilities as of each reporting period based on the estimated time period over which services will be performed and the level of effort to be expended. If the actual timing of the performance of services or the level of effort varies from our estimate, we adjust the accrual or prepaid expense accordingly.

Although we do not expect our estimates to be materially different from amounts actually incurred, if our estimates of the status and timing of services performed differ from the actual status and timing of services performed, it could result in us reporting amounts that are too high or too low in any particular period.

Our research and development costs may vary significantly based on factors such as:

•
the costs and timing of our CMC activities, including fulfilling good manufacturing practice (“GMP”) related standards and compliance, and identifying and qualifying second suppliers;

•
the costs related to raw materials we purchase directly or through third-party manufacturing and supply partners;

•
the cost of clinical trials of our vaccine candidates;

•
changes in the standard-of-care on which a clinical development plan was based, which may require new or additional trials;

•
the number of sites included in the trials;

•
the countries in which the trials are conducted;

•
delays in adding a sufficient number of trial sites and recruiting suitable volunteers to participate in our clinical trials;

•
the number of subjects that participate in the trials;

•
the number of doses that subjects receive;

•
subjects dropping out of a study or lost in follow-up;

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•
potential additional safety monitoring requested by regulatory agencies;

•
the duration of subject participation in the trials and follow-up;

•
the cost and timing of manufacturing our vaccine candidates;

•
the phase of development of our vaccine candidates;

•
the costs of establishing additional manufacturing capacity to meet potential incremental supply requirements following the potential initial commercial launch of VAX-24 or VAX-31 for adults;

•
the costs that may be required for secondary supply sources; and

•
the immunogenicity or efficacy and safety and tolerability profile of our vaccine candidates.

General and Administrative

General and administrative expenses consist primarily of costs and expenses related to personnel (including salaries, employee benefits and stock-based compensation) in our executive, legal, finance and accounting, human resources and other administrative functions; legal services relating to intellectual property and corporate matters; accounting, auditing, consulting and tax services; insurance; and facility and other allocated costs not otherwise included in research and development expenses. We expect our general and administrative expenses to continue to increase in absolute dollars for the foreseeable future as we increase our headcount and expand our services to support our continued research and development activities and grow our business. We expect continued increases in general and administrative expenses related to human resources, finance and accounting, legal, insurance expenses, investor relations and corporate communications activities and other administrative and professional services.

Other Income (Expense), Net

Other income (expense), net includes interest income earned from our cash and cash equivalents and investments, grant income, foreign currency transaction gains (losses) related to our Swiss Franc and Euro cash and liability balances, loss on disposals of fixed assets and interest expense.

Interest Income

Interest income is earned from our cash and cash equivalent balances and short- and long-term investments. The cost of investment securities is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization and accretion are included in other income (expense), net. Realized gains and losses are also included in other income (expense), net. When the fair value of a debt security declines below its amortized cost basis, any portion of that decline attributable to credit losses, to the extent expected to be nonrecoverable before the sale of the security, is recognized in our consolidated statements of operations. When the fair value of a debt security declines below its amortized cost basis due to changes in interest rates, such amounts are recorded in other comprehensive loss, and are recognized in our consolidated statements of operations only if we sell or intend to sell the security before recovery of its cost basis.

Grant Income

Our VAX-A1 vaccine development program currently is funded in part by a grant obtained from Combating Antibiotic Resistant Bacteria Biopharmaceutical Accelerator (“CARB-X”), a global non-profit partnership dedicated to accelerating antibacterial innovation to tackle the rising global threat of drug-resistant bacteria. The CARB-X grant provides for total potential funding of up to $14.6 million (including $11.7 million awarded to date since the grant’s inception in 2019) upon the achievement of VAX-A1 development milestones through June 2024.

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Our VAX-GI vaccine development program is currently funded in part by two grants obtained from the National Institutes of Health (“NIH”), administered by the University of Maryland, Baltimore. Our first grant from the NIH was awarded in April 2021 and provides for potential funding up to five years totaling approximately $0.5 million. In June 2023, we received another grant from the NIH that provides for potential funding up to five years totaling approximately $4.6 million.

We recognized $4.8 million, $1.9 million and $1.6 million in grant income for funding research and development under these awards during the years ended December 31, 2023, 2022 and 2021, respectively. Grant income is included as a component of Other income (expense), net in the consolidated statements of operations.

Results of Operations

Comparison of the Years Ended December 31, 2023 and 2022

The following table summarizes our results of operations for the periods presented:

* not meaningful

Operating Expenses

Research and Development Expenses

The following table summarizes our research and development expenses for the periods presented:

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(1)
Includes expenses for third-party manufacturing and outsourced contract services, including preclinical studies, clinical trials and outsourced assays.

(2)
Includes travel-related expenses and other miscellaneous office expenses.

Research and development expenses increased by $162.9 million, or 96.1%, in 2023 compared to 2022. The increases of $123.8 million in product and clinical development expenses, $7.2 million in laboratory supplies and equipment and $5.0 million in facility and other allocated expenses were primarily due to (i) Phase 3 readiness activities for our adult PCV program, primarily related to manufacturing, and, to a lesser degree, (ii) VAX-A1 research and development costs, (iii) VAX-24 Phase 2 infant clinical study costs, (iv) manufacturing readiness activities in connection with the potential future commercial launches of our PCV programs, and (v) the initiation of the clinical proof-of-concept VAX-31 Phase 1/2 study in adults, partially offset by lower costs related to the VAX-24 adult Phase 2 program which concluded in 2023. The decrease of $5.7 million in research and development consumables was primarily related to higher costs incurred in 2022 for extract and reagents for Phase 3 readiness and commercial preparation activities for our PCV programs. The increase of $30.5 million in personnel-related expenses was primarily due to growth in the number of employees in our research and development functions and higher compensation costs, including salaries, benefits and stock-based compensation expense.

Acquired Manufacturing Rights

In December 2022, we entered into the Option Agreement with Sutro Biopharma, pursuant to which we acquired the Option. As consideration for the Option and other rights and authorizations granted to us under the Option Agreement, we paid Sutro Biopharma upfront consideration of $22.5 million, consisting of (i) $10.0 million in cash and $7.5 million worth of shares of our common stock (the number of shares to be calculated based on the arithmetic average of the daily volume weighted average price of our common stock as traded on Nasdaq in the three consecutive trading days immediately prior to the issuance thereof) and (ii) $5.0 million payable within five business days after we and Sutro Biopharma mutually agree in writing upon the Form Definitive Agreement. The 167,780 shares of common stock issued was recorded at fair value of $8.0 million on the date of settlement, December 22, 2022. In the event that we elected to exercise the Option, we agreed to pay Sutro Biopharma an aggregate Option exercise price of $75.0 million in cash in two installments and, upon the occurrence of certain regulatory milestones, certain additional milestone payments totaling up to $60.0 million in cash.

In September 2023, we and Sutro Biopharma mutually agreed in writing to the Form Definitive Agreement to become effective in the event that we exercise the Option, and in October 2023, we paid Sutro Biopharma the $5.0 million that was previously accrued.

In November 2023, we exercised the Option by submitting written notice thereof to Sutro Biopharma and concurrently paid Sutro Biopharma $50.0 million in cash as the first of two installment payments for the Option exercise price. Under the Option Agreement, we are obligated to pay Sutro an additional $25.0 million in cash within six months of the Option Exercise Date as the second of two installment payments for the Option exercise. This has been accrued on our consolidated balance sheets as of December 31, 2023. Upon the occurrence of certain regulatory milestones, we would be obligated to pay Sutro Biopharma certain additional milestone payments totaling up to $60.0 million in cash. In the event that we undergo a change of control, certain rights and payments may be accelerated.

As of December 31, 2023 and 2022, we have determined there is no current alternative future use of the acquired manufacturing rights paid and expensed the Option as of December 31, 2023 and 2022. We have classified the costs incurred related to the execution of the Option Agreement, the mutual agreement of the Form Definitive Agreement and the Option exercise, as Acquired Manufacturing Rights in the accompanying consolidated statement of operations for the years ended December 31, 2023 and 2022.

General and Administrative Expenses

General and administrative expenses increased by $20.9 million, or 52.5%, in 2023 compared to 2022. The increase was mainly due to increases of (i) $17.7 million in personnel-related costs related to growth in the

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number of employees in our general and administrative functions and higher compensation costs, including salaries, benefits and stock-based compensation expense, and (ii) $3.7 million in professional and consulting services.

Other Income (Expense), Net

Other income (expense), net increased by $57.0 million, or 649.9%, in 2023 compared to 2022. The increase was mainly due to increases of (i) $54.6 million in interest income resulting from higher cash balances generated from our follow-on financings and our ATM program (as described below) during the year and higher interest rates and, to a lesser extent, (ii) $2.8 million in grant income.

Comparison of the Years Ended December 31, 2022 and 2021

The following table summarizes our results of operations for the periods presented:

* not meaningful

Research and Development Expenses

The following table summarizes our research and development expenses for the periods presented:

(1)
Includes expenses for third-party manufacturing and outsourced contract services, including preclinical studies and outsourced assays.

(2)
Includes travel-related expenses, other miscellaneous office expenses and warrant expense.

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Research and development expenses increased by $91.0 million, or 116.1%, in 2022 compared to 2021. The increases of $43.7 million in product and clinical development expenses and $2.1 million in laboratory supplies and equipment were primarily due to increased VAX-31 IND readiness activities, increased VAX-24 Phase 3 readiness activities, the initiation of the VAX-24 Phase 1/2 clinical proof-of-concept study in adults 18-64 years of age and the initiation of the VAX-24 Phase 2 clinical study in adults 65 years and older, partially offset by a decrease in VAX-24 IND readiness activities as the IND application for our VAX-24 adult indication was submitted in late 2021. The increase of $16.7 million in research and development consumables was primarily related to costs incurred for extract and reagents for VAX-24 Phase 3 readiness and commercial preparation activities. The increase of $16.3 million in personnel-related expenses was primarily due to growth in the number of employees in our research and development functions and higher compensation costs, including salaries, benefits and stock-based compensation expense. The increase of $9.1 million in facility related and other allocated expenses was primarily due to an increase in lease expense related to our current corporate headquarters.

General and Administrative Expenses

General and administrative expenses increased by $14.6 million, or 57.6%, in 2022 compared to 2021. The increase was mainly due to increases of (i) $11.5 million in personnel-related costs related to growth in the number of employees in our general and administrative functions and higher compensation costs, including salaries, benefits and stock-based compensation expense, and (ii) $2.9 million in professional and consulting services.

Other Income (Expense), Net

Other income (expense), net increased by $5.2 million, or 144.1%, in 2022 compared to 2021. The increase was mainly due to an increase of $8.0 million in interest income resulting from higher cash balances generated from our follow-on financings in the first and fourth quarters of 2022 and our ATM program (as described below) during the year and higher interest rates. This was partially offset by an increase in foreign currency losses due to the appreciation of the U.S dollar against the Swiss Franc and Euro.

Liquidity and Capital Resources

From inception through December 31, 2023, we have incurred losses and negative cash flows from operations and have funded our operations primarily through the issuance of common stock, pre-funded warrants to purchase our common stock and, prior to our IPO, redeemable convertible preferred stock, totaling approximately $2.16 billion in aggregate gross proceeds and $2.05 billion net of underwriting discounts, commissions and offering expenses. As of December 31, 2023, we had $397.5 million of cash and cash equivalents, $845.5 million in investments and an accumulated deficit of $924.4 million.

On July 2, 2021, we filed a shelf registration statement on Form S-3ASR (the “Shelf Registration Statement”) under which we may, from time to time, sell securities in one or more offerings of our common stock, preferred stock, debt securities or warrants. The Shelf Registration Statement became automatically effective upon the filing of the Form S-3ASR on July 2, 2021.

ATM Program

In July 2021, we entered into an Open Market Sales AgreementSM (the “Original ATM Sales Agreement”) with Jefferies LLC (“Jefferies”) which provided that, upon the terms and subject to the conditions and limitations set forth in the Original ATM Sales Agreement, we may elect to issue and sell, from time to time, shares of our common stock having an aggregate offering price of up to $150.0 million through Jefferies acting as our sales agent or principal. As of February 27, 2023, we had sold 4,995,709 shares of our common stock under the Original ATM Sales Agreement at an average price of $27.57 per share for aggregate gross proceeds of $137.8 million. On February 27, 2023, we and Jefferies entered into an amendment to the Original ATM Sales Agreement (as amended, the “Amended ATM Sales Agreement”) pursuant to which we may offer and sell shares of our common stock having an aggregate offering price of up to $400.0 million, which is in addition to the $150.0 million aggregate offering price under the Original ATM Sales Agreement. The material terms and conditions of the Original ATM Sales Agreement otherwise remain unchanged. We will pay Jefferies a commission of up to 3.0% of the gross sales

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proceeds of any common stock sold through Jefferies under the Amended ATM Sales Agreement; however, we are not obligated to make any sales of common stock. As of December 31, 2023, we have sold 1,588,807 shares of our common stock under the Amended ATM Sales Agreement at an average price of $44.06 per share for aggregate gross proceeds of $70.0 million ($68.6 million net of commissions and offering expenses).

Underwritten Follow-on Public Offerings

In January 2022, we completed an underwritten public offering in which we issued 2,500,000 shares of common stock at a price of $20.00 per share and pre-funded warrants to purchase 2,500,000 shares of our common stock at a price of $19.999 per underlying share. In February 2022, the underwriters exercised their option to purchase an additional 750,000 shares of common stock. In aggregate, we received $107.6 million in net proceeds after deducting underwriting discounts and commissions and other offering expenses payable by us, and excluding the exercise of any pre-funded warrants.

In October 2022, we completed an underwritten public offering of 17,812,500 shares of our common stock, which included the full exercise of the underwriters' option to purchase an additional 2,812,500 shares, at a price of $32.00 per share and pre-funded warrants to purchase 3,750,000 shares of our common stock at a price of $31.999 per underlying share. In aggregate, we received $651.6 million in net proceeds after deducting underwriting discounts and commissions and other offering expenses payable by us, and excluding the exercise of any pre-funded warrants.

In April 2023, we completed an underwritten public offering of 13,030,000 shares of our common stock, which included the full exercise of the underwriters’ option to purchase an additional 1,830,000 shares, at a price of $41.00 per share and pre-funded warrants to purchase 1,000,000 shares of our common stock at a price of $40.999 per underlying share. In aggregate, we received $545.3 million in net proceeds after deducting underwriting discounts and commissions and other estimated offering expenses payable by us, and excluding the exercise of any pre-funded warrants.

In February 2024, we completed an underwritten public offering of 12,695,312 shares of our common stock, which included the full exercise of the underwriters’ option to purchase an additional 1,757,812 shares, at a price of $64.00 per share and pre-funded warrants to purchase 781,250 shares of our common stock at a price of $63.999 per underlying share. In aggregate, we received approximately $816.5 million in net proceeds after deducting underwriting discounts and commissions and other estimated offering expenses payable by us, and excluding the exercise of any pre-funded warrants.

Future Funding Requirements

Our primary uses of cash are to fund our operations, which consist primarily of research and development expenditures related to our programs and, to a lesser extent, capital expenditures for our commercial manufacturing facility build-out and general and administrative expenditures. We anticipate that we will continue to incur significant expenses and capital expenditures for the foreseeable future as we continue to advance our vaccine candidates, expand our corporate infrastructure, further our research and development initiatives for our vaccine candidates, build out and operate our commercial manufacturing facilities, and scale our laboratory and manufacturing operations. We are subject to all of the risks typically related to the development of new drug candidates, and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business. We anticipate that we will need substantial additional funding in connection with our continuing operations.

We believe that our existing cash, cash equivalents and investments as of the date of this Annual Report on Form 10-K will be sufficient to fund our operating expenses and capital expenditure requirements through at least 12 months from the filing date of this Annual Report on Form 10-K. We have raised substantial capital; however, we will need to raise substantial additional capital to complete development, manufacturing and commercialization of our drug candidates. Until we can generate sufficient revenue from the commercialization of our vaccine candidates or from collaboration agreements with third parties, if ever, we expect to finance our future cash needs through public or private equity or debt financings, third-party (including government) funding and marketing and

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distribution arrangements, as well as other collaborations, strategic alliances and licensing arrangements, or any combination of these approaches. The sale of equity, pre-funded warrants or convertible debt securities may result in dilution to our stockholders and, in the case of preferred equity securities or convertible debt, those securities could provide for rights, preferences or privileges senior to those of our common stock. Debt financings may subject us to covenant limitations or restrictions on our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. Our ability to raise additional funds may be adversely impacted by deteriorating global economic conditions, including higher inflation rates and changes in interest rates, and the recent disruptions to and volatility in the credit and financial markets in the United States and worldwide. There can be no assurance that we will be successful in acquiring additional funding at levels sufficient to fund our operations or on terms favorable or acceptable to us. If we are unable to obtain adequate financing when needed or on terms favorable or acceptable to us, we may be forced to delay, reduce the scope of or eliminate one or more of our research and development programs.

Our future capital requirements will depend on many factors, including:

•
the timing, scope, progress, results and costs of research and development, testing, screening, manufacturing, preclinical development and clinical trials;

•
the costs of establishing additional manufacturing capacity to meet potential incremental supply requirements following the potential initial commercial launch of VAX-24 or VAX-31 for adults;

•
the outcome, timing and cost of seeking and obtaining regulatory approvals from the FDA and comparable foreign regulatory authorities, including the potential for such authorities to require that we perform field efficacy studies for our PCV candidates, require more studies than those that we currently expect or change their requirements regarding the data required to support a marketing application;

•
the cost of building a sales force in anticipation of any product commercialization;

•
the costs of future commercialization activities, including product manufacturing, marketing, sales, royalties and distribution, for any of our vaccine candidates for which we receive marketing approval;

•
our ability to maintain existing, and establish new, strategic collaborations, licensing or other arrangements and the financial terms of any such agreements, including the timing and amount of any future milestone, royalty or other payments due under any such agreement;

•
exchange rate fluctuations due to exposure of foreign operations and foreign currency fluctuations and translations;

•
any product liability or other lawsuits related to our products;

•
the revenue, if any, received from commercial sales, or sales to foreign governments, of our vaccine candidates for which we may receive marketing approval;

•
the costs to establish, maintain, expand, enforce and defend the scope of our intellectual property portfolio, including the amount and timing of any payments we may be required to make, or that we

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may receive, in connection with licensing, preparing, filing, prosecuting, defending and enforcing our patents or other intellectual property rights;

•
expenses needed to attract, hire and retain skilled personnel; and

•
the impact of macroeconomic factors, including rising inflation which may impact labor costs, research and development costs and supply chain constraints, as well as civil and political unrest in certain countries and regions, which may exacerbate the magnitude of the factors discussed above.

A change in the outcome of any of these or other variables could significantly change the costs and timing associated with the development of our vaccine candidates. Furthermore, our operating plans may change in the future, and we may need additional funds to meet operational needs and capital requirements associated with such change.

Cash Flows

The following table summarizes our cash flows for the periods indicated:

Cash Flows from Operating Activities

Net cash used in operating activities for the year ended December 31, 2023 was $296.8 million, which primarily resulted from a net loss of $402.3 million, partially offset by net non-cash charges of $24.2 million and a net change in operating assets and liabilities of $81.3 million. Non-cash charges primarily consisted of $48.8 million in stock-based compensation, $7.0 million in amortization of right-of-use (“ROU”) assets and $3.2 million in depreciation and amortization, partially offset by a net accretion of discounts on investments of $34.8 million. The net change in operating assets and liabilities of $81.3 million was primarily due to increases in cash flows from (i) accrued manufacturing expenses of $44.5 million, (ii) accrued expenses of $36.3 million, mainly attributable to the $25.0 million accrued payable in connection to the Sutro Option exercise, (iii) prepaid and other assets of $17.9 million, mainly attributable to an increase in accretion income from capital deployed into our investments, (iv) amortization of existing operating lease ROU assets of $11.3 million, (v) accounts payable of $11.2 million, and (vi) accrued compensation of $9.9 million, partially offset by decreases in other assets of $33.0 million, mainly attributable to the manufacturing facility buildout, and operating lease ROU asset of $16.7 million due to new lease entered during the year.

Net cash used in operating activities for the year ended December 31, 2022 was $170.6 million, which primarily resulted from a net loss of $223.5 million, partially offset by non-cash charges of $40.2 million and a net change in operating assets and liabilities of $12.7 million. Non-cash charges primarily consisted of $23.7 million in stock-based compensation, $8.0 million in non-cash payments for the acquired manufacturing rights, $6.6 million in amortization of ROU assets and $2.6 million in depreciation and amortization. The net change in operating assets and liabilities of $12.7 million was primarily due to increases in cash flows from accrued expenses of $7.2 million, accrued manufacturing expenses of $3.8 million and accounts payable of $2.9 million, partially offset by a decrease in cash flows from accrued compensation of $2.3 million.

Net cash used in operating activities for the year ended December 31, 2021 was $121.4 million, which primarily resulted from a net loss of $100.1 million and a net change in operating assets and liabilities of $37.0 million, partially offset by non-cash charges of $15.7 million. The net change in operating assets and liabilities of

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$37.0 million was primarily due to decreases in cash flows due to (i) operating lease liabilities of $12.9 million resulting from leasehold improvements costs applied against such liabilities upon the commencement of our San Carlos office lease in December 2021, (ii) accounts payable of $12.5 million resulting primarily from the payment of deferred Lonza payables in December 2021, (iii) accrued manufacturing expenses of $8.6 million resulting from timing of payments, (iv) and prepaid and other current assets of $7.4 million related to a receivable for reimbursement of tenant improvement allowance and prepayments on various contracts, including repairs and maintenance, production of critical raw materials, research and clinical trial preparation. These changes were partially offset by increases in cash flows due to accrued expenses of $4.6 million primarily related to costs associated with the manufacture of extract in connection with our relationship with Sutro Biopharma. Non-cash charges consisted of $10.7 million in stock-based compensation expense, $1.8 million in depreciation and amortization, $1.7 million in amortization of operating lease ROU assets and $1.4 million in net amortization of premiums on investments.

Cash Flows from Investing Activities

Cash used in investing activities for the year ended December 31, 2023 was $773.3 million, which related primarily to $1,329.9 million in purchases of investments, $51.8 million in payments related to manufacturing facility and equipment construction-in-progress and $16.1 million in purchases of property and equipment, partially offset by $611.9 million in maturities of investments and $12.6 million in sales of investments.

Cash provided by investing activities for the year ended December 31, 2022 was $74.6 million, which related primarily to $168.7 million in maturities of investments and $14.5 million in sales of investments, partially offset by $102.7 million in purchases of investments and $5.8 million in purchases of lab equipment and furniture and fixtures.

Cash used in investing activities for the year ended December 31, 2021 was $212.3 million which related primarily to $336.3 million in purchases of investments and $6.6 million in purchases of lab equipment and furniture and fixtures, partially offset by $100.5 million in maturities of investments and $30.1 million in sales of investments.

Cash Flows from Financing Activities

Cash provided by financing activities for the year ended December 31, 2023 was $639.8 million, which primarily consisted of net proceeds from the follow-on offering in the second quarter of 2023 of $545.3 million, net proceeds from shares issued under our Amended ATM Sales Agreement of $90.7 million and proceeds from exercises of common stock options of $5.6 million.

Cash provided by financing activities for the year ended December 31, 2022 was $861.5 million, which primarily consisted of net proceeds from the follow-on offerings in the first and fourth quarters of 2022 of $759.2 million in aggregate, net proceeds from shares issued under our Amended ATM Sales Agreement of $97.3 million and proceeds from exercises of common stock options of $4.9 million.

Cash provided by financing activities for the year ended December 31, 2021 was $17.8 million, which primarily consisted of net proceeds from shares issued under our Amended ATM Sales Agreement of $13.9 million and proceeds from exercises of common stock options of $3.0 million.

Contractual Obligations and Commitments

Our material cash requirements include the following contractual and other obligations.

Leases

We have operating lease agreements for our office spaces. As of December 31, 2023, we had lease payment obligations totaling $37.1 million, of which $8.8 million is payable within one year.

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Option Agreement

In November 2023 (the “Option Exercise Date”), we exercised the Option pursuant to the Option Agreement by submitting written notice thereof to Sutro Biopharma and concurrently paid Sutro Biopharma $50.0 million in cash as the first of two installment payments for the Option exercise price. Under the Option Agreement, we are obligated to pay Sutro an additional $25.0 million in cash within six months of the Option Exercise Date as the second of two installment payments for the Option exercise. Upon the occurrence of certain regulatory milestones, we would be obligated to pay Sutro Biopharma certain additional milestone payments totaling up to $60.0 million in cash. In the event that we undergo a change of control, certain rights and payments may be accelerated.

Purchase Obligations

We have certain payment obligations under various license agreements. Under these agreements, we are required to make milestone payments upon successful completion and achievement of certain intellectual property, clinical, regulatory and sales milestones. The payment obligations under the license agreements are contingent upon future events such as our achievement of specified development, clinical, regulatory and commercial milestones, and we will be required to make development milestone payments and royalty payments in connection with the sale of products developed under these agreements. As the achievement and timing of these future milestone payments are not probable or estimable, such amounts have not been included in our balance sheets as of December 31, 2023 or December 31, 2022.

We enter into agreements in the normal course of business with CMOs and other vendors for manufacturing services and raw materials purchases. We rely on several third-party manufacturers for our manufacturing requirements. As of December 31, 2023, we had the following amounts of non-cancelable purchase commitments related to manufacturing services and raw materials purchased due to our key manufacturing partners. These amounts represent our minimum contractual obligations, including termination fees. If we terminate certain firm orders with our key manufacturing partners, we will be required to pay for the manufacturing services scheduled or raw materials purchased under our arrangements. The actual amounts we pay in the future to the vendors under such agreements may differ from the purchase order amounts.

Critical Accounting Policies and Significant Judgments and Estimates

Our management’s discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses and the disclosure of contingent assets and liabilities in our consolidated financial statements. On an ongoing basis, we evaluate our estimates and judgments, including those related to accrued research and development expenses, stock-based compensation and leases. We base our estimates on historical experience, known trends and events and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

While our significant accounting policies are described in the notes to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K, we believe that the following critical accounting policies are most important to understanding and evaluating our reported financial results:

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Accrued Research and Development Expenses

We have entered into various agreements with CMOs and CROs. As part of the process of preparing our consolidated financial statements, we are required to estimate our accrued research and development expenses, including accrued manufacturing expenses, as of each balance sheet date. This process involves reviewing open contracts and purchase orders, communicating with our personnel and third parties to identify services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of the actual cost. We make estimates of our accrued research and development expenses as of each balance sheet date based on facts and circumstances known to us at that time. We periodically confirm the accuracy of our estimates with the service providers and make adjustments, if necessary. The significant estimates in our accrued research and development expenses include the costs incurred for services performed by our vendors in connection with research and development activities for which we have not yet been invoiced.

We accrue for costs related to research and development activities based on our estimates of the services received and efforts expended pursuant to quotes and contracts with vendors, including CMOs and CROs, that conduct research, development and manufacturing on our behalf. The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows. There may be instances in which payments made to our vendors will exceed the level of services provided and result in a prepayment of the research and development expense. Advance payments for goods and services that will be used in future research and development activities are expensed when the activity has been performed or when the goods have been received. We make significant judgments and estimates in determining accrued research and development liabilities as of each reporting period based on the estimated time period over which services will be performed and the level of effort to be expended. If the actual timing of the performance of services or the level of effort varies from our estimate, we adjust the accrual or prepaid expense accordingly.

Although we do not expect our estimates to be materially different from amounts actually incurred, if our estimates of the status and timing of services performed differ from the actual status and timing of services performed, it could result in us reporting amounts that are too high or too low in any particular period. To date, there have been no material differences between our estimates of such expenses and the amounts actually incurred.

Stock-Based Compensation Expense

Stock-based compensation expense related to awards to employees is measured at the grant date based on the fair value of the award. The fair value of the award that is ultimately expected to vest is recognized as expense on a straight-line basis over the requisite service period, which is generally the vesting period, net of the impact of actual forfeitures recorded in the period in which they occur.

Stock-based compensation expense related to awards to non-employees is recognized based on the then-current fair value at each measurement date over the associated service period of the award, which is generally the vesting term, using the straight-line method. The fair value of non-employee stock options is estimated using the Black-Scholes valuation model with assumptions generally consistent with those used for employee stock options, with the exception of the expected term, which is the remaining contractual life at each measurement date. Refer to Note 2, “Basis of Presentation and Summary of Significant Accounting Policies,” and Note 10, “Equity Incentive Plans,” to our consolidated financial statements for more information on assumptions used in estimating stock-based compensation expense.

The Black-Scholes option-pricing model requires the use of subjective assumptions, such as volatility, which determine the fair value of stock-based awards. The assumptions utilized in the Black-Scholes option-pricing model are as follows:

Expected Term

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Expected term represents the period that our stock-based awards are expected to be outstanding. The expected term for employee equity instruments is calculated using the simplified method where there is insufficient historical data about exercise patterns and post-vesting employment termination behavior. The simplified method is based on the vesting period and the contractual term for each grant, or for each vesting-tranche for awards with graded vesting. The mid-point between the vesting date and the maximum contractual expiration date is used as the expected term under this method. For awards with multiple vesting-tranches, the time from grant until the mid-points for each of the tranches may be averaged to provide an overall expected term. The expected term for non-employee stock options is the remaining contractual term.

Expected Volatility

Expected volatility is estimated from the average historical volatilities of publicly traded companies within the life sciences industry that are considered to be comparable to our business over a period approximately equal to the expected term for employees’ options and the remaining contractual life for non-employees’ options. We will continue to apply this process until a sufficient amount of historical information regarding the volatility of our own stock price becomes available.

Expected Dividend

We have not paid and do not anticipate paying any dividends in the near future. Accordingly, we have estimated the dividend yield to be zero.

Risk-Free Interest Rate

The risk-free interest rate is based on the U.S. Treasury yield in effect at the time of grant for zero-coupon notes with remaining terms corresponding with the expected term of the option.

Fair Value of Common Stock

For valuations after the completion of our IPO, the fair value of each share of underlying common stock is based on the closing price of our common stock as reported on the Nasdaq Global Select Market on the date of grant.

Leases

We adopted Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842) on January 1, 2021, using the modified retrospective transition approach. There was no cumulative-effect adjustment recorded to retained earnings upon adoption.

Under ASC 842, we assess all arrangements that convey the right to control the use of property, plant and equipment, at inception, to determine if it is, or contains, a lease based on the unique facts and circumstances present in the arrangements. In addition, we determine whether leases meet the classification criteria of a finance or operating lease at the lease commencement date considering: (i) whether the lease transfers ownership of the underlying asset to the lessee at the end of the lease term, (ii) whether the lease contains a bargain purchase option, (iii) whether the lease term is for a major part of the remaining economic life of the underlying asset, (iv) whether the present value of the sum of the lease payments and residual value guaranteed by the lessee equals or exceeds substantially all of the fair value of the underlying asset, and (v) whether the underlying asset is of such a specialized nature that it is expected to have no alternative use to the lessor at the end of the lease term. As of December 31, 2023, our lease population consisted only of operating real estate leases.

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Once a lease is identified and its classification determined, we recognize a ROU asset, and a corresponding lease liability. Lease liabilities are recorded based on the present value of lease payments over the expected lease term. The corresponding ROU asset is measured from the initial lease liability, adjusted by (i) accrued or prepaid rents, (ii) remaining unamortized initial direct costs and lease incentives, and (iii) any impairments of the ROU asset.

Significant assumptions utilized in recognizing the ROU assets and corresponding lease liabilities included the expected lease term and the incremental borrowing rate. The expected lease term includes both contractual lease periods and, as applicable, extensions of the lease term when we have determined the exercise of the option to extend is reasonably certain to occur. The incremental borrowing rate was utilized to discount lease payments over the expected term given our operating leases do not provide an implicit rate. We estimated the incremental borrowing rate based on an analysis of corporate bond yields with a credit rating similar to ours. The determination of our incremental borrowing rate requires management judgment, including development of a synthetic credit rating and cost of debt, as we currently do not carry any debt. We believe that the estimates used in determining the incremental borrowing rate are reasonable based upon current facts and circumstances.

For additional details regarding the impact of adoption and disclosure, see Note 6, “Leases,” to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.

Recently Adopted Accounting Pronouncements

See Note 2, “Basis of Presentation and Summary of Significant Accounting Policies,” to our consolidated financial statements for additional information.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and related notes and other financial information included elsewhere in this Annual Report on Form 10-K. This discussion and analysis contains forward-looking statements based upon our current beliefs, plans and expectations that involve risks, uncertainties and assumptions, such as statements regarding our plans, objectives, expectations, intentions and beliefs. Our actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under the section titled “Risk Factors” and elsewhere in this Annual Report on Form 10-K. You should carefully read the “Risk Factors” section of this Annual Report on Form 10-K to gain an understanding of the important factors that could cause actual results to differ materially from our forward-looking statements. Please also see the section titled “Special Note Regarding Forward-Looking Statements.”

Overview

We are a clinical-stage vaccine innovation company engineering high-fidelity vaccines to protect humankind from the consequences of bacterial diseases. We are developing broad-spectrum conjugate and novel protein vaccines to prevent or treat bacterial infectious diseases. We are re-engineering the way highly complex vaccines are made through modern synthetic techniques, including advanced chemistry and the XpressCF cell-free protein synthesis platform, exclusively licensed from Sutro Biopharma, Inc., or Sutro Biopharma. Unlike conventional cell-based approaches, our system for producing difficult-to-make proteins and antigens is intended to accelerate our ability to efficiently create and deliver high-fidelity vaccines with enhanced immunological benefits.

Our pipeline includes:

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Pneumococcal conjugate vaccine, or PCV, candidates that we believe are among the most broad-spectrum PCV candidates currently in development, targeting the approximately $7 billion global pneumococcal vaccine market. Pneumococcal disease is an infection caused by Streptococcus pneumoniae, or pneumococcus, bacteria. It can result in invasive pneumococcal disease, or IPD, including meningitis and bacteremia, and non-invasive pneumococcal disease, including pneumonia, otitis media and sinusitis.

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Our lead vaccine candidate, VAX-24, is a 24-valent, broad-spectrum investigational PCV being developed for the prevention of IPD. VAX-24 is intended to improve upon the standard-of-care PCV vaccines for both children and adults by covering the serotypes that are responsible for most of the pneumococcal disease currently in circulation.

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VAX-24 Adult Program: On October 24, 2022, we announced positive topline results from both the Phase 1 and Phase 2 portions of a clinical proof-of-concept study evaluating the safety, tolerability and immunogenicity of VAX-24 in 800 healthy adults aged 18-64. The Phase 1 portion of the study evaluated the safety and tolerability of a single injection of VAX-24 at three dose levels, 1.1mcg, 2.2mcg and 2.2mcg/4.4mcg, and compared to PCV20 in 64 healthy adults 18-49 years of age. The Phase 2 portion evaluated the safety, tolerability and immunogenicity of a single injection of VAX-24 at the same three dose levels and compared to a single injection of Prevnar 20™, or PCV20, in 771 healthy adults 50-64 years of age. In this study, VAX-24 met the primary safety and tolerability objectives, demonstrating a safety profile similar to PCV20, for all doses studied. In this study, VAX-24 met or exceeded the established regulatory immunogenicity standards for all 24 serotypes at the conventional 2.2mcg dose, which we intend to move forward into a Phase 3 program. At this dose, VAX-24 met the standard opsonophagocytic activity, or OPA, response non-inferiority criteria for all 20 serotypes common with PCV20, of which 16 achieved higher immune responses. Additionally, at all three doses, VAX-24 met the standard superiority criteria for all four serotypes unique to VAX-24. VAX-24 has the potential to cover an additional 10-28 percent of strains causing IPD in adults over the current standard-of-care PCVs. We have a separate Phase 2 study in approximately 200 healthy adults aged 65 and older for which we have completed enrollment, and we anticipate announcing topline safety, tolerability and immunogenicity results from this

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study in the second quarter of 2023. We anticipate final results with the six-month safety data from both Phase 2 adult studies in the first half of 2023 and expect to hold regulatory interactions with the U.S. Food and Drug Administration, or FDA, in the second half of 2023 to inform the Phase 3 program. We expect topline safety, tolerability and immunogenicity data from the Phase 3 pivotal, non-inferiority study in adults in 2025. The FDA has granted Fast Track and Breakthrough Therapy designations for VAX-24 in adults.

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VAX-24 Pediatric Program: For our VAX-24 pediatric program, in late February 2023, we announced that the FDA cleared the infant investigational new drug, or IND, application for the prevention of IPD in infants. We plan to initiate an infant Phase 2 study in the second quarter of 2023. We expect topline safety, tolerability and immunogenicity data from the infant Phase 2 study primary three-dose immunization series by 2025. The study design will include a primary immunization series consisting of three doses followed by a subsequent booster dose.

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Our second PCV candidate, VAX-31 (formerly VAX-XP), builds on what has been established with VAX-24 and is designed to expand the breadth of coverage to 31 strains without compromising immunogenicity due to carrier suppression. VAX-31 was designed to provide coverage for approximately 95% of IPD currently circulating in the U.S. population. We anticipate submitting an IND application to the FDA for VAX-31 in adults in the second half of 2023. We expect topline safety, tolerability and immunogenicity data from a Phase 1/2 study in adults in 2024.

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VAX-A1, a novel conjugate vaccine candidate designed to prevent disease caused by Group A Streptococcus, or Group A Strep. Group A Strep is pervasive globally and causes 700 million cases of illness annually, including pharyngitis, or strep throat, and certain severe invasive infections such as sepsis, necrotizing fasciitis and toxic shock syndrome. There is currently no vaccine against Group A Strep, which is one of the leading infectious disease-related causes of death and disability worldwide and a significant contributor to the prescription of antibiotics in the very young. We believe we have demonstrated preclinical proof of concept for VAX-A1, the data for which were published in December 2020. We nominated the final vaccine candidate for VAX-A1 in the first quarter of 2021 and initiated IND-enabling activities in the second half of 2021. We continue to advance the development of VAX-A1 and we intend to provide further information about the anticipated timing of an IND application will be provided as the program progresses.

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VAX-PG, a novel protein vaccine candidate targeting the keystone pathogen responsible for periodontitis, a chronic oral inflammatory disease affecting an estimated 65 million adults in the United States. We believe we have generally demonstrated preclinical proof of concept for a periodontitis protein vaccine, the data for which was published in February 2019. We nominated a final vaccine candidate for VAX-PG in the fourth quarter of 2022 and we continue to progress the program. Our initial goal is to develop a therapeutic vaccine to slow or stop disease progression; however, the results from clinical trials may inform the potential adoption of prophylactic immunization.

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VAX-GI, a new vaccine program designed to prevent Shigella, a bacterial illness that affects an estimated 188 million people worldwide each year and results in approximately 164,000 deaths annually, mostly among children under five years of age in low- and middle-income settings.

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We have other discovery-stage programs that leverage our cell-free protein synthesis platform, which, if proven successful in preclinical studies, could also be advanced into IND-enabling activities and clinical studies.

Since January 1, 2022, key developments affecting our business include the following:

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Dosed First Participants in both the Phase 1 and Phase 2 Portions of VAX-24 Phase 1/2 Clinical Proof-of-Concept Study in Adults: In February 2022, we announced that the first participants were dosed in the Phase 1 portion of the VAX-24 Phase 1/2 clinical study. This was followed by an announcement in April 2022 that the first participants had been dosed in the Phase 2 portion of this study. The initiation of the Phase 2 portion occurred after an independent Data

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Monitoring Committee completed a prespecified review of initial Phase 1 safety and tolerability data and recommended that the study progress as planned.

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The VAX-24 Phase 1/2 clinical proof-of-concept study was a randomized, observer-blind, dose-finding, controlled study designed to evaluate the safety, tolerability and immunogenicity of VAX-24 in healthy adults (NCT05266456).

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The Phase 1 portion of the study evaluated the safety and tolerability of a single injection of VAX-24 at three dose levels and compared to Prevnar 20 in 64 healthy adults 18 to 49 years of age.

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The Phase 2 portion evaluated the safety, tolerability and immunogenicity of a single injection of VAX-24 at three dose levels and compared to Prevnar 20 in 771 healthy adults 50 to 64 years of age. The prespecified immunogenicity endpoints of the Phase 2 portion of the study included an assessment of the induction of antibody responses, using opsonophagocytic activity, or OPA, and immunoglobulin G, or IgG, at each of the three VAX-24 doses and compared to Prevnar 20™ and, for the additional four serotypes contained in VAX-24 and Pneumovax® 23, but not in Prevnar 20™, the percentage of subjects that experienced a four-fold rise in antibody titers.

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Participants in the study were evaluated for safety through six months after vaccination.

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Completed Successful $115 Million Follow-On Financing: In January 2022, we completed an underwritten public offering of 3,250,000 shares of our common stock, which included the full exercise of the underwriters’ option to purchase additional shares, and pre-funded warrants to purchase 2,500,000 shares of common stock. The aggregate gross proceeds to us from the offering were $115.0 million, before deducting underwriting discounts and commissions and other estimated offering expenses payable by us, and excluding the exercise of any pre-funded warrants.

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Completed Enrollment of Phase 2 Portion of VAX-24 Phase 1/2 Clinical Proof-of-Concept Study in Adults: In July 2022, we announced the completion of enrollment in the Phase 2 portion of the Phase 1/2 clinical proof-of-concept study.

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Initiated Separate VAX-24 Phase 2 Clinical Study in Adults 65 Years and Older: In July 2022, we announced that we dosed the first participants in a separate Phase 2 study in adults 65 years of age and older. This study is intended to further build the body of clinical evidence to support the potential of VAX-24 as the broadest-spectrum PCV in adults.

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This VAX-24 Phase 2 clinical study (VAX-24 Study 102, NCT05297578) is a randomized, observer-blind, dose-finding, controlled study designed to evaluate the safety, tolerability and immunogenicity of VAX-24 in approximately 200 healthy adults 65 years of age and older.

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The study is evaluating the safety, tolerability and immunogenicity of a single injection of VAX-24 at three dose levels and compared to a single injection of Prevnar 20™. The prespecified immunogenicity endpoints of the study include an assessment of the induction of antibody responses, using OPA and IgG, at each of the three VAX-24 doses and compared to Prevnar 20™ and, for the additional four serotypes contained in VAX-24 and Pneumovax® 23, but not in Prevnar 20™, the percentage of subjects that experience a four-fold rise in antibody titers.

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Participants in the study are evaluated for safety through six months after vaccination.

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Completed Successful Pre-IND Meeting with FDA Regarding VAX-24 Pediatric Development Program: In July 2022, we successfully completed a pre-IND meeting with the FDA regarding the pediatric clinical program for VAX-24. We received positive written feedback from the FDA supporting the initiation of a pediatric study that proceeds directly into infants contingent on satisfactory topline safety, tolerability and immunogenicity results from the ongoing VAX-24 Phase 1/2 clinical proof-of-concept study in adults 18 to 64 years of age. This approach provides us with an accelerated clinical path to deliver a potentially best-in-class PCV, VAX-24, to the

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pediatric population, which represents the largest portion of the pneumococcal vaccine market in the United States.

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Received FDA Fast Track Designation for VAX-24 in Adults: In early August 2022, we announced that the FDA granted Fast Track designation to VAX-24 in adults ages 18 and older. The Fast Track designation is an FDA process that has been designed to facilitate the development and expedite the review of drugs, including vaccines, that treat or prevent serious conditions and fill an unmet medical need.

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Completed Enrollment of Phase 2 Study Evaluating Safety, Tolerability and Immunogenicity of VAX-24 in Adults 65 Years and Older: In September 2022, we announced the completion of enrollment in the Phase 2 portion of the ongoing VAX-24 Phase 1/2 clinical proof-of-concept study in adults 65 years and older.

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Announced Positive Topline Results from VAX-24 Phase 1/2 Clinical Proof-of-Concept Study in Adults 18-64 Years of Age: In October 2022, we announced positive topline results from the Phase 1/2 clinical proof-of-concept study evaluating the safety, tolerability and immunogenicity of VAX-24 in healthy adults aged 18-64. In this study, VAX-24 met the primary safety and tolerability objectives, demonstrating a safety profile similar to PCV20 for all doses studied. The study also showed VAX-24 met or exceeded the established regulatory immunogenicity standards for all 24 serotypes at the conventional 2.2mcg dose, which we intend to move forward into a Phase 3 program. At this dose, VAX-24 met the standard opsonophagocytic activity response non-inferiority criteria for all 20 serotypes common with PCV20, of which 16 achieved higher immune responses. Additionally, at all three doses, VAX-24 met the standard superiority criteria for all four serotypes unique to VAX-24. VAX-24 has the potential to cover an additional 10-28 percent of strains causing IPD in adults over the current standard-of-care PCVs.

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Confirmed VAX-31 Serotype Composition: In October 2022, we unveiled the serotype composition for VAX-31, the follow-on vaccine in our carrier-sparing PCV franchise, which is designed to contain 31 serotypes that collectively cover approximately 95% of the circulating strains causing IPD in adults in the United States.

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Completed Successful $690 Million Follow-On Offering: In October 2022, we completed an underwritten public offering of 17,812,500 shares of our common stock, which included the full exercise of the underwriters’ option to purchase additional shares, and pre-funded warrants to purchase 3,750,000 shares of common stock. The aggregate gross proceeds to us from the offering were $690.0 million, before deducting underwriting discounts and commissions and other estimated offering expenses payable by us, and excluding the exercise of any pre-funded warrants.

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Entered into Option Grant Agreement with Sutro Biopharma for the Development and Manufacturing Rights of Cell-Free Extract: In December 2022, we and Sutro Biopharma, Inc., or Sutro Biopharma announced an option grant agreement pursuant to which we acquired from Sutro Biopharma an option to access expanded rights to develop and manufacture cell-free extract, among other rights.

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Received FDA Breakthrough Therapy Designation for VAX-24 for the Prevention of IPD in Adults: In January 2023, we announced that the FDA granted Breakthrough Therapy designation for VAX-24, for the prevention of IPD in adults. With Breakthrough Therapy designation, Vaxcyte will have access to all of the elements of the FDA’s Fast Track program, as well as the ability to receive guidance and support from the FDA on an efficient drug development program and an organizational commitment from senior managers within the FDA. The FDA’s decision was based on positive topline results from the Phase 1/2 proof-of-concept study of VAX-24 in adults 18-64 years of age.

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FDA Clearance of Investigational New Drug Application for VAX-24 for the Prevention of Invasive Pneumococcal Disease in Infants: In late February 2023, we announced that the FDA cleared the VAX-24 IND application for the prevention of IPD in infants. We plan to initiate the infant Phase 2 study in the second quarter of 2023, with topline safety, tolerability and immunogenicity data following the primary three-dose immunization series expected by 2025.

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The study design will include a primary immunization series consisting of three doses followed by a subsequent booster dose.

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Announced new vaccine program VAX-GI: In late February 2023, we announced that we added a new vaccine program, VAX-GI, designed to prevent Shigella, a bacterial illness that affects an estimated 188 million people worldwide each year and results in approximately 164,000 deaths annually, mostly among children under five years of age in low- and middle-income settings.

Since our inception in November 2013, we have devoted substantially all of our resources to performing research and development, undertaking preclinical studies, advancing our vaccine candidates through clinical trials and manufacturing activities in support of our product development efforts, acquiring and developing our technology and vaccine candidates, organizing and staffing our company, establishing our intellectual property portfolio and raising capital to support and expand such activities. We do not have any products approved for sale and have not generated any revenue from product sales. To date, we have financed our operations primarily with proceeds from the sales of our common stock, pre-funded warrants to purchase our common stock and, prior to our initial public offering, or IPO, in June 2020, redeemable convertible preferred stock. We will continue to require additional capital to develop and commercialize our vaccine candidates and fund operations for the foreseeable future. Accordingly, until such time as we can generate significant revenue from sales of our vaccine candidates, if ever, we expect to finance our cash needs through public or private equity or debt financings, third-party (including government) funding and marketing and distribution arrangements, as well as other collaborations, strategic alliances and licensing arrangements, or any combination of these approaches.

We have incurred net losses in each year since inception and expect to continue to incur net losses in the foreseeable future. Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year, depending in large part on the timing of our preclinical studies, clinical trials and manufacturing activities, and our expenditures on other research and development activities. Our net losses were $223.5 million and $100.1 million for the years ended December 31, 2022 and 2021, respectively. As of December 31, 2022, we had an accumulated deficit of $522.1 million and cash, cash equivalents and investments of $957.9 million, We believe our cash, cash equivalents and investments will be sufficient to fund our operating expenses and capital expenditure requirements through at least 12 months from the filing date of this Annual Report on Form 10-K.

We do not expect to generate any revenue from commercial product sales unless and until we successfully complete development and obtain regulatory approval for one or more of our vaccine candidates, which we expect will take a number of years. We expect our expenses will increase substantially in connection with our ongoing activities, as we:

•
advance our vaccine candidates through preclinical studies and clinical trials;

•
require the scale-up of our manufacturing capabilities, in particular to prepare for our Phase 3 program for VAX-24;

•
incur additional costs that may be required for secondary supply sources;

•
require the manufacture of supplies for our clinical trials, in particular our clinical trials for our PCV candidates, VAX-24 and VAX-31;

•
pursue regulatory approval of our vaccine candidates;

•
establish additional manufacturing capacity to meet potential incremental supply requirements following the initial commercial launch of VAX-24;

•
hire additional personnel;

•
operate as a public company;

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•
acquire, discover, validate and develop additional vaccine candidates; and

•
obtain, maintain, expand and protect our intellectual property portfolio.

We rely and will continue to rely on third parties to conduct our preclinical studies and clinical trials and for manufacturing and supply of our vaccine candidates. We have no internal manufacturing capabilities, and we will continue to rely on third parties, of which the main suppliers are single-source suppliers, for our preclinical and clinical trial materials. Given our stage of development, we do not yet have a marketing or sales organization or commercial infrastructure. Accordingly, if we obtain regulatory approval for any of our vaccine candidates, we also would expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution.

Because of the numerous risks and uncertainties associated with vaccine development, we are unable to predict the timing or amount of increased expenses or when or if we will be able to achieve or maintain profitability. Even if we are able to generate revenue from the sale of our vaccines, we may not become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and may be forced to reduce our operations.

Certain Significant Relationships

Lonza

In October 2016, we entered into a non-exclusive development and manufacturing services agreement, as amended, with Lonza, or the 2016 Lonza DMSA, pursuant to which Lonza is obligated to perform manufacturing process development and the manufacture of components for VAX-24, including the polysaccharide antigens, our proprietary eCRM protein carrier and conjugated drug substances.

In June 2018, we entered into a letter agreement with Lonza, or the Lonza Letter Agreement, pursuant to which we agreed to certain terms for potential future payments in shares of our common stock as partial satisfaction of future obligations to Lonza. The Lonza Letter Agreement states that the initial pre-IND cash payments under the 2016 Lonza DMSA would be subject to a specified dollar cap, or the Initial Cash Cap. After the Initial Cash Cap has been reached, we would have the option to make any further pre-IND payments owed to Lonza in cash, in shares of our common stock at then market prevailing prices, or a combination of both, at our election. In April 2021, we reached the Initial Cash Cap and notified Lonza that we would be exercising our option to issue approximately $10.0 million in shares of our common stock as payment for a portion of pre-IND payments due April 30, 2021. In June 2021, we issued 399,680 shares of our common stock to Lonza at a price of $25.02 per share to pay for $10.0 million of the pre-IND payments due April 30, 2021.

In October 2018, we entered into a second non-exclusive development and manufacturing services agreement with Lonza, or the 2018 Lonza DMSA, pursuant to which Lonza is obligated to perform services including manufacturing process development and the manufacture and supply of VAX-24 finished drug product.

In April 2022, we entered into a third non-exclusive development and manufacturing services agreement with Lonza, as amended, or the 2022 Lonza DMSA, effective as of March 22, 2022. Pursuant to the 2022 Lonza DMSA, Lonza will perform manufacturing process development and clinical manufacture and supply of our proprietary PCV.

Under each of the 2016 Lonza DMSA, 2018 Lonza DMSA and 2022 Lonza DMSA, collectively the Lonza Agreements, we will pay Lonza agreed-upon fees for its performance of development and manufacturing services and pass through expenses incurred by Lonza for raw materials, as well as customary procurement and handling fees. Under each Lonza Agreement, we will own all right, title and interest in and to any and all New Customer Intellectual Property (as defined in each Lonza Agreement), and Lonza shall own all right, title and interest in New General Application Intellectual Property (as defined in each Lonza Agreement). Subject to the terms and conditions set forth in the Lonza Agreements, Lonza granted us a non-exclusive, world-wide, fully paid-up, irrevocable, transferable license, including the right to grant sublicenses, under the New General Application

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Intellectual Property (as defined in each Lonza Agreement), to research, develop, make, have made, use, sell and import the Product (as defined in each Lonza Agreement) manufactured under each Lonza Agreement.

Unless earlier terminated, each Lonza Agreement will remain in place for a period of five years and includes customary conditions for termination prior to that period. The 2016 Lonza DMSA has been amended to extended its term until March 31, 2023.

For additional details regarding our relationship with Lonza, see Note 6, “Commitments and Contingencies,” to our financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.

Sutro Biopharma

Sutro Biopharma is a clinical stage, publicly traded drug discovery, development and manufacturing company using precise protein engineering and rational design (enabled by Sutro Biopharma’s proprietary XpressCF platform technology) to advance next-generation oncology therapeutics. Following our corporate formation, we acquired an exclusive license to Sutro Biopharma’s proprietary cell-free protein synthesis platform, XpressCF, for the discovery, development and sale of vaccines for the treatment or prevention of infectious diseases, excluding cancer vaccines. Under a related supply agreement with Sutro Biopharma, we have an exclusive relationship in our field to buy extract and certain custom reagents for use in manufacturing the vaccine compositions covered by the exclusive license, which we use to produce our protein carriers and certain of our antigens. Under a separate agreement with Sutro Biopharma, we enhanced our rights with respect to access to a second supplier of extract and acquired an option to access expanded rights to develop and manufacture extract, among other rights.

Amended and Restated License Agreement with Sutro Biopharma

We are party to a license agreement with Sutro Biopharma, or the Sutro Biopharma License Agreement, on August 1, 2014. The Sutro Biopharma License Agreement was amended on October 12, 2015 and again on May 9, 2018 and May 29, 2018. Under the Sutro Biopharma License Agreement, we received an exclusive, worldwide, royalty-bearing, sublicensable license under Sutro Biopharma’s patents and know-how relating to cell-free expression of proteins to (i) research, develop, use, sell, offer for sale, export, import and otherwise exploit specified vaccine compositions, such rights being sublicensable, for the treatment or prophylaxis of infectious diseases, excluding cancer vaccines, and (ii) manufacture, or have manufactured by an approved contract manufacturing organization, such vaccine compositions from extracts supplied by Sutro Biopharma pursuant to the Sutro Biopharma Supply Agreement (as described below). We are obligated to use commercially reasonable efforts to develop, obtain regulatory approval for and commercialize the vaccine compositions. In consideration of the rights granted under the Sutro Biopharma License Agreement, we are obligated to pay Sutro Biopharma a 4% royalty on worldwide aggregate annual net sales of our vaccine products for human health and a 2% royalty on such net sales of vaccine products for animal health. Such royalty rates are subject to specified reductions, including standard reductions for third-party payments and for expiration of relevant patent claims. We are also obligated to pay Sutro Biopharma any royalties due to Stanford University (the upstream licensor of Sutro Biopharma), to the extent the royalties payable by Sutro Biopharma to Stanford University are greater than the royalties payable by us to Sutro Biopharma. Royalties are payable on a vaccine composition-by-vaccine composition and country-by-country basis until the later of expiration of the last valid claim in the licensed patents covering such vaccine composition in such country and ten years after the first commercial sale of such vaccine composition. The latest expiration date of a licensed Sutro Biopharma patent application, if issued, would be 2036, subject to any adjustment or extension of patent term that may be available in a particular country. In addition, we are obligated to pay Sutro Biopharma a percentage of net sublicensing revenue received in the low teen percentages. In addition, in the event we sublicense our non-manufacturing rights under the Sutro Biopharma License Agreement before a specified date, we are obligated to pay Sutro Biopharma a percentage, in the low double-digits, of the sublicensing revenue we receive under such agreement.

The Sutro Biopharma License Agreement will remain in effect until terminated. The agreement may be terminated by either party for the other party’s material breach uncured within 60 days’ notice, by us at will with 60

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days’ notice, or by Sutro Biopharma if we challenge Sutro Biopharma’s patents or if we undergo a change of control with a specified competitor of Sutro Biopharma.

Supply Agreement with Sutro Biopharma

In May 2018, we entered into a supply agreement, or the Sutro Biopharma Supply Agreement, with Sutro Biopharma pursuant to which we purchase from Sutro Biopharma extract and custom reagents for use in manufacturing non-clinical and certain clinical supply of vaccine compositions utilizing the technology licensed under the Sutro Biopharma License at prices not to exceed a specified percentage above Sutro Biopharma’s fully burdened manufacturing cost. If any extracts or custom reagents do not meet the specifications and warranties provided, then we will not have an obligation to pay for the non-conforming product, and Sutro Biopharma will be obligated to replace the non-conforming product within the shortest possible time with conforming product at our cost. The term of the Sutro Biopharma Supply Agreement is from execution until the later of July 31, 2022 and the date the parties enter into and commence activities under the supply agreement unless extended through a subsequent supply agreement for the supply of extract and custom reagents for vaccine compositions for Phase 3 and commercial uses as contemplated in the Sutro Biopharma Supply Agreement. The Sutro Biopharma Supply Agreement may be terminated by either party for the other party’s material breach uncured within 60 days’ notice, by us at will with 60 days’ notice, or by mutual agreement of the parties. In December 2019, we exercised our right to require Sutro Biopharma to establish a second supplier for extract and custom reagents to support our anticipated clinical and commercial needs.

Option Agreement with Sutro Biopharma

In December 2022, we entered into an option grant agreement with Sutro Biopharma, or the Option Agreement. Pursuant to the Option Agreement, we acquired from Sutro Biopharma (i) authorization to enter into an agreement with an independent alternate CMO to directly source Sutro Biopharma’s cell-free extract, allowing us to have direct oversight over financial and operational aspects of the relationship with the CMO; and (ii) a right, but not an obligation, to obtain certain exclusive rights to internally manufacture and/or source extract from certain CMOs and the right to independently develop and make improvements to extract (including the right to make improvements to the extract manufacturing process as well as cell lines) for use in connection with the exploitation of certain vaccine compositions, or the Option. We and Sutro Biopharma have agreed to negotiate the terms and conditions of a form definitive agreement to be entered into in the event we exercise the Option, which shall include the terms and conditions set forth in an executed term sheet between us, or the Term Sheet, and such terms that are necessary to give effect to each of the terms and conditions set forth in the Term Sheet, or the Form Definitive Agreement. The Option period is five years from the date of the Option Agreement, subject to potential acceleration in the event we undergo a change of control.

As consideration for the Option and other rights and authorizations granted to us under the Option Agreement, we agreed to pay Sutro Biopharma upfront consideration of $22.5 million, consisting of (i) $10.0 million in cash and $7.5 million worth of shares of our common stock (the number of shares to be calculated based on the arithmetic average of the daily volume weighted average price of our common stock as traded on Nasdaq in the three consecutive trading days immediately prior to the issuance thereof), and (ii) $5.0 million payable within five business days after we and Sutro Biopharma mutually agree in writing upon the Form Definitive Agreement. The 167,780 shares of common stock issued was recorded at fair value of $8.0 million on the date of settlement, December 22, 2022. In the event that we elect to exercise the Option, we would pay Sutro Biopharma an aggregate Option exercise price of $75.0 million in cash in two installments and, upon the occurrence of certain regulatory

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milestones, certain additional milestone payments totaling up to $60.0 million in cash. In the event that we undergo a change of control, certain rights and payments may be accelerated.

For additional details regarding our relationship with Sutro Biopharma, see Note 6, “Commitments and Contingencies,” and Note 15, “Related Party Transactions,” to our financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.

Impact of COVID-19 and Other Trends

We are continuing to closely monitor the impact of the global COVID-19 pandemic on our business. In particular, the COVID-19 pandemic slowed raw material supply chains and travel restrictions delayed the qualification of key analytical equipment used in manufacturing and curtailed in-person CMO oversight of manufacturing, affecting our manufacturing processes. As the pandemic continues, we could see an additional impact on our ability to advance our programs, obtain supplies from our contract manufacturers or interact with regulators, ethics committees or other important agencies due to limitations in regulatory authority, employee resources or otherwise. In any event, if the COVID-19 pandemic continues and persists for an extended period of time, we could experience significant disruptions to our development timelines, which would adversely affect our business, financial condition, results of operations and growth prospects.

Additionally, the recent trends towards rising inflation may also materially adversely affect our business and corresponding financial position and cash flows. Inflationary factors, such as increases in the cost of our clinical trial materials and supplies, interest rates and overhead costs may adversely affect our operating results. Rising interest and inflation rates also present a recent challenge impacting the U.S. economy and could make it more difficult for us to obtain traditional financing on acceptable terms, if at all, in the future. Although we do not believe that inflation has had a material impact on our financial position or results of operations to date, we may experience increases in the near future (especially if inflation rates continue to rise) on our operating costs, including our labor costs and research and development costs, due to supply chain constraints, consequences associated with COVID-19 and the ongoing conflict between Russia and Ukraine, and employee availability and wage increases, which may result in additional stress on our working capital resources.

Components of Results of Operations

Operating Expenses

Research and Development

Research and development expenses represent costs incurred in performing research, development and manufacturing activities in support of our own product development efforts and include personnel-related costs (including salaries, employee benefits and stock-based compensation) for our personnel in research and development functions; costs related to acquiring, developing and manufacturing supplies for preclinical studies, clinical trials and other studies, including fees paid to CMOs; costs and expenses related to agreements with contract research organizations, or CROs, investigative sites and consultants to conduct non-clinical and preclinical studies and clinical trials; professional and consulting services costs; research and development consumables costs; laboratory supplies and equipment costs; and facility and other allocated costs.

Research and development expenses are expensed as incurred. Non-refundable advance payments for services that will be used or rendered for future research and development activities are recorded as prepaid expenses and recognized as expenses as the related services are performed. We do not allocate our costs by vaccine candidates, as our vaccine candidates are at an early stage of development and our research and development expenses include internal costs, such as payroll and other personnel expenses, which are not tracked by vaccine candidate. In particular, with respect to internal costs, several of our departments support multiple vaccine candidate research and development programs.

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We expect our research and development expenses to increase substantially in absolute dollars for the foreseeable future as we advance our vaccine candidates into and through preclinical studies and clinical trials, scale up our manufacturing activities, establish additional manufacturing capacity to meet potential incremental supply requirements following the initial commercial launch of VAX-24, pursue regulatory approval of our vaccine candidates and expand our pipeline of vaccine candidates. The process of conducting the necessary preclinical and clinical research and completing the manufacturing requirements to obtain regulatory approval is costly and time-consuming. The actual probability of success for our vaccine candidates may be affected by a variety of factors, including the safety and efficacy or immunogenicity of our vaccine candidates, clinical data, investment in our clinical programs, competition, manufacturing capabilities and commercial viability. We may never succeed in achieving regulatory approval for any of our vaccine candidates. As a result of the uncertainties discussed above, we are unable to determine the duration and completion costs of our research and development projects or if, when and to what extent we will generate revenue from the commercialization and sale of our vaccine candidates.

We accrue for costs related to research and development activities based on our estimates of the services received and efforts expended pursuant to quotes and contracts with vendors, including CMOs and CROs, that conduct research, development and manufacturing activities on our behalf. The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows. There may be instances in which payments made to our vendors exceed the level of services provided and result in a prepayment of the research and development expense. Advance payments for goods and services to be used in future research and development activities are expensed when the activity has been performed or when the goods have been received. We make significant judgments and estimates in determining accrued research and development liabilities as of each reporting period based on the estimated time period over which services will be performed and the level of effort to be expended. If the actual timing of the performance of services or the level of effort varies from our estimate, we adjust the accrual or prepaid expense accordingly.

Although we do not expect our estimates to be materially different from amounts actually incurred, if our estimates of the status and timing of services performed differ from the actual status and timing of services performed, it could result in us reporting amounts that are too high or too low in any particular period.

Our research and development costs may vary significantly based on factors such as:

•
the costs and timing of our chemistry, manufacturing and controls, or CMC, activities, including fulfilling good manufacturing practice, or GMP, related standards and compliance, and identifying and qualifying second suppliers;

•
the costs related to raw materials estimates from our third-party manufacturing and supply partners;

•
the cost of clinical trials of our vaccine candidates being greater than we anticipate;

•
changes in the standard of care on which a clinical development plan was based, which may require new or additional trials;

•
the number of sites included in the trials;

•
the countries in which the trials are conducted;

•
delays in adding a sufficient number of trial sites and recruiting suitable volunteers to participate in our clinical trials;

•
the number of subjects that participate in the trials;

•
the number of doses that subjects receive;

•
subjects dropping out of a study or lost in follow-up;

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•
potential additional safety monitoring requested by regulatory agencies;

•
the duration of subject participation in the trials and follow-up;

•
the cost and timing of manufacturing our vaccine candidates;

•
the phase of development of our vaccine candidates;

•
the costs of establishing additional manufacturing capacity to meet potential incremental supply requirements following the initial commercial launch of VAX-24;

•
the costs that may be required for secondary supply sources; and

•
the efficacy and safety profile of our vaccine candidates.

General and Administrative

General and administrative expenses consist primarily of costs and expenses related to personnel (including salaries, employee benefits and stock-based compensation) in our executive, legal, finance and accounting, human resources and other administrative functions; legal services relating to intellectual property and corporate matters; accounting, auditing, consulting and tax services; insurance; and facility and other allocated costs not otherwise included in research and development expenses. We expect our general and administrative expenses to continue to increase in absolute dollars for the foreseeable future as we increase our headcount and expand our services to support our continued research and development activities and grow our business. We expect continued increases in general and administrative expenses related to compliance with the rules and regulations of the SEC and The Nasdaq Stock Market LLC (“Nasdaq”), insurance expenses, investor relations and corporate communications activities and other administrative and professional services.

Other Income (Expense), Net

Other income (expense), net includes interest income earned from our cash and cash equivalents, grant income, foreign currency transaction gains (losses) related to our Swiss Franc and Euro cash and liability balances, loss on disposals of fixed assets and interest expense.

Grant Income

In July 2019, we received a cost-reimbursement research award from Combating Antibiotic Resistant Bacteria Biopharmaceutical Accelerator, or CARB-X, a public-private partnership funded under a Cooperative Agreement from Assistant Secretary for Preparedness and Response/Biomedical Advanced Research and Development Authority and by awards from Wellcome Trust, Germany’s Federal Ministry of Education and Research, the United Kingdom Global Antimicrobial Resistance Innovation Fund and the Bill & Melinda Gates Foundation. In connection with this funding, we entered into a cost-reimbursement sub-award agreement with the Trustees of Boston University, the administrator of the program, or the CARB-X agreement. CARB-X has awarded us total funding to date of $6.6 million, with potential funding of up to $29.7 million upon the achievement of future VAX-A1 development milestones. In January 2022, CARB-X revised the parameters for the contribution of CARB-X funding and implemented maximum funding levels for all grant recipients. As a result, our total funding available upon achievement of development milestones through Phase 1 human clinical trials was revised from $29.7 million to $14.6 million (inclusive of the $6.6 million awarded to date). Separately, the National Institute of Health, or NIH, awarded us up to $0.5 million in April 2021 to advance the development of a vaccine against Shigella infection. Grant income pursuant to our award agreements is recognized as we incur and pay qualifying expenses over the periods of the awards. We recognized $1.9 million, $1.6 million and $2.5 million in grant income for funding research and development under these awards during the years ended December 31, 2022, 2021 and 2020, respectively. Grant income is included as a component of Other income (expense), net in the statements of operations.

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Results of Operations

Comparison of the Years Ended December 31, 2022 and 2021

The following table summarizes our results of operations for the periods presented:

* not meaningful

Operating Expenses

Research and Development Expenses

The following table summarizes our research and development expenses for the periods presented:

(1)
Includes expenses for third-party manufacturing and outsourced contract services, including preclinical studies, clinical trials and outsourced assays.

(2)
Includes travel-related expenses and other miscellaneous office expenses.

Research and development expenses increased by $91.0 million, or 116.1%, in 2022 compared to 2021. The increases of $43.7 million in product and clinical development expenses and $2.1 million in laboratory supplies and equipment were primarily due to increased VAX-31 IND readiness activities, increased VAX-24 Phase 3 readiness activities, the initiation of the VAX-24 Phase 1/2 clinical proof-of-concept study in adults 18-64 years of age and the initiation of the VAX-24 Phase 2 clinical study in adults 65 years and older, partially offset by a decrease in VAX-24 IND readiness activities as the IND application for our VAX-24 adult program was submitted in late 2021. The increase of $16.7 million in research and development consumables was primarily related to costs incurred for extract and reagents for VAX-24 Phase 3 readiness and commercial preparation activities. The increase

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of $16.3 million in personnel-related expenses was primarily due to growth in the number of employees in our research and development functions and higher compensation costs, including salaries, benefits and stock-based compensation expense. The increase of $9.1 million in facility related and other allocated expenses was primarily due to an increase in lease expense related to our current corporate headquarters.

Acquired Manufacturing Rights

In December 2022, we entered into the Option Agreement with Sutro Biopharma pursuant to which we acquired, among other things, the Option. As consideration for the Option and other rights and authorizations granted to us under the Option Agreement, we paid Sutro Biopharma upfront consideration. As of December 31, 2022, we have determined there is no current alternative future use of the acquired manufacturing rights paid and accrued for the Option as of December 31, 2022. We have classified such costs incurred in entering the Option Agreement as Acquired Manufacturing Rights on the accompanying statement of operations for the year ended December 31, 2022.

General and Administrative Expenses

General and administrative expenses increased by $14.6 million, or 57.6%, in 2022 compared to 2021. The increase was mainly due to increases of $11.5 million in personnel-related costs related to growth in the number of employees in our general and administrative functions and higher compensation costs, including salaries, benefits and stock-based compensation expense and $2.9 million in professional and consulting services.

Other Income (Expense), Net

Other income (expense), net increased by $5.2 million, or 144.1%, in 2022 compared to 2021. The increase was mainly due to an increase of $8.0 million in interest income resulting from higher cash balances generated from our follow-on financings in the first and fourth quarters of 2022 and our ATM program during the year and higher interest rates. This was partially offset by an increase in foreign currency losses due to the appreciation of the U.S dollar against the Swiss Franc and Euro.

Comparison of the Years Ended December 31, 2021 and 2020

The following table summarizes our results of operations for the periods presented:

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Research and Development Expenses

The following table summarizes our research and development expenses for the periods presented:

(1)
Includes expenses for third-party manufacturing and outsourced contract services, including preclinical studies and outsourced assays.

(2)
Includes travel-related expenses, other miscellaneous office expenses and warrant expense.

Research and development expenses increased by $4.8 million, or, 6.6% in 2021 compared to 2020. The increase was primarily attributable to increases in (i) personnel-related expenses of $7.5 million related to the increase in the number of employees to support our research and development activities and higher stock-based compensation expense, (ii) facility related and other allocated expenses of $5.1 million resulting from increases in rent and lease expense as well as expenses allocated to research and development, (iii) research and development consumables of $4.6 million related to higher critical raw materials expenses and (iv) laboratory supplies and equipment expenses of $1.4 million mainly related to our VAX-24 and VAX-A1 programs. These increases were partially offset by a decrease of $13.9 million in product and clinical development expenses, which represented the net impact of a decrease in outsourced manufacturing expenses related to our VAX-24 program and an increase in such expenses related to our VAX-31 program.

General and Administrative Expenses

General and administrative expenses increased by $9.2 million, or, 57.7% in 2021 compared to 2020. The increase was mainly due to increases of $7.0 million in personnel-related costs related to higher stock-based compensation expense resulting from an increase in the number of options granted during the year and growth in the number of employees in our general and administrative functions, $1.3 million in professional and consulting services related primarily to compliance activities under the Sarbanes-Oxley Act of 2002, as amended, or the Sarbanes-Oxley Act, and technology infrastructure enhancements and $1.1 million in directors and officers insurance expense as a result of operating as a public company.

Other Income (Expense), Net

Other income (expense), net increased by $3.2 million, or, 887.1% in 2021 compared to 2020. The increase was mainly due to an increase of $4.0 million in foreign currency gains resulting from the appreciation of the U.S. Dollar against the Swiss Franc in 2021 compared to 2020, partially offset by a decrease of $0.9 million in grant income for the CARB-X program.

Liquidity and Capital Resources

From inception through December 31, 2022, we have incurred losses and negative cash flows from operations and have funded our operations primarily through the issuance of common stock, pre-funded warrants to purchase our common stock and, prior to our IPO, redeemable convertible preferred stock, totaling approximately $1.49 billion in aggregate gross proceeds and $1.42 billion net of underwriting discounts, commissions and offering expenses. As of December 31, 2022, we had $834.7 million of cash and cash equivalents, $123.2 million in investments and an accumulated deficit of $522.1 million.

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On July 2, 2021, we filed a shelf registration statement on Form S-3ASR, or the Shelf Registration Statement, under which we may, from time to time, sell securities in one or more offerings of our common stock, preferred stock, debt securities or warrants. The Shelf Registration Statement became automatically effective upon the filing of the Form S-3ASR on July 2, 2021.

In July 2021, we entered into an Open Market Sales AgreementSM, or the ATM Sales Agreement, with Jefferies LLC, which provides that, upon the terms and subject to the conditions and limitations set forth in the ATM Sales Agreement, we may elect to issue and sell, from time to time, shares of our common stock having an aggregate offering price of up to $150.0 million through Jefferies acting as our sales agent or principal. Under the ATM Sales Agreement, Jefferies may sell the shares of common stock by any method permitted by law deemed to be an “at-the-market offering” as defined under the Securities Act of 1933, as amended, in block transactions or in privately-negotiated transactions with our consent. Jefferies will use commercially reasonable efforts to sell the shares of common stock subject to the ATM Sales Agreement from time to time, based upon our instructions (including any price, time or size limits or other customary parameters or conditions that we may impose). We will pay Jefferies a commission of up to 3.0% of the gross sales proceeds of any common stock sold through Jefferies under the ATM Sales Agreement; however, we are not obligated to make any sales of common stock. As of December 31, 2022, we have sold 4,488,573 shares of our common stock under the ATM Sales Agreement at an average price of $25.56 per share for aggregate gross proceeds of $114.7 million ($111.2 million net of commissions and offering expenses).

In January 2022, we completed an underwritten public offering in which we issued 2,500,000 shares of common stock at a price of $20.00 per share and pre-funded warrants to purchase 2,500,000 shares of our common stock at a price of $19.999 per underlying share. In February 2022, the underwriters exercised their option to purchase an additional 750,000 shares of common stock. In aggregate, we received approximately $107.6 million in net proceeds after deducting underwriting discounts and commissions and other offering expenses payable by us, and excluding the exercise of any pre-funded warrants.

In October 2022, we completed an underwritten public offering of 17,812,500 shares of our common stock, which included the full exercise of the underwriters' option to purchase an additional 2,812,500 shares, at a price of $32.00 per share and pre-funded warrants to purchase 3,750,000 shares of our common stock at a price of $31.999 per underlying share. In aggregate, we received $651.6 million in net proceeds after deducting underwriting discounts and commissions and other offering expenses payable by us, and excluding the exercise of any pre-funded warrants.

Future Funding Requirements

Our primary uses of cash are to fund our operations, which consist primarily of research and development expenditures related to our programs and, to a lesser extent, general and administrative expenditures. We anticipate that we will continue to incur significant expenses for the foreseeable future as we continue to advance our vaccine candidates, expand our corporate infrastructure, including the costs associated with being a public company, further our research and development initiatives for our vaccine candidates and scale our laboratory and manufacturing operations. We are subject to all of the risks typically related to the development of new drug candidates, and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business. We anticipate that we will need substantial additional funding in connection with our continuing operations.

We believe that our existing cash, cash equivalents and investments as of the date of this Annual Report on Form 10-K will be sufficient to fund our operating expenses and capital expenditure requirements through at least 12 months from the filing date of this Annual Report on Form 10-K. We have raised substantial capital, however, we will need to raise substantial additional capital to complete development and commercialization of our drug candidates. Until we can generate sufficient revenue from the commercialization of our vaccine candidates or from collaboration agreements with third parties, if ever, we expect to finance our future cash needs through public or private equity or debt financings, third-party (including government) funding and marketing and distribution arrangements, as well as other collaborations, strategic alliances and licensing arrangements, or any combination of these approaches. The sale of equity, pre-funded warrants or convertible debt securities may result in dilution to our

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stockholders and, in the case of preferred equity securities or convertible debt, those securities could provide for rights, preferences or privileges senior to those of our common stock. Debt financings may subject us to covenant limitations or restrictions on our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. Our ability to raise additional funds may be adversely impacted by deteriorating global economic conditions, including higher inflation rates and changes in interest rates, and the recent disruptions to and volatility in the credit and financial markets in the United States and worldwide. There can be no assurance that we will be successful in acquiring additional funding at levels sufficient to fund our operations or on terms favorable or acceptable to us. If we are unable to obtain adequate financing when needed or on terms favorable or acceptable to us, we may be forced to delay, reduce the scope of or eliminate one or more of our research and development programs.

Our future capital requirements will depend on many factors, including:

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the timing, scope, progress, results and costs of research and development, testing, screening, manufacturing, preclinical development and clinical trials;

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the costs of establishing additional manufacturing capacity to meet potential incremental supply requirements following the initial commercial launch of VAX-24;

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our exercise of the Option with Sutro Biopharma;

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the outcome, timing and cost of seeking and obtaining regulatory approvals from the FDA and comparable foreign regulatory authorities, including the potential for such authorities to require that we perform field efficacy studies for our PCV candidates, require more studies than those that we currently expect or change their requirements regarding the data required to support a marketing application;

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the cost of building a sales force in anticipation of any product commercialization;

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the costs of future commercialization activities, including product manufacturing, marketing, sales, royalties and distribution, for any of our vaccine candidates for which we receive marketing approval;

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our ability to maintain existing, and establish new, strategic collaborations, licensing or other arrangements and the financial terms of any such agreements, including the timing and amount of any future milestone, royalty or other payments due under any such agreement;

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any product liability or other lawsuits related to our products;

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the revenue, if any, received from commercial sales, or sales to foreign governments, of our vaccine candidates for which we may receive marketing approval;

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the costs to establish, maintain, expand, enforce and defend the scope of our intellectual property portfolio, including the amount and timing of any payments we may be required to make, or that we

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may receive, in connection with licensing, preparing, filing, prosecuting, defending and enforcing our patents or other intellectual property rights;

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expenses needed to attract, hire and retain skilled personnel;

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the costs of operating as a public company; and

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the impact of the COVID-19 pandemic, which may exacerbate the magnitude of the factors discussed above.

A change in the outcome of any of these or other variables could significantly change the costs and timing associated with the development of our vaccine candidates. Furthermore, our operating plans may change in the future, and we may need additional funds to meet operational needs and capital requirements associated with such change.

Cash Flows

The following table summarizes our cash flows for the periods indicated:

Cash Flows from Operating Activities

Net cash used in operating activities for the year ended December 31, 2022 was $170.6 million, which primarily resulted from a net loss of $223.5 million, partially offset by non-cash charges of $40.2 million and a net change in operating assets and liabilities of $12.7 million. Non-cash charges primarily consisted of $23.7 million in stock-based compensation, $8.0 million in non-cash payments for the acquired manufacturing rights, $6.6 million in amortization of right-of-use, or ROU, assets and $2.6 million in depreciation and amortization. The net change in operating assets and liabilities of $12.7 million was primarily due to increases in cash flows from accrued expenses of $7.2 million, accrued payable of $2.9 million and accrued manufacturing expenses of $3.8 million, partially offset by a decrease in cash flows from accrued compensation of $2.3 million.

Net cash used in operating activities for the year ended December 31, 2021 was $121.4 million, which primarily resulted from a net loss of $100.1 million and a net change in operating assets and liabilities of $37.0 million, partially offset by non-cash charges of $15.7 million. The net change in operating assets and liabilities of $37.0 million was primarily due to decreases in cash flows due to operating lease liabilities of $12.9 million resulting from leasehold improvements costs applied against such liabilities upon the commencement of our San Carlos office lease in December 2021; accounts payable of $12.5 million resulting primarily from the payment of deferred Lonza payables in December 2021; accrued manufacturing expenses of $8.6 million resulting from timing of payments; and prepaid and other current assets of $7.4 million related to a receivable for reimbursement of tenant improvement allowance and prepayments on various contracts, including repairs and maintenance, production of critical raw materials, research and clinical trial preparation. These changes were partially offset by increases in cash flows due to accrued expenses of $4.6 million primarily related to costs associated with the manufacture of extract in connection with our relationship with Sutro Biopharma. Non-cash charges consisted of $10.7 million in stock-based compensation expense, $1.8 million in depreciation and amortization, $1.7 million in amortization of operating lease ROU assets and $1.4 million in net amortization of premiums on investments.

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Net cash used in operating activities for the year ended December 31, 2020 was $46.6 million, which primarily resulted from a net loss of $89.2 million, partially offset by a net change in operating assets and liabilities of $35.3 million and non-cash charges of $7.3 million. The net change in operating assets and liabilities of $35.3 million was primarily due to increases in accounts payable of $26.1 million resulting from the deferral of completion payments until April 2021 in accordance with our contract with Lonza, accrued manufacturing expenses of $7.2 million related to outsourced manufacturing activities and accrued expenses of $2.2 million related primarily to increases in contract research services related to the VAX-24 program. Non-cash charges primarily consisted of $5.4 million in stock-based compensation expense, $1.4 million in depreciation and amortization and $0.3 million in asset impairment charges.

Cash Flows from Investing Activities

Cash from investing activities for the year ended December 31, 2022 was $74.6 million, which related primarily to $168.7 million in maturities of investments and $14.5 million in sales of investments, partially offset by $102.7 million in purchases of investments and $5.8 million in purchases of lab equipment and furniture and fixtures.

Cash used in investing activities for the year ended December 31, 2021 was $212.3 million, which related primarily to $336.3 million in purchases of investments and $6.6 million in purchases of lab equipment and furniture and fixtures, partially offset by $100.5 million in maturities of investments and $30.1 million in sales of investments.

Cash used in investing activities for the year ended December 31, 2020 was $1.1 million which related primarily to purchases of lab equipment and leasehold improvements.

Cash Flows from Financing Activities

Cash provided by financing activities for the year ended December 31, 2022 was $861.5 million, which primarily consisted of net proceeds from the follow-on offerings in the first and fourth quarters of 2022 of $759.2 million, net proceeds from shares issued under our ATM Sales Agreement of $97.3 million and proceeds from exercises of common stock options of $4.9 million.

Cash provided by financing activities for the year ended December 31, 2021 was $17.8 million, which primarily consisted of net proceeds from shares issued under our ATM Sales Agreement of $13.9 million and proceeds from exercises of common stock options of $3.0 million.

Cash provided by financing activities for the year ended December 31, 2020 was $374.9 million, which primarily consisted of net proceeds of $264.0 million from our IPO and $109.9 million from the issuance of our Series D redeemable convertible preferred stock.

Contractual Obligations and Commitments

Our material cash requirements include the following contractual and other obligations.

Leases

We have operating lease agreements for our office spaces. As of December 31, 2022, we had lease payment obligations totaling $20.6 million, of which $6.7 million is payable within one year.

Option Agreement

Pursuant to the Option Agreement, we and Sutro Biopharma have agreed to negotiate the terms and conditions of the Form Definitive Agreement. Within five business days after we and Sutro Biopharma mutually

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agree in writing upon the Form Definitive Agreement, we have agreed to pay Sutro Biopharma $5.0 million. Additionally, in the event that we elect to exercise the Option, we would pay Sutro Biopharma an aggregate Option exercise price of $75.0 million in cash in two installments and, upon the occurrence of certain regulatory milestones, certain additional milestone payments totaling up to $60.0 million in cash. In the event that we undergo a change of control, certain rights and payments may be accelerated.

Purchase Obligations

We have certain payment obligations under various license agreements. Under these agreements, we are required to make milestone payments upon successful completion and achievement of certain intellectual property, clinical, regulatory and sales milestones. The payment obligations under the license agreements are contingent upon future events such as our achievement of specified development, clinical, regulatory and commercial milestones, and we will be required to make development milestone payments and royalty payments in connection with the sale of products developed under these agreements. As the achievement and timing of these future milestone payments are not probable or estimable, such amounts have not been included in our balance sheets as of December 31, 2022 or December 31, 2021.

We enter into agreements in the normal course of business with CMOs and other vendors for manufacturing services and raw materials purchases. We rely on several third-party manufacturers for our manufacturing requirements. As of December 31, 2022, we had the following amounts of non-cancelable purchase commitments related to manufacturing services and raw materials purchased due to our key manufacturing partners. These amounts represent our minimum contractual obligations, including termination fees. If we terminate certain firm orders with our key manufacturing partners, we will be required to pay for the manufacturing services scheduled or raw materials purchased under our arrangements. The actual amounts we pay in the future to the vendors under such agreements may differ from the purchase order amounts.

Critical Accounting Policies and Significant Judgments and Estimates

Our management’s discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses and the disclosure of contingent assets and liabilities in our financial statements. On an ongoing basis, we evaluate our estimates and judgments, including those related to accrued expenses, stock-based compensation and leases. We base our estimates on historical experience, known trends and events and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

While our significant accounting policies are described in the notes to our financial statements included elsewhere in this Annual Report on Form 10-K, we believe that the following critical accounting policies are most important to understanding and evaluating our reported financial results:

Accrued Research and Development Expenses

We have entered into various agreements with CMOs and CROs. As part of the process of preparing our financial statements, we are required to estimate our accrued research and development expenses, including

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accrued manufacturing expenses, as of each balance sheet date. This process involves reviewing open contracts and purchase orders, communicating with our personnel and third parties to identify services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of the actual cost. We make estimates of our accrued research and development expenses as of each balance sheet date based on facts and circumstances known to us at that time. We periodically confirm the accuracy of our estimates with the service providers and make adjustments, if necessary. The significant estimates in our accrued research and development expenses include the costs incurred for services performed by our vendors in connection with research and development activities for which we have not yet been invoiced.

We accrue for costs related to research and development activities based on our estimates of the services received and efforts expended pursuant to quotes and contracts with vendors, including CMOs and CROs, that conduct research, development and manufacturing on our behalf. The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows. There may be instances in which payments made to our vendors will exceed the level of services provided and result in a prepayment of the research and development expense. Advance payments for goods and services that will be used in future research and development activities are expensed when the activity has been performed or when the goods have been received. We make significant judgments and estimates in determining accrued research and development liabilities as of each reporting period based on the estimated time period over which services will be performed and the level of effort to be expended. If the actual timing of the performance of services or the level of effort varies from our estimate, we adjust the accrual or prepaid expense accordingly.

Although we do not expect our estimates to be materially different from amounts actually incurred, if our estimates of the status and timing of services performed differ from the actual status and timing of services performed, it could result in us reporting amounts that are too high or too low in any particular period. To date, there have been no material differences between our estimates of such expenses and the amounts actually incurred.

Stock-Based Compensation Expense

Stock-based compensation expense related to awards to employees is measured at the grant date based on the fair value of the award. The fair value of the award that is ultimately expected to vest is recognized as expense on a straight-line basis over the requisite service period, which is generally the vesting period, net of the impact of actual forfeitures recorded in the period in which they occur.

Stock-based compensation expense related to awards to non-employees is recognized based on the then-current fair value at each measurement date over the associated service period of the award, which is generally the vesting term, using the straight-line method. The fair value of non-employee stock options is estimated using the Black-Scholes valuation model with assumptions generally consistent with those used for employee stock options, with the exception of the expected term, which is the remaining contractual life at each measurement date. Refer to Note 2, “Basis of Presentation and Summary of Significant Accounting Policies,” and Note 10, “Equity Incentive Plans,” to our financial statements for more information on assumptions used in estimating stock-based compensation expense.

The Black-Scholes option-pricing model requires the use of subjective assumptions, such as volatility, which determine the fair value of stock-based awards. The assumptions utilized in the Black-Scholes option-pricing model are as follows:

Expected Term

Expected term represents the period that our stock-based awards are expected to be outstanding. The expected term for employee equity instruments is calculated using the simplified method where there is insufficient historical data about exercise patterns and post-vesting employment termination behavior. The simplified method is based on the vesting period and the contractual term for each grant, or for each vesting-tranche for awards with graded vesting. The mid-point between the vesting date and the maximum contractual

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expiration date is used as the expected term under this method. For awards with multiple vesting-tranches, the time from grant until the mid-points for each of the tranches may be averaged to provide an overall expected term. The expected term for non-employee stock options is the remaining contractual term.

Expected Volatility

Expected volatility is estimated from the average historical volatilities of publicly traded companies within the life sciences industry that are considered to be comparable to our business over a period approximately equal to the expected term for employees’ options and the remaining contractual life for non-employees’ options. We will continue to apply this process until a sufficient amount of historical information regarding the volatility of our own stock price becomes available.

Expected Dividend

We have not paid and do not anticipate paying any dividends in the near future. Accordingly, we have estimated the dividend yield to be zero.

Risk-Free Interest Rate

The risk-free interest rate is based on the U.S. Treasury yield in effect at the time of grant for zero-coupon notes with remaining terms corresponding with the expected term of the option.

Fair Value of Common Stock

For valuations after the completion of our IPO, the fair value of each share of underlying common stock is based on the closing price of our common stock as reported on the Nasdaq Global Select Market on the date of grant.

Leases

We adopted Accounting Standards Update, or ASU 2016-02, Leases (Topic 842) on January 1, 2021, using the modified retrospective transition approach. There was no cumulative-effect adjustment recorded to retained earnings upon adoption.

Under ASC 842, we assess all arrangements that convey the right to control the use of property, plant and equipment, at inception, to determine if it is, or contains, a lease based on the unique facts and circumstances present in the arrangements. In addition, we determine whether leases meet the classification criteria of a finance or operating lease at the lease commencement date considering: (i) whether the lease transfers ownership of the underlying asset to the lessee at the end of the lease term, (ii) whether the lease contains a bargain purchase option, (iii) whether the lease term is for a major part of the remaining economic life of the underlying asset, (iv) whether the present value of the sum of the lease payments and residual value guaranteed by the lessee equals or exceeds substantially all of the fair value of the underlying asset, and (v) whether the underlying asset is of such a specialized nature that it is expected to have no alternative use to the lessor at the end of the lease term. As of December 31, 2022, our lease population consisted only of operating real estate leases.

Once a lease is identified and its classification determined, we recognize a ROU asset, and a corresponding lease liability. Lease liabilities are recorded based on the present value of lease payments over the expected least term. The corresponding ROU asset is measured from the initial lease liability, adjusted by (i) accrued or prepaid rents, (ii) remaining unamortized initial direct costs and lease incentives, and (iii) any impairments of the ROU asset.

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Significant assumptions utilized in recognizing the ROU asset and corresponding lease liabilities included the expected lease term and the incremental borrowing rate. The expected lease term includes both contractual lease periods and, as applicable, extensions of the lease term when we have determined the exercise of the option to extend is reasonably certain to occur. The incremental borrowing rate was utilized to discount lease payments over the expected term given our operating leases do not provide an implicit rate. We estimated the incremental borrowing rate based on an analysis of corporate bond yields with a credit rating similar to us. The determination of our incremental borrowing rate requires management judgment, including development of a synthetic credit rating and cost of debt, as we currently do not carry any debt. We believe that the estimates used in determining the incremental borrowing rate are reasonable based upon current facts and circumstances.

For additional details regarding the impact of adoption and disclosure, see Note 5, “Leases,” to our financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.

Recently Adopted Accounting Pronouncements

See Note 2, “Basis of Presentation and Summary of Significant Accounting Policies,” to our financial statements for additional information.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and related notes and other financial information included elsewhere in this Annual Report on Form 10-K. This discussion and analysis contains forward-looking statements based upon our current beliefs, plans and expectations that involve risks, uncertainties and assumptions, such as statements regarding our plans, objectives, expectations, intentions and beliefs. Our actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under the section titled “Risk Factors” and elsewhere in this Annual Report on Form 10-K. You should carefully read the “Risk Factors” section of this Annual Report on Form 10-K to gain an understanding of the important factors that could cause actual results to differ materially from our forward-looking statements. Please also see the section titled “Special Note Regarding Forward-Looking Statements.”

Overview

We are a clinical-stage vaccine innovation company engineering high-fidelity vaccines to protect humankind from the consequences of bacterial diseases. We are developing broad-spectrum conjugate and novel protein vaccines to prevent or treat bacterial infectious diseases. We are re-engineering the way highly complex vaccines are made through modern synthetic techniques, including advanced chemistry and the XpressCF cell-free protein synthesis platform, exclusively licensed from Sutro Biopharma, Inc. Unlike conventional cell-based approaches, our system for producing difficult-to-make proteins and antigens is intended to accelerate our ability to efficiently create and deliver high-fidelity vaccines with enhanced immunological benefits. Our pipeline includes pneumococcal conjugate vaccine, or PCV, candidates that we believe are among the most broad-spectrum PCV candidates currently in development, targeting the approximately $7 billion global pneumococcal vaccine market. Our lead vaccine candidate, VAX-24, is a 24-valent, broad-spectrum investigational PCV being developed for the prevention of invasive pneumococcal disease, or IPD, and pneumonia. On January 6, 2022, we announced that the U.S. Food and Drug Administration, or FDA, cleared our investigational new drug, or IND, application for VAX-24. On February 23, 2022, we announced the initiation of our Phase 1/2 clinical proof-of-concept study in adults aged 18 to 64. We expect to announce topline safety, tolerability and immunogenicity results from this study by the end of 2022. Pending the successful completion of the Phase 1 portion of this study, we expect to begin enrollment in a separate Phase 2 study in healthy adults aged 65 and older and to announce topline safety, tolerability and immunogenicity results from this Phase 2 study in the first half of 2023. We also anticipate submitting our first VAX-24 pediatric IND application to the FDA in the first half of 2023, subject to a pre-IND meeting with the FDA and successful topline results from the VAX-24 Phase 1/2 study in adults aged 18 to 64. Our second PCV candidate, VAX-XP, leverages our scalable and modular platform and builds on the technical proof of concept established by VAX-24 and is designed to expand the breadth of coverage to greater than 30 strains without compromising immunogenicity due to carrier suppression. In addition to our PCV franchise, we are developing a novel conjugate vaccine candidate for Group A Strep and a novel protein vaccine candidate targeting the keystone pathogen responsible for periodontitis.

Since January 1, 2021, key developments affecting our business include the following:

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Completed the Manufacture of VAX-24 Drug Product: In the fourth quarter of 2021, we completed all steps in the manufacturing process, including formulation, fill and finish, along with the testing and release, for the VAX-24 drug product. This achievement led to the submission of the VAX-24 IND application to the FDA before the end of 2021.

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Dosed First Participants in VAX-24 Phase 1/2 Clinical Study: Following the early January 2022 clearance of the VAX-24 IND application, we initiated the Phase 1/2 clinical study of VAX-24, a 24-valent PCV candidate designed to prevent IPD and pneumonia in adults. The VAX-24 clinical proof-of-concept study is a randomized, observer-blind, dose-finding, controlled study designed to evaluate the safety, tolerability and immunogenicity of VAX-24 in healthy adults. The Phase 1 portion of the study will evaluate the safety and tolerability of a single injection of VAX-24 at three dose levels and compared to Prevnar 20 in approximately 64 healthy adults 18 to 49 years of age. The Phase 2 portion will evaluate the safety, tolerability and immunogenicity of a

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single injection of VAX-24 at three dose levels and compared to Prevnar 20 in approximately 800 healthy adults 50 to 64 years of age. The prespecified immunogenicity endpoints of the Phase 2 portion of the study include an assessment of the induction of antibody responses, using immunoglobulin G (IgG) and opsonophagocytic activity (OPA), at each of the VAX-24 doses and compared to Prevnar 20 and, for the additional four serotypes contained in VAX-24 and Pneumovax 23 but not in Prevnar 20, the four-fold rise in antibody titers.

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Completed Successful $115 Million Follow-On Financing: In the first quarter of 2022, we completed an underwritten public offering of 3,250,000 shares of our common stock, which included the full exercise of the underwriters’ option to purchase additional shares, and pre-funded warrants to purchase 2,500,000 shares of common stock. The shares of common stock were sold at a public offering price of $20.00 per share, and the pre-funded warrants were sold at a public offering price of $19.999 per underlying share. The aggregate gross proceeds to us from the offering were $115.0 million, before deducting underwriting discounts and commissions and other estimated offering expenses payable by us, and excluding the exercise of any pre-funded warrants.

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Advanced and Presented Preclinical Data for VAX-XP Program: We have continued to advance VAX-XP, our PCV candidate with an expanded breadth of coverage of greater than 30 strains. During IDWeek 2021, we presented findings from a preclinical study that evaluated the immunogenicity of VAX-XP, which showed VAX-XP exhibited conjugate-like immune responses for all 31 serotypes, as demonstrated by IgG immune responses 14 days after both an initial and booster dose that were superior to polysaccharide-based vaccines and comparable to Prevnar 13. Additionally, all serotypes in VAX-XP elicited a T-cell dependent immune response as demonstrated by the increase in IgG titers post-boost.

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Initiated VAX-A1 IND-Enabling Activities. We continue to advance development of VAX-A1, a novel conjugate vaccine designed to prevent infections caused by Group A Streptococcus, or Strep, bacteria. Following the nomination of our final VAX-A1 vaccine candidate in the first quarter of 2021, we initiated IND-enabling studies in the second half of 2021.

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Strengthened Leadership Team and Board of Directors with Key Appointments: During 2021, we added several key leaders to our executive team and Board of Directors. In October, Harp Dhaliwal joined as Senior Vice President of Commercial Manufacturing and Supply Chain, and we appointed Dr. Carlos Paya, who serves as the Board Chair, and Dr. Michael Kamarck to our board of directors. This followed the September 2021 board appointments of Annie Drapeau and Teri Loxam. These accomplished industry leaders have deep experience across the biopharmaceutical and vaccine industries and will provide additional skills and expertise as we advance and scale our business.

Since our inception in November 2013, we have devoted substantially all of our resources to performing research and development, undertaking preclinical studies and enabling manufacturing activities in support of our product development efforts, acquiring and developing our technology and vaccine candidates, organizing and staffing our company, performing business planning, establishing our intellectual property portfolio and raising capital to support and expand such activities. We do not have any products approved for sale and have not generated any revenue from product sales. To date, we have financed our operations primarily with proceeds from the sales of our redeemable convertible preferred stock, common stock and pre-funded warrants to purchase common stock. We will continue to require additional capital to develop our vaccine candidates and fund operations for the foreseeable future. Accordingly, until such time as we can generate significant revenue from sales of our vaccine candidates, if ever, we expect to finance our cash needs through public or private equity or debt financings, third-party (including government) funding and marketing and distribution arrangements, as well as other collaborations, strategic alliances and licensing arrangements, or any combination of these approaches.

We have incurred net losses in each year since inception and expect to continue to incur net losses in the foreseeable future. Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year, depending in

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large part on the timing of our preclinical studies, clinical trials and manufacturing activities, and our expenditures on other research and development activities. Our net losses were $100.1 million and $89.2 million for the years ended December 31, 2021 and 2020, respectively. As of December 31, 2021, we had an accumulated deficit of $298.6 million and cash, cash equivalents and investments of $273.1. million, We believe our cash, cash equivalents and investments will be sufficient to fund our operating expenses and capital expenditure requirements through at least the next 12 months from the filing date of this Annual Report on Form 10-K.

We do not expect to generate any revenue from commercial product sales unless and until we successfully complete development and obtain regulatory approval for one or more of our vaccine candidates, which we expect will take a number of years. We expect our expenses will increase substantially in connection with our ongoing activities, as we:

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advance our vaccine candidates through preclinical studies and clinical trials;

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require the scale-up of our manufacturing capabilities;

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require the manufacture of supplies for our preclinical studies and clinical trials, in particular our PCV candidates, VAX-24 and VAX-XP;

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pursue regulatory approval of our vaccine candidates;

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hire additional personnel;

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operate as a public company;

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acquire, discover, validate and develop additional vaccine candidates; and

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obtain, maintain, expand and protect our intellectual property portfolio.

We rely and will continue to rely on third parties to conduct our preclinical studies and clinical trials and for manufacturing and supply of our vaccine candidates. We have no internal manufacturing capabilities, and we will continue to rely on third parties, of which the main suppliers are single-source suppliers, for our preclinical and clinical trial materials. Given our stage of development, we do not yet have a marketing or sales organization or commercial infrastructure. Accordingly, if we obtain regulatory approval for any of our vaccine candidates, we also would expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution.

Because of the numerous risks and uncertainties associated with vaccine development, we are unable to predict the timing or amount of increased expenses or when or if we will be able to achieve or maintain profitability. Even if we are able to generate revenue from the sale of our vaccines, we may not become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and may be forced to reduce our operations.

Certain Significant Relationships

Sutro Biopharma

Vaxcyte was formed through its relationship with Sutro Biopharma, in 2013 by our co-founders with the goal of utilizing Sutro Biopharma’s proprietary XpressCF platform for protein synthesis in the field of vaccines addressing infectious diseases.

In addition to receiving funding, we entered into a license agreement with Sutro Biopharma, or the Sutro License, on August 1, 2014. The Sutro License was amended on October 12, 2015 and again on May 9, 2018 and May 29, 2018. Under this license, we received an exclusive, worldwide, royalty-bearing, sublicensable license under Sutro Biopharma’s patents and know-how relating to cell-free expression of proteins to (i) research, develop, use,

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sell, offer for sale, export, import and otherwise exploit specified vaccine compositions, such rights being sublicensable, for the treatment or prophylaxis of infectious diseases, excluding cancer vaccines, and (ii) manufacture, or have manufactured by an approved contract manufacturing organization, such vaccine compositions from extracts supplied by Sutro Biopharma pursuant to the Sutro Biopharma Supply Agreement (as described below). We are obligated to use commercially reasonable efforts to develop, obtain regulatory approval for and commercialize the vaccine compositions. In consideration of the rights granted under the Sutro License, we are obligated to pay Sutro Biopharma a 4% royalty on worldwide aggregate net sales of vaccine products for human health and a 2% royalty on such net sales of vaccine products for animal health. Such royalty rates are subject to specified reductions, including standard reductions for third-party payments and for expiration of relevant patent claims. Royalties are payable on a vaccine composition-by-vaccine composition and country-by-country basis until the later of expiration of the last valid claim in the licensed patents covering such vaccine composition in such country and ten years after the first commercial sale of such vaccine composition. In addition, we are obligated to pay Sutro Biopharma a percentage in the low-double digits of any net sublicensing revenue received for sublicense agreements executed before July 2020. Our obligation to pay sublicense fees to Sutro Biopharma expired in July 2020.

In May 2018, we entered into a supply agreement, which we refer to as the Sutro Biopharma Supply Agreement, with Sutro Biopharma pursuant to which we purchase from Sutro Biopharma extract and custom reagents for use in manufacturing non-clinical and certain clinical supply of vaccine compositions utilizing the technology licensed under the Sutro License at prices not to exceed a specified percentage above Sutro Biopharma’s fully burdened manufacturing cost. If any extracts or custom reagents do not meet the specifications and warranties provided, then we will not have an obligation to pay for the non-conforming product, and Sutro Biopharma will be obligated to replace the non-conforming product within the shortest possible time with conforming product at our cost. The term of the Sutro Biopharma Supply Agreement is from execution until the later of July 31, 2021 and the date the parties enter into and commence activities under the supply agreement unless extended through a subsequent supply agreement for the supply of extract and custom reagents for vaccine compositions for Phase 3 and commercial uses as contemplated in the Supply Agreement. In February 2021, we entered into an amendment to the Sutro Biopharma Supply Agreement and extended the term to July 31, 2022.

For additional details regarding our relationship with Sutro Biopharma, see Note 14, “Related Party Transactions,” to our financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.

Lonza

In October 2016, we entered into a development and manufacturing services agreement, as amended, with Lonza Ltd., or the Lonza DMSA, pursuant to which Lonza Ltd., or Lonza, is obligated to perform services including manufacturing process development and the manufacture of components for VAX-24, including the polysaccharide antigens, our proprietary eCRM protein carrier and conjugated drug substances.

In September 2017, we and Lonza agreed to defer the completion payments for any stage that commenced after December 31, 2019 or had not been completed by December 31, 2019 until the earlier of the completion of all IND-enabling activities or December 31, 2020. In March 2020, Lonza agreed to defer the completion payments until the earlier of the completion of all IND-enabling activities or April 30, 2021. In April 2021, Lonza further agreed to defer 50% of the completion payments until the earlier of the completion of all IND-enabling activities or December 31, 2021.

In June 2018, we entered into a letter agreement with Lonza, pursuant to which we agreed to certain terms for potential future payments in shares of our common stock as partial satisfaction of future obligations to Lonza. Specifically, we and Lonza agreed that the initial pre-IND cash payments made by us to Lonza would be subject to a specified dollar cap, which we refer to as the Initial Cash Cap. After the Initial Cash Cap has been reached, then at our election, we would have the option to make any further pre-IND payments owed to Lonza in cash, in shares of our common stock at then market prevailing prices, or a combination of both, provided that (i) Lonza had the right to elect to receive up to 25% of pre-IND payments in shares of our common stock, up to a maximum of $2.5 million, and (ii) we had the right to issue no more than $10.0 million of pre-IND payments in shares of our common stock. In April 2021, we reached the Initial Cash Cap and notified Lonza that we would be exercising our option to issue approximately $10.0 million in shares of our common stock as payment for a portion

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of pre-IND payments due April 30, 2021. In June 2021, we issued 399,680 shares of our common stock to Lonza at a price of $25.02 per share to pay for $10.0 million of the pre-IND payments due April 30, 2021.

In October 2018, we entered into a second development and manufacturing services agreement with Lonza, or the Lonza 2018 DMSA, and together with the Lonza DMSA, or the Lonza Agreements, pursuant to which Lonza is obligated to perform services including manufacturing process development and the manufacture and supply of VAX-24 finished drug product.

Under the Lonza Agreements, we will pay Lonza agreed upon fees for Lonza’s performance of manufacturing services, and we will reimburse Lonza for its out-of-pocket costs associated with purchasing raw materials, plus a customary handling fee. Each Lonza Agreement is managed by a steering committee and any dispute at the steering committee will be resolved by senior executives of the parties.

For additional details regarding our relationship with Lonza, see Note 6, “Commitments and Contingencies,” to our financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.

Impact of COVID-19

We are continuing to closely monitor the impact of the global COVID-19 pandemic on our business and are taking proactive efforts designed to protect the health and safety of our employees and to maintain business continuity. We believe that the measures we have implemented and continue to implement are appropriate, and we will continue to monitor and seek to comply with guidance from governmental authorities and adjust our activities as appropriate. Based on guidance issued by federal, state and local authorities, we transitioned to a remote work model for our non-lab based employees in March 2020, while maintaining essential in-person laboratory functions in order to advance key research and development initiatives, supported by the implementation of updated onsite safety procedures, including routine testing of employees. In 2021, we began to allow non-lab employees who have been fully vaccinated to return to the office on a voluntary and limited basis. In addition, we have recently implemented requirements for employees to obtain COVID-19 booster shots.

In particular, the COVID-19 pandemic slowed raw material supply chains and travel restrictions delayed the qualification of key analytical equipment used in manufacturing and curtailed in-person CMO oversight of manufacturing, affecting our manufacturing processes. As the pandemic continues, we could see an additional impact on our ability to advance our programs, obtain supplies from our contract manufacturers or interact with regulators, ethics committees or other important agencies due to limitations in regulatory authority, employee resources or otherwise. In any event, if the COVID-19 pandemic continues and persists for an extended period of time, we could experience significant disruptions to our development timelines, which would adversely affect our business, financial condition, results of operations and growth prospects.

In addition, while the potential economic impact brought by, and the duration of, the COVID-19 pandemic may be difficult to assess or predict, the pandemic could result in significant and prolonged disruption of global financial markets, reducing our ability to access capital, which could in the future negatively affect our liquidity. In addition, a recession or market correction resulting from the continued spread of COVID-19 could materially affect our business and the potential value of our common stock.

The extent of the impact of the COVID-19 pandemic on our development and regulatory efforts, our ability to raise sufficient additional capital on acceptable terms, if at all, and the value of and market for our common stock will depend on future developments that are highly uncertain and cannot be predicted with confidence at this time, such as the ultimate duration of the pandemic, travel restrictions, quarantines, social distancing and business closure requirements in the United States and in other countries, and the effectiveness of actions taken globally to contain and treat COVID-19. For additional information about risks and uncertainties related to the COVID-19 pandemic that may impact our business, financial condition and results of operations, see the section titled “Risk Factors.”

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Components of Results of Operations

Operating Expenses

Research and Development

Research and development expenses represent costs incurred in performing research, development and manufacturing activities in support of our own product development efforts and include personnel-related costs (such as salaries, employee benefits and stock-based compensation) for our personnel in research and development functions; costs related to acquiring, developing and manufacturing supplies for preclinical studies, clinical trials and other studies, including fees paid to contract manufacturing organizations; costs and expenses related to agreements with contract research organizations, investigative sites and consultants to conduct non-clinical and preclinical studies and clinical trials; professional and consulting services costs; research and development consumables costs; laboratory supplies and equipment costs; and facility and other allocated costs.

Research and development expenses are expensed as incurred. Non-refundable advance payments for services that will be used or rendered for future research and development activities are recorded as prepaid expenses and recognized as expenses as the related services are performed. We do not allocate our costs by vaccine candidates, as our vaccine candidates are at an early stage of development and our research and development expenses include internal costs, such as payroll and other personnel expenses, which are not tracked by vaccine candidate. In particular, with respect to internal costs, several of our departments support multiple vaccine candidate research and development programs.

We expect our research and development expenses to increase substantially in absolute dollars for the foreseeable future as we advance our vaccine candidates into and through preclinical studies and clinical trials, scale up our manufacturing operations, pursue regulatory approval of our vaccine candidates and expand our pipeline of vaccine candidates. The process of conducting the necessary preclinical and clinical research and developing the necessary manufacturing capabilities to obtain regulatory approval is costly and time-consuming. The actual probability of success for our vaccine candidates may be affected by a variety of factors, including the safety and efficacy of our vaccine candidates, early clinical data, investment in our clinical programs, competition, manufacturing capability and commercial viability. We may never succeed in achieving regulatory approval for any of our vaccine candidates. As a result of the uncertainties discussed above, we are unable to determine the duration and completion costs of our research and development projects or if, when and to what extent we will generate revenue from the commercialization and sale of our vaccine candidates.

We accrue for costs related to research and development activities based on our estimates of the services received and efforts expended pursuant to quotes and contracts with vendors, including contract manufacturing organizations, or CMOs, that conduct research and development on our behalf. The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows. There may be instances in which payments made to our vendors exceed the level of services provided and result in a prepayment of the research and development expense. Advance payments for goods and services to be used in future research and development activities are expensed when the activity has been performed or when the goods have been received. We make significant judgments and estimates in determining accrued research and development liabilities as of each reporting period based on the estimated time period over which services will be performed and the level of effort to be expended. If the actual timing of the performance of services or the level of effort varies from our estimate, we adjust the accrual or prepaid expense accordingly.

Although we do not expect our estimates to be materially different from amounts actually incurred, if our estimates of the status and timing of services performed differ from the actual status and timing of services performed, it could result in us reporting amounts that are too high or too low in any particular period.

Our research and development costs may vary significantly based on factors such as:

•
the costs and timing of our chemistry, manufacturing and controls, or CMC, activities, including fulfilling GMP-related standards and compliance, and identifying and qualifying a second supplier;

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•
the costs related to raw materials estimates from our third-party manufacturing and supply partners;

•
the cost of clinical trials of our vaccine candidates being greater than we anticipate;

•
changes in the standard of care on which a clinical development plan was based, which may require new or additional trials;

•
the number of sites included in the trials;

•
the countries in which the trials are conducted;

•
delays in adding a sufficient number of trial sites and recruiting suitable volunteers to participate in our clinical trials;

•
the number of subjects that participate in the trials;

•
the number of doses that subjects receive;

•
subjects dropping out of a study or lost in follow-up;

•
potential additional safety monitoring requested by regulatory agencies;

•
the duration of subject participation in the trials and follow-up;

•
the cost and timing of manufacturing our vaccine candidates;

•
the phase of development of our vaccine candidates; and

•
the efficacy and safety profile of our vaccine candidates.

General and Administrative

General and administrative expenses consist primarily of costs and expenses related to personnel (including salaries, employee benefits and stock-based compensation) in our executive, legal, finance and accounting, human resources and other administrative functions; legal services, including relating to intellectual property and corporate matters; accounting, auditing, consulting and tax services; insurance; and facility and other allocated costs not otherwise included in research and development expenses. We expect our general and administrative expenses to increase substantially in absolute dollars for the foreseeable future as we increase our headcount to support our continued research and development activities and grow our business. We also anticipate that we will incur increased expenses as a result of operating as a public company, including expenses related to audit, legal, regulatory and tax-related services associated with maintaining compliance with SEC rules and regulations and those of any national securities exchange on which our securities are traded, additional insurance expenses, investor relations activities and other administrative and professional services.

Other Income (Expense), Net

Other income (expense), net includes interest expense incurred on our capital leases for lab equipment, interest income earned from our cash and cash equivalents, grant income, foreign currency transaction gains (losses) related to our Swiss Franc cash and liability balances and changes in the fair value of our redeemable convertible preferred stock tranche liability (see Note 2, “Basis of Presentation and Summary of Significant Accounting Policies,” Note 3, “Fair Value Measurements and Fair Value of Financial Instruments,” and Note 7, “Redeemable Convertible Preferred Stock,” to our financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for more detail).

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Grant Income

In July 2019, we received a cost-reimbursement research award from Combating Antibiotic Resistant Bacteria Biopharmaceutical Accelerator, or CARB-X, a public-private partnership funded under a Cooperative Agreement from Assistant Secretary for Preparedness and Response/Biomedical Advanced Research and Development Authority and by awards from Wellcome Trust, Germany’s Federal Ministry of Education and Research, the United Kingdom Global Antimicrobial Resistance Innovation Fund and the Bill & Melinda Gates Foundation. In connection with this funding, we entered into a cost-reimbursement sub-award agreement with the Trustees of Boston University, the administrator of the program, or the CARB-X agreement. CARB-X awarded us up to $1.6 million in initial funding to advance the development of a universal vaccine to prevent infections caused by Group A Strep Bacteria. In July 2020, the CARB-X agreement was amended with the initial funding amount increased from $1.6 million to $2.7 million. In December 2020, we reached the maximum CARB-X funding limit for this initial funding period, and subsequently submitted our funding proposal to CARB-X for the next period under our agreement. In April 2021, we received approval for the next phase of CARB-X development and executed the cost-reimbursement sub-award agreement with the Trustees of Boston University in August 2021. Pursuant to the CARB-X agreement, the award committed additional funding of $3.2 million for IND-enabling activities and total potential funding of up to $29.7 million (including the current $3.2 million award and the prior $2.7 million award) upon the achievement of future VAX-A1 development milestones. In January 2022, CARB-X revised the parameters for the contribution of CARB-X funding and implemented maximum funding levels for all grant recipients. As a result, our total funding available upon achievement of development milestones through Phase 1 human clinical trials was revised from $29.7 million to $13.9 million (inclusive of the $5.9 million awarded to date). Separately, the National Institute of Health, or NIH, awarded us up to $0.5 million in April 2021 to advance the development of a vaccine against Shigella infection. Grant income pursuant to our award agreements is recognized as we incur and pay qualifying expenses over the periods of the awards. We recognized $1.6 million, $2.5 million and $0.2 million in grant income for funding research and development under these awards during the years ended December 31, 2021, 2020 and 2019, respectively. Grant income is included as a component of Other income (expense), net in the statements of operations.

Results of Operations

Comparison of the Years Ended December 31, 2021 and 2020

The following table summarizes our results of operations for the periods presented:

* not meaningful

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Operating Expenses

Research and Development Expenses

The following table summarizes our research and development expenses for the periods presented:

(1)
Includes expenses for third-party manufacturing and outsourced contract services, including preclinical studies and outsourced assays.

(2)
Includes travel-related expenses, other miscellaneous office expenses and warrant expense.

Research and development expenses increased by $4.8 million, or 6.6%, in 2021 compared to 2020. The increase was primarily attributable to increases in (i) personnel-related expenses of $7.5 million related to the increase in the number of employees to support our research and development activities and higher stock-based compensation expense, (ii) facility related and other allocated expenses of $5.1 million resulting from increases in rent and lease expense as well as expenses allocated to research and development, (iii) research and development consumables of $4.6 million related to higher critical raw materials expenses and (iv) laboratory supplies and equipment expenses of $1.4 million mainly related to our VAX-24 and VAX-A1 programs. These increases were partially offset by a decrease of $13.9 million in product and clinical development expenses, which represented the net impact of a decrease in outsourced manufacturing expenses related to our VAX-24 program and an increase in such expenses related to our VAX-XP program.

General and Administrative Expenses

General and administrative expenses increased by $9.2 million, or 57.7%, in 2021 compared to 2020. The increase was mainly due to increases of $7.0 million in personnel-related costs related to higher stock-based compensation expense resulting from an increase in the number of options granted during the year and growth in the number of employees in our general and administrative functions, $1.3 million in professional and consulting services related primarily to compliance activities under the Sarbanes-Oxley Act of 2002, as amended, or the Sarbanes-Oxley Act, and technology infrastructure enhancements and $1.1 million in directors and officers insurance expense as a result of operating as a public company.

Other Income (Expense), Net

Other income (expense), net increased by $3.2 million, or 887.1%, in 2021 compared to 2020. The increase was mainly due to an increase of $4.0 million in foreign currency gains resulting from the appreciation of the U.S. Dollar against the Swiss Franc in 2021 compared to 2020, partially offset by a decrease of $0.9 million in grant income for the CARB-X program.

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Comparison of the Years Ended December 31, 2020 and 2019

The following table summarizes our results of operations for the periods presented:

* not meaningful

Research and Development Expenses

The following table summarizes our research and development expenses for the periods presented:

(1)
Includes expenses for third-party manufacturing and outsourced contract services, including preclinical studies and outsourced assays.

(2)
Includes travel-related expenses, other miscellaneous office expenses and warrant expense.

Research and development expenses increased by $28.0 million, or, 61.3% in 2020 compared to 2019. The increase was primarily attributable to an increase of $23.1 million in product and clinical development expenses mainly related to our lead vaccine candidate, VAX-24, driven by increases of $18.6 million in outsourced manufacturing activities and $4.5 million in outsourced research services due to the ramp-up of the eCRM and polysaccharide GMP campaigns and conjugation and drug product activities in preparation for our anticipated IND application submission in the first quarter of 2022 and Phase 1/2 clinical study initiation thereafter. The increase in personnel-related expenses of $4.0 million was primarily related to the increase in the number of employees to support our expansion in research and development activities and higher stock-based compensation expense resulting from an increase in the number of options granted during the year and an increase in the fair value of our common stock affecting the valuation of new option grants.

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General and Administrative Expenses

General and administrative expenses increased by $7.5 million, or, 87.4% in 2020 compared to 2019. The increase was mainly due to increases of $3.9 million in personnel-related costs related to higher stock-based compensation expense resulting from an increase in the number of options granted during the year and an increase in the fair value of our common stock affecting the valuation of new option grants, as well as growth in the number of employees in our general and administrative functions, $1.6 million in professional and consulting services resulting from increased legal expenses and consulting costs, and $1.7 million in other expenses primarily due to an increase in directors and officers insurance expense as a result of being a public company.

Other Income (Expense), Net

Other income (expense), net decreased by $3.5 million, or, 90.6% in 2020 compared to 2019. During 2019, we recognized a $3.2 million gain resulting from a change in the fair value of the redeemable convertible preferred stock tranche liability, which was settled in December 2019, and there was no such gain recognized during 2020. Other income (expense), net also decreased due to an increase in foreign currency losses of $2.2 million resulting from the depreciation of the U.S. Dollar against the Swiss Franc. These decreases were partially offset by an increase of $2.2 million in grant income from the CARB-X program, which commenced in July 2019.

Liquidity and Capital Resources

From inception through December 31, 2021, we have incurred losses and negative cash flows from operations and have funded our operations primarily through the issuance of redeemable convertible preferred stock and common stock totaling approximately $583.9 million in aggregate gross proceeds and $559.1 million net of underwriting discounts, commissions and offering expenses. As of December 31, 2021, we had $69.0 million of cash and cash equivalents, $204.1 million in investments and an accumulated deficit of $298.6 million.

On July 2, 2021, we filed a shelf registration statement on Form S-3ASR, or the Shelf Registration Statement, under which we may, from time to time, sell securities in one or more offerings of our common stock, preferred stock, debt securities or warrants. The Shelf Registration Statement became automatically effective upon the filing of the Form S-3ASR on July 2, 2021.

In July 2021, we entered into an Open Market Sales AgreementSM, or the ATM Sales Agreement, with Jefferies LLC, which provides that, upon the terms and subject to the conditions and limitations set forth in the ATM Sales Agreement, we may elect to issue and sell, from time to time, shares of our common stock having an aggregate offering price of up to $150.0 million through Jefferies acting as our sales agent or principal. Under the ATM Sales Agreement, Jefferies may sell the shares of common stock by any method permitted by law deemed to be an “at-the-market offering” as defined under the Securities Act of 1933, as amended, in block transactions or in privately-negotiated transactions with our consent. Jefferies will use commercially reasonable efforts to sell the shares of common stock subject to the ATM Sales Agreement from time to time, based upon our instructions (including any price, time or size limits or other customary parameters or conditions that we may impose). We will pay Jefferies a commission of up to 3.0% of the gross sales proceeds of any common stock sold through Jefferies under the ATM Sales Agreement; however, we are not obligated to make any sales of common stock. As of December 31, 2021, we have sold 567,045 shares of our common stock under the ATM Sales Agreement at an average price of $25.26 per share for aggregate gross proceeds of $14.3 million ($13.9 million net of commissions and offering expenses).

In January 2022, we completed an underwritten public offering in which we issued 2,500,000 shares of common stock and pre-funded warrants to purchase 2,500,000 shares of our common stock, and received approximately $93.5 million in net proceeds, after deducting underwriting discounts and commissions and other estimated offering expenses payable by us. In February 2022, the underwriters exercised their option to purchase an additional 750,000 shares of common stock, and we received approximately $14.1 million in additional net proceeds after deducting underwriting discounts and commissions.

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Future Funding Requirements

Our primary uses of cash are to fund our operations, which consist primarily of research and development expenses related to our programs, general and administrative expenses and capital expenditures. We anticipate that our operating expenses and capital expenditures will increase significantly for the foreseeable future as we continue to advance our current vaccine candidates through research, development and manufacturing, continue our research initiatives to develop new vaccine candidates, scale our laboratory and manufacturing operations and expand our corporate infrastructure, including the costs associated with being a public company. We are subject to all of the risks typically related to the development of new drug candidates, and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business. We anticipate that we will need substantial additional funding in connection with our continuing operations.

We believe that our existing cash, cash equivalents and investments as of the date of this Annual Report on Form 10-K will be sufficient to fund our operating expenses and capital expenditure requirements through at least 12 months from the filing date of this Annual Report on Form 10-K. However, we will need to raise additional capital prior to commencing pivotal trials for any of our vaccine candidates. Until we can generate sufficient revenue from the commercialization of our vaccine candidates or from collaboration agreements with third parties, if ever, we expect to finance our future cash needs through public or private equity or debt financings, third-party (including government) funding and marketing and distribution arrangements, as well as other collaborations, strategic alliances and licensing arrangements, or any combination of these approaches. The sale of equity, pre-funded warrants or convertible debt securities may result in dilution to our stockholders and, in the case of preferred equity securities or convertible debt, those securities could provide for rights, preferences or privileges senior to those of our common stock. Debt financings may subject us to covenant limitations or restrictions on our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. Our ability to raise additional funds may be adversely impacted by deteriorating global economic conditions and the recent disruptions to and volatility in the credit and financial markets in the United States and worldwide resulting from the ongoing COVID-19 pandemic. There can be no assurance that we will be successful in acquiring additional funding at levels sufficient to fund our operations or on terms favorable or acceptable to us. If we are unable to obtain adequate financing when needed or on terms favorable or acceptable to us, we may be forced to delay, reduce the scope of or eliminate one or more of our research and development programs.

Our future capital requirements will depend on many factors, including:

•
the timing, scope, progress, results and costs of research and development, testing, screening, manufacturing, preclinical development and clinical studies and clinical trials, including any impacts related to the COVID-19 pandemic;

•
the outcome, timing and cost of seeking and obtaining regulatory approvals from the FDA and comparable foreign regulatory authorities, including the potential for such authorities to require that we perform field efficacy studies for our PCV candidates, require more studies than those that we currently expect or change their requirements regarding the data required to support a marketing application;

•
the cost of building a sales force in anticipation of any product commercialization;

•
the costs of future commercialization activities, including product manufacturing, marketing, sales, royalties and distribution, for any of our vaccine candidates for which we receive marketing approval;

•
our ability to maintain existing, and establish new, strategic collaborations, licensing or other arrangements and the financial terms of any such agreements, including the timing and amount of any future milestone, royalty or other payments due under any such agreement;

•
any product liability or other lawsuits related to our products;

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•
the revenue, if any, received from commercial sales, or sales to foreign governments, of our vaccine candidates for which we may receive marketing approval;

•
the costs to establish, maintain, expand, enforce and defend the scope of our intellectual property portfolio, including the amount and timing of any payments we may be required to make, or that we may receive, in connection with licensing, preparing, filing, prosecuting, defending and enforcing of any patents or other intellectual property rights;

•
the expenses needed to attract, hire and retain skilled personnel;

•
the costs of operating as a public company; and

•
the impact of the COVID-19 pandemic, which may exacerbate the magnitude of the factors discussed above.

A change in the outcome of any of these or other variables could significantly change the costs and timing associated with the development of our vaccine candidates. Furthermore, our operating plans may change in the future, and we may need additional funds to meet operational needs and capital requirements associated with such change.

Cash Flows

The following table summarizes our cash flows for the periods indicated:

Cash Flows from Operating Activities

Net cash used in operating activities for the year ended December 31, 2021 was $121.4 million, which primarily resulted from a net loss of $100.1 million and a net change in operating assets and liabilities of $37.0 million, partially offset by non-cash charges of $15.7 million. The net change in operating assets and liabilities of $37.0 million was primarily due to decreases in cash flows due to operating lease liabilities of $12.9 million resulting from leasehold improvements costs applied against such liabilities upon the commencement of our San Carlos office lease in December 2021; accounts payable of $12.5 million resulting primarily from the payment of deferred Lonza payables in December 2021; accrued manufacturing expenses of $8.6 million resulting from timing of payments; and prepaid and other current assets of $7.4 million related to a receivable for reimbursement of tenant improvement allowance and prepayments on various contracts, including repairs and maintenance, production of critical raw materials, research and clinical trial preparation. These changes were partially offset by increases in cash flows due to accrued expenses of $4.6 million primarily related to costs associated with the manufacture of extract in connection with our relationship with Sutro Biopharma. Non-cash charges consisted of $10.7 million in stock-based compensation expense, $1.8 million in depreciation and amortization, $1.7 million in amortization of operating lease right-of-use assets and $1.4 million in net amortization of premiums on investments.

Net cash used in operating activities for the year ended December 31, 2020 was $46.6 million, which primarily resulted from a net loss of $89.2 million, partially offset by a net change in operating assets and liabilities of $35.3 million and non-cash charges of $7.3 million. The net change in operating assets and liabilities of $35.3 million was primarily due to increases in accounts payable of $26.1 million resulting from the deferral of completion

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payments until April 2021 in accordance with our contract with Lonza, accrued manufacturing expenses of $7.2 million related to outsourced manufacturing activities and accrued expenses of $2.2 million related primarily to increases in contract research services related to the VAX-24 program. Non-cash charges primarily consisted of $5.4 million in stock-based compensation expense, $1.4 million in depreciation and amortization and $0.3 million in asset impairment charges.

Net cash used in operating activities for the year ended December 31, 2019 was $47.1 million, which primarily resulted from a net loss of $50.3 million and net non-cash charges of $0.8 million, partially offset by a net change in operating assets and liabilities of $3.9 million. Non-cash charges primarily consisted of a $3.2 million decrease in the fair value of our redeemable convertible preferred stock tranche liabilities primarily related to a reduction in the time to maturity during the year and the settlement of the Series C tranche liability in December 2019, partially offset by $1.2 million of depreciation and amortization expense and $1.2 million of stock-based compensation expense. The net change in operating assets and liabilities of $3.9 million was primarily due increases of $4.7 million in accrued liabilities resulting primarily from our increased contract manufacturing activities in 2019 and $0.9 million in accounts payable resulting from timing of billings and payments, partially offset by a $1.1 million increase in prepaid expenses and other current assets, a $0.8 million decrease in accrued compensation due primarily to the timing of the payment of our annual performance bonuses and a $0.7 million in prepaid expenditures mainly related to contract manufacturing activities, contract research services and maintenance contracts.

Cash Flows from Investing Activities

Cash used in investing activities for the year ended December 31, 2021 was $212.3 million, which related primarily to $336.3 million in purchases of investments and $6.6 million in purchases of lab equipment and furniture and fixtures, partially offset by $100.5 million in maturities of investments and $30.1 million in sales of investments.

Cash used in investing activities for the years ended December 31, 2020 and 2019 was $$1.1 million and $1.2 million, respectively, which related primarily to purchases of lab equipment and leasehold improvements.

Cash Flows from Financing Activities

Cash provided by financing activities for the year ended December 31, 2021 was $17.8 million, which primarily consisted of net proceeds from shares issued under our ATM Sales Agreement of $13.9 million, proceeds from exercises of common stock options of $3.0 million and proceeds from shares issued under our employee stock purchase plan of $0.9 million.

Cash provided by financing activities for the year ended December 31, 2020 was $374.9 million, which primarily consisted of net proceeds of $264.0 million from our IPO and $109.9 million from the issuance of our Series D redeemable convertible preferred stock.

Cash provided by financing activities for the year ended December 31, 2019 was $41.6 million, which primarily consisted of net proceeds from the issuance of the second tranche of our Series C redeemable convertible preferred stock of $42.5 million, partially offset by deferred offering costs of $1.1 million.

Contractual Obligations and Commitments

Our material cash requirements include the following contractual and other obligations.

Leases

We have operating lease agreements for our office spaces. As of December 31, 2021, we had lease payment obligations totaling $20.3 million.

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Purchase Obligations

We have certain payment obligations under various license agreements. Under these agreements, we are required to make milestone payments upon successful completion and achievement of certain intellectual property, clinical, regulatory and sales milestones. The payment obligations under the license agreements are contingent upon future events such as our achievement of specified development, clinical, regulatory and commercial milestones, and we will be required to make development milestone payments and royalty payments in connection with the sale of products developed under these agreements. As the achievement and timing of these future milestone payments are not probable or estimable, such amounts have not been included in our balance sheets as of December 31, 2021 or December 31, 2020. See Note 14, “Related Party Transactions,” to our financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.

We enter into agreements in the normal course of business with vendors for preclinical, clinical and non-clinical studies, manufacturing and supply of our preclinical and clinical materials and for other services and products used for operating purposes. These contracts are generally cancelable following a certain period after written notice, and therefore, we believe that our non-cancelable obligations under these agreements are not material.

Critical Accounting Policies and Significant Judgments and Estimates

Our management’s discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses and the disclosure of contingent assets and liabilities in our financial statements. On an ongoing basis, we evaluate our estimates and judgments, including those related to accrued expenses, stock-based compensation and leases. We base our estimates on historical experience, known trends and events and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

While our significant accounting policies are described in the notes to our financial statements included elsewhere in this Annual Report on Form 10-K, we believe that the following critical accounting policies are most important to understanding and evaluating our reported financial results:

Accrued Research and Development Expenses

We have entered into various agreements with contract manufacturing organizations, or CMOs, and clinical research organizations, or CROs. As part of the process of preparing our financial statements, we are required to estimate our accrued research and development expenses, including accrued manufacturing expenses, as of each balance sheet date. This process involves reviewing open contracts and purchase orders, communicating with our personnel and third parties to identify services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of the actual cost. We make estimates of our accrued research and development expenses as of each balance sheet date based on facts and circumstances known to us at that time. We periodically confirm the accuracy of our estimates with the service providers and make adjustments, if necessary. The significant estimates in our accrued research and development expenses include the costs incurred for services performed by our vendors in connection with research and development activities for which we have not yet been invoiced.

We accrue for costs related to research and development activities based on our estimates of the services received and efforts expended pursuant to quotes and contracts with vendors, including CMOs, that conduct research, development and manufacturing on our behalf. The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows. There may be instances in which payments made to our vendors will exceed the level of services provided and result in a

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prepayment of the research and development expense. Advance payments for goods and services that will be used in future research and development activities are expensed when the activity has been performed or when the goods have been received. We make significant judgments and estimates in determining accrued research and development liabilities as of each reporting period based on the estimated time period over which services will be performed and the level of effort to be expended. If the actual timing of the performance of services or the level of effort varies from our estimate, we adjust the accrual or prepaid expense accordingly.

Although we do not expect our estimates to be materially different from amounts actually incurred, if our estimates of the status and timing of services performed differ from the actual status and timing of services performed, it could result in us reporting amounts that are too high or too low in any particular period. To date, there have been no material differences between our estimates of such expenses and the amounts actually incurred.

Stock-Based Compensation Expense

Stock-based compensation expense related to awards to employees is measured at the grant date based on the fair value of the award. The fair value of the award that is ultimately expected to vest is recognized as expense on a straight-line basis over the requisite service period, which is generally the vesting period, net of the impact of actual forfeitures recorded in the period in which they occur.

Stock-based compensation expense related to awards to non-employees is recognized based on the then-current fair value at each measurement date over the associated service period of the award, which is generally the vesting term, using the straight-line method. The fair value of non-employee stock options is estimated using the Black-Scholes valuation model with assumptions generally consistent with those used for employee stock options, with the exception of the expected term, which is the remaining contractual life at each measurement date. Refer to Notes 2 and 10 for more information on assumptions used in estimating stock-based compensation expense.

The Black-Scholes option-pricing model requires the use of subjective assumptions, such as volatility, which determine the fair value of stock-based awards. The assumptions utilized in the Black-Scholes option-pricing model are as follows:

Expected Term

Expected term represents the period that our stock-based awards are expected to be outstanding. The expected term for employee equity instruments is calculated using the simplified method where there is insufficient historical data about exercise patterns and post-vesting employment termination behavior. The simplified method is based on the vesting period and the contractual term for each grant, or for each vesting-tranche for awards with graded vesting. The mid-point between the vesting date and the maximum contractual expiration date is used as the expected term under this method. For awards with multiple vesting-tranches, the time from grant until the mid-points for each of the tranches may be averaged to provide an overall expected term. The expected term for non-employee stock options is the remaining contractual term.

Expected Volatility

Expected volatility is estimated from the average historical volatilities of publicly traded companies within the life sciences industry that are considered to be comparable to our business over a period approximately equal to the expected term for employees’ options and the remaining contractual life for non-employees’ options. We will continue to apply this process until a sufficient amount of historical information regarding the volatility of our own stock price becomes available.

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Expected Dividend

We have not paid and do not anticipate paying any dividends in the near future. Accordingly, we have estimated the dividend yield to be zero.

Risk-Free Interest Rate

The risk-free interest rate is based on the U.S. Treasury yield in effect at the time of grant for zero-coupon notes with remaining terms corresponding with the expected term of the option.

Fair Value of Common Stock

For valuations after the completion of our IPO, the fair value of each share of underlying common stock is based on the closing price of our common stock as reported on the Nasdaq Global Select Market on the date of grant.

Leases

We adopted Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842) on January 1, 2021, using the modified retrospective transition approach. There was no cumulative-effect adjustment recorded to retained earnings upon adoption.

Under ASC 842, we assess all arrangements that convey the right to control the use of property, plant and equipment, at inception, to determine if it is, or contains, a lease based on the unique facts and circumstances present in the arrangements. In addition, we determine whether leases meet the classification criteria of a finance or operating lease at the lease commencement date considering: (1) whether the lease transfers ownership of the underlying asset to the lessee at the end of the lease term, (2) whether the lease contains a bargain purchase option, (3) whether the lease term is for a major part of the remaining economic life of the underlying asset, (4) whether the present value of the sum of the lease payments and residual value guaranteed by the lessee equals or exceeds substantially all of the fair value of the underlying asset, and (5) whether the underlying asset is of such a specialized nature that it is expected to have no alternative use to the lessor at the end of the lease term. As of December 31, 2021, our lease population consisted only of operating real estate leases.

Once a lease is identified and its classification determined, we recognize a right-of-use, or ROU, asset and a corresponding lease liability. Lease liabilities are recorded based on the present value of lease payments over the expected least term. The corresponding ROU asset is measured from the initial lease liability, adjusted by (i) accrued or prepaid rents, (ii) remaining unamortized initial direct costs and lease incentives, and (iii) any impairments of the ROU asset.

Significant assumptions utilized in recognizing the right-of-use assets and corresponding lease liabilities included the expected lease term and the incremental borrowing rate. The expected lease term includes both contractual lease periods and, as applicable, extensions of the lease term when we have determined the exercise of the option to extend is reasonably certain to occur. The incremental borrowing rate was utilized to discount lease payments over the expected term given our operating leases do not provide an implicit rate. We estimated the incremental borrowing rate based on an analysis of corporate bond yields with a credit rating similar to us. The determination of our incremental borrowing rate requires management judgment, including development of a synthetic credit rating and cost of debt, as we currently do not carry any debt. We believe that the estimates used in determining the incremental borrowing rate are reasonable based upon current facts and circumstances.

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For additional details regarding the impact of adoption and disclosure, see Note 5, “Leases,” to our financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.

Recently Adopted Accounting Pronouncements

See Note 2, “Basis of Presentation and Summary of Significant Accounting Policies,” to our financial statements for additional information.