Novavax, Inc. (NASDAQ:NVAX) TD Cowen's 44th Annual Health Care Conference Call March 6, 2024 1:30 PM ET
Company Participants
John Jacobs - President and Chief Executive Officer
Filip Dubovsky - President, Research and Development
Jim Kelly - Executive Vice President, Chief Financial Officer and Treasurer
Conference Call Participants
Brendan Smith - TD Cowen
Brendan Smith
All right. I think it's about 1:30, so we'll get started. All right. Well, once again, I know it's late in the afternoon, or getting late in the afternoon on the third day, but let me once again welcome you all to TD Cowen's 44th Annual Health Care Conference.
I'm joined today by some of the industry's esteemed colleagues. I have John Jacobs, the CEO of Novavax to my right, and to his right is Dr. Filip Dubovsky, who's the President of R&D, Novavax. And then all the way to the end is going to be Jim Kelly, CFO and Treasurer of Novavax. So thank you guys for joining.
John Jacobs
Nobody trying to signal by attire who the scientist, who the CFO, and who the business leader is.
Question-and-Answer Session
Q - Brendan Smith
Awesome. So, obviously a lot to talk about here with Novavax, right? We're just coming off of the '23 into '24 season, maybe in tail end of it, depending on where you're talking about and who you're talking to. But maybe let's just start high level first off, what are kind of the most important takeaways for you guys from the way that the launch went in the fall through the winter and now kind of where we are today?
John Jacobs
Great question. You know, it marked my one year anniversary back at the end of January, Brendan, right with the company. And coming in, I knew we had a significant mission to control costs and get the company streamlined and improve our processes from strain selection to shots in arms and how we compete in the marketplace. And Novavax was still going through many firsts that were material that our competition had already achieved, like the strain change study, study 311 for us last year was a first while competitors had done that the year before, playing a little bit of catch up and clean up in order to position us well for ongoing commercial execution. So just if you take back a look at the year guys, right? We were able to remove approximately $1 billion out of our expense basis in just 12 months without hurting our capabilities. In fact, in parallel to that expense reduction, we were able to improve our capabilities and show that we could get the vaccine out in season instead of a year plus behind competition. So significant improvement. We were also able to reduce current liabilities. We had a significant number of one time, significant liabilities from the take or pay days on the initial growth spurt through the pandemic to the tune of hundreds of millions of dollars. And most recently resolved our prior disagreement with Gavi, which allows both organizations to look forward to the future and put the past behind us in a way that enables us to manage cash. So chapter one, post pandemic, stabilize, improve the cash runway, clean up the balance sheet, convert it from these large take or pay liabilities to a typical accounts payable on your current liabilities, which is a sign of improving health, and give us a really good shot on goal in chapter two, which is the next two seasons and our last two seasons by our intention to be a standalone COVID company, where we continue to grow market share presence, prominence, and improve our systems and cut expenses even further to our midpoint target of 750 million. And expenses were about 1.7 billion at the end of '22, annually. So when I joined in January, we have taken almost $1 billion out of our ongoing annual expense basis by the time we get there. Lessons learned in the fall. So we've achieved all of those things, which are great things for the company. We continue to get the majority of our revenue, as you know, Brendan, from outside the US through APAs that will be ongoing through 2026. Over the next three years, we migrate away from APA to a fully commercialized marketplace by 2027. It's very important that we begin to penetrate and perform well in commercial markets. This coming year in the US, as well as in Europe, where we move to tenders in countries like Italy and Spain that we're targeting private pharmacy markets in France and UK which we're targeting believe will have success in. So the lessons learned certainly get beyond the rest of these first have a better presentation of our products. So we're targeting a pre-filled syringe in 2024 from a five-dose vial. What everybody learned about COVID was that IDNs or physician groups were not distributing any shots in 2023 in the US marketplace. Everyone assumed it would be roughly 25% to 35% of the market similar to flu. They didn't make the choice to participate with any manufacturer's vaccine. It was about 95% retail based in the US marketplace. So we've redeployed our team against retail, started those conversations for contracting much earlier and fully anticipate to be more broadly covered in the normal workflow on the schedulers in a pre-filled syringe. And this year, our intention is also to be under a BLA instead of an emergency use authorization. Where we were on an even playing field even with a five-dose vial, key learning, even a few weeks behind the mRNAs although we were in season we were able to get to a 10 share on certain retailers in 15 business days from launch. In other pharmacies we either weren't covered or weren't on an even playing field yet. So that was with a five-dose vial under an emergency use authorization a few weeks behind mRNAs in a first time commercial market for us. Now our awareness levels are 2X where they were before intending pre-filled syringe BLA on time launch, much more broad coverage. Possibilities are very good for us to perform much better in '24 than '23.
Brendan Smith
Right. Okay. So there's a lot to unpack there, right? A lot of learnings, but a lot of kind of looking forward here. So I guess first thing that kind of jumps to my when you're talking about BLA and I know there's we'll kind of get into each of these. When you're talking about actual BLA for the vaccine I mean first of all where are you at right now and kind of the process for next season's BLA, I know it's obviously very early, but also give us maybe a sense of what difference that would like tangibly make in the kind of launch trajectory and like what you could actually do from a commercial perspective.
John Jacobs
Filip, do you want to start with maybe timing and where we are?
Filip Dubovsky
Sure. We've talked about the fact that we are in the process of rolling our BLA into the FDA, which is an advantage for us because it means they're actively reviewing our data right now. And the intent is to have it all wrapped up before the season because we want to be under BLA as we enter into the season. That's not a make or break for us because they've also had a UA avenue open to us if we need it. But we feel like we want to be under BLA and that's our intent to do it. And that's where the data is pointing us right now.
John Jacobs
And the second part of your question was what does it do for you? It certainly allows you to market your product as a traditional marketed product using brand name and other things like that versus an EUA where you're limited by the emergency use authorization language and the timing on how you can promote. So there are some advantages to commercial, but the material advantages for us really come from access and presentation of our product and timeliness of our approval. That's really the lever that we want to pull in '24 to drive share. Having a BLA will be important. Even if we were out under an EUA, that's fine, but we fully anticipate a BLA.
Brendan Smith
All right. Yeah, I mean, this all makes good sense. I mean, the other thing I guess that you also touched on, John, that I feel like maybe is a little bit underappreciated here is kind of the difference with a pre-filled syringe. Between different vials, between multidose vials, I guess, you know, in a perhaps different non-infectious disease context, you know, you kind of think of this as a traditional drug delivery, IV, subcu, pre-filled syringe. But when it comes to the actual vaccine, I mean, what's left for you from maybe a regulatory perspective from where you are now to kind of get prepared for a pre-filled in the fall? Is there any differences that are important to kind of shout out, is there any kind of weather testing or what have you that's kind of going to be important to make sure that that's what's actually available in the fall?
John Jacobs
We're well underway with that right now, but Filip or Jim, any color you want to add to that?
Filip Dubovsky
Yeah, I mean, a couple of points. One is there's nothing particularly magical about a pre- filled syringe. In fact, we were authorized through our partner, SK, in Korea in a PFS. The regulatory process is being rolled into our BLA. So when the BLA hits, it's going to be the variant strain that's selected in the spring. It's going to be in a PFS.
Brendan Smith
Okay. I guess now we're talking about strains. So what's the latest? Understandably, this is going to change, right? Changes every day. But where are you kind of now? What's the latest strain that we should expect that you'll be targeting? And I guess, is there anything that you think is lurking out there on the horizon that could potentially shift that conversation by the time the VRBPAC happens?
John Jacobs
So the point you come, but nature could always throw a curve ball at you, but the virus has been mutating in a more predictable and a bit slower fashion right now, as it has fit with human population, right? So through natural selection, you expect that. So something starts as a pandemic, it's rapidly morphing and changing. And then as it seeks fit with human population, you start to see a more predictable mutation and can get into more of a seasonal rhythm, Brendan, right, like you do with the flu. That's what we're starting to see. Filip, I don't know if you want to comment further.
Filip Dubovsky
Yeah, I guess just to step back a tiny bit, I mean, we've been talking to the global regulators over the past 10 days a week. We've talked to the FDA, EMA, WHO, Health Canada about the strains and the data we have on the strains. So a couple things to point out. Right now, JN.1 is well over 90%, 95% of all strains globally. The XBB.1.5 vaccines work quite well against it. We see that in our own immunodata as well as the effectiveness data that the CDC published on February 1st. The reason that change isn't for what's circulating now, but what's going to circulate next. So you want to get close enough to that so that the broad immune responses are relevant to that and your future proofing the vaccine for the next set of mutations. Right now, we have JN.1 in commercial manufacturing. We've heard from some of the other mRNA competitors, same thing. The VRBPAC has been moved up in time this year. It came from June to a month earlier, so the 16th of May. Yeah, and in Europe, it's in April. So they shifted those to allow non-mRNA vaccine companies an opportunity to participate in the markets.
Brendan Smith
So I guess the other thing, I know you guys were very proactive about this last year, but in terms of kind of looking at the at-risk variants, right, and then in developing, which kind of strains would potentially go into the VRBPAC. I mean, it seems like that's a little less necessary maybe this year because it's a bit earlier, but I guess what kind of, how is that process for you guys?
Filip Dubovsky
We are a common protein vaccine company. We make dozens and dozens of these and we cross test against each other. So I can tell you that our JN.1 vaccine works fine against JN.1.1, JN.11.1, JN.4, JN.1.7. So we know this ahead of time, and this is the kind of data that we can bring to the FDA and VRBPAC choices we make.
John Jacobs
One of the questions asked early on of Novavax. So, look, you're a protein-based vaccine. How do you guys do this? It takes you six months from the time you identify a strain to get your vaccine out the door. mRNAs can do it in three or four months. So how do you take a six-month timeline and make it three or four, you do the work of the first two to three months ahead of time. And then from go, it's the same time as your competition, which is exactly what we did last year. It's not brain surgery, I'm not a scientist, I play one on TV, right? But it's pretty simple to me that if that's what it was, it was to develop these few strains and take that two or three months off of your timeline, then from go, you're the same time as your competition. So that's a change we made. It doesn't sound complex, but it's not how we were thinking as a company at the time. So we got everyone in a room about this size, filled the chairs, talked through it for a day, and applied more of a flu-like strategy to COVID where we can produce these antigens very quickly to Filip's Point, make them all see the data, cross-reference it all, and have it ready in a limited commercial scale at a de minimis impact on the P&L. So by the time you get go, we kind of know what's coming. We can see it in the data. But if we happen to miss something or a new variant through point pops up, we've already got it at a certain scale and can move very quickly. So that enabled us to streamline approach and be more efficient.
Brendan Smith
All right, great. So now you gave some guidance for 2024 on the Q4 call. Maybe give us a sense of, when you're talking about that $800 million to $1 billion in revenues this year, Maybe walk us through the breakdown of that, APA versus commercial market and kind of where some of these existing APAs you would ship to.
John Jacobs
And I'll let Jim provide some detailed color, but it's 500 million to 600 million range for APA business outside of the United States. A large majority of that coming from Australia, New Zealand, Canada, but our European APA ended last year. And then you have commercial revenues, 300 million to 400 million range, you're at midpoint 350 between the US and select European countries. But, Jim, you maybe want to add an additional color?
Jim Kelly
Yes, certainly. You know, we continue to be in that unique situation where we have the pandemic era APAs to not only support markets where we want to be, but offer supportive cash flow to the company. And so when you look at the APAs at 500 to 600, midpoint 550, about 100 million has already been numbered in the first quarter. And that represented the closeout of the European APA. I think John just mentioned, Europe's going to be more of a traditional commercial market this fall. And I'll come to that in a moment. So when you look at the remaining amounts, you got 450 remaining, a little over 80% Australia, New Zealand, Canada, and they've been exceptional partners for us. So the Australia and New Zealand, you know, that will occur upon authorization. They're still reviewing our XBB right now, of course, Southern Hemisphere, and it's our intent to be on time and, you know, importantly be there during their season. Turning then to the commercial or non-APA, you do have a slice in there for potential R21 economics, royalties or reimbursement. And I'll just talk about that real quick. It is a great proof-of-concept for our technology. Serum Institute, one of our partners, has developed a new malaria vaccine. They expect to launch it sometime this year. It's a game changer, a life-saving vaccine. Just multiple thousands of children die every day in Africa. So we have some economics there. The vast majority of the non-APA is from the commercial markets of the US and Europe. You look at UK and France, they're primarily going to be retail markets, kind of traditional retail markets, and then with Italy and Spain, tender markets. And while I think many folks have looked to Europe and they've seen, for example, Pfizer has quite a high amount of share in Europe based on the renegotiated APA there. These tenders that we're describing, they're protein. And so we think we've got the right answer for those APAs, or excuse me, tenders in Spain and Italy. When you look at the retail, the private market in both the UK and France, they're looking to do spring campaigns. So, you know, we have doses in France right now. We're working. We just got added to the Green Book in the UK. So we're looking forward to compete in those markets potentially this spring. You know, this is all new news and, in fact, had not been included in our guidance, so we're waiting to learn more. But I think it's a beginning of the evolution of the commercial marketplace in Europe.
Brendan Smith
Okay. All right. So I guess that's great. That's a lot of good detail. So when you're talking about Southern Hemisphere deliveries and talking about authorization, right, I mean, instinctively we're thinking that these would be booked in like Q2, Q3, right? With the Northern Hemisphere then coming into Q4. So it's a fair, with that guidance then for the year, it's fairly steady cadence. Is that fair to kind of assume, based on what you're looking at now and based on the proportion coming from APAs.
Jim Kelly
So it's right. And the next stop is going to be this Australia and New Zealand based on that authorization. And you're right. It's the end of the XBB shipments. And then we transition over to the new updated vaccine up to the full.
Brendan Smith
All right. So I guess the other thing that does come up sometimes in conversations with some of these existing APAs, I think there's just people want to understand a little bit more any potential risks that there are to whether they're not fulfilling them or pushing them off to later this year or next year. I mean, not even just with you guys, I think for the past couple of years, some of these APA, there's just kind of a constant conversation, right? And I'm sure the stipulations are slightly different each time, but I guess just give us a sense of like how at risk any of these numbers are, if they are at all for you this year?
Jim Kelly
But I say there's no guarantees on anything in life except death and taxes, right? And in business, no guarantees. Relatively, though, an APA has a more secure, at least stated demand that's contractual. So you agree on demand through an APA with a government. They agree to purchase a certain number of doses of vaccine contractually from you as long as the company meets our obligations, which include aligning with our regulatory authorities on what they expect, getting timely approvals of that, producing the vaccine, having it released on their soil in the timely manner. If we execute against that, the understanding is they will execute against their side of the commitment and that's been proven time and time again on APA. Is there risk? There's execution risk on our side if we fail to deliver on those expectations. If we're late, if we can't get the doses produced in line with our regulatory authorities. If we had a miss on a strain change or something else, it's not guaranteed money, but it's demand that's contractually committed to as long as we meet our end of the bargain. On the commercial side, obviously you're in a traditional competitive marketplace. You've got to drive your own share, you've got to pull that through and pull around and use their associated. So there's relatively more risk in commercial, relatively less risk in APA, there's execution risk across all of it.
Brendan Smith
Okay. So I guess to your point about commercial then when we're looking at some of the like the Australia and New Zealand regions of the world where you have outstanding APAs. Do you have a sense of when those markets could switch to commercial?
John Jacobs
We do we actually have timing Jim on that our APAs run through 2026 with the bulk of the opportunity in '24 into '25, and then a trailing tail of that into '26. So by 2026, we expect to have a full conversion away from APA to commercial. And that's when we intend to launch actually our combination vaccine, our second product, where we get to introduce our flu vaccine to the world. And Filip, you shared some data, Q3 earnings call on our Phase 2 with our flu and our COVID vaccine, but just some remarkable results. I don't know if you wanna add color on our confidence around our flu vaccine that we'd introduce in the form of combo with COVID?
Filip Dubovsky
Yeah, do you want me to jump right in there? Okay, yeah, so we are planning a Phase 3 study at the end of this year, and the second half of this year, and that's a licensure enabling study for us. We've gotten concurrence with the FDA about the design of the study, the sample size, the safety database, the endpoints, et cetera. And what they've shared with us is that should we meet those endpoints and we show meaningful clinical benefit, then we have a pathway open for advanced accelerated approval pathway for the vaccine. And that would imply filing that data in 2025 with being in the market in 2026. And we're going into this study with a fair amount of confidence, because the study is basically a mimic of what we did in a Phase 2 design, and there we had some very, you know, supportive results which would allow us to achieve the end points that these interested in.
Brendan Smith
Okay. So when you're talking about combo, I think, you know, everybody who's looking at a combo, whether right now or in the future, I think, are thinking about it slightly differently. Is this in one vial, both vaccines, or is it in two vials? Have you decided this?
John Jacobs
It's not a bedside mix. It would be one pre-filled syringe OR you would have both components in that syringe.
Brendan Smith
Has FDA commented on that? Is that their preferred method of this or this is kind of coming from your internal?
John Jacobs
Certainly commercially that's preferable. And we feel, Filip, you may want to comment on what we feel is a potential development and an R&D advantage to our platform. You can pack our platform multiple antigen into one vaccine while we believe maintaining a very nice reactogenicity profile. You may want to comment on that.
Filip Dubovsky
Yeah, I think the best way to think about this is by referencing the data we've shared. I mean, the previous study, we had a combination vaccine that we had head to head against two licensed influenza vaccines. And the reactogenicity was clinically indistinguishable between the three vaccines. So we're going in with an immune response, which looks great to us, and a reactor profile which is favorable to what we think the competition's going to look like.
John Jacobs
When you think about some vaccines, you know, some consumers will avoid getting their follow-up booster or another shot just because they want to avoid the side effects or having to miss a day or two of work because of that, et cetera. To have the ability to put in the potential to put multiple antigens for multiple diseases into one shot and have a very nice tolerability and side effects profile where you're delivering some impressive efficacy results in immunogenic responses, we feel is an advantage for us. Yet to be proven out in the study that's pending, but certainly we're optimistic about it.
Brendan Smith
So I mean, Filip, you made a point of saying that the Phase 3 is very comparable in a lot of ways to the Phase 2. Are there any important distinctions from the actual design perspective other than N that we should be aware of as you're kind of getting this underway later this year?
Filip Dubovsky
Yeah, not that we've disclosed. We're still in a competitive space. And we have a couple tricks in our process.
Brendan Smith
So I guess then, next natural question, when you're looking to fund pivotal study, launch a new product next year or year after, from the existing APAs that you have, from the existing funds that you have going on, and we'll get to Gavi in just a second. I mean, what is kind of the financing strategy for this over the next 12, maybe to 24 months to just make sure that that study gets completed the way it needs to?
Filip Dubovsky
Everything we've projected already contemplates the inclusion of a standalone go-forward with our Phase 3 study. And very importantly, when I first joined last year, you heard us saying that we would almost need a partner to be able to bring that study forward. Through our successful cost reduction efforts, Brendan, that we've talked about over the last year. We put the company in a position to do that independently now in our base operating plan. And that's really important because we want leverage. And if we're going to consider business development deals or opportunities in the future for Novavax, we would only want to consider those from a position of leverage, where we don't need to do that. So we can consider if we'd like to do something like that, it's beneficial to our shareholders and to our company. So we put ourselves in a position of leverage now according to the base operating plan where we can bring that study forward on our own and expect a data readout actually in the first half of 2025.
Brendan Smith
Okay. That's right.
Jim Kelly
It's a year quicker than we were even thinking a year ago.
Brendan Smith
Yeah. Okay. Are these conversations with potential partners maybe not even for the CIC study, but just --
Filip Dubovsky
Well, I did say we weren't having those conversations.
Brendan Smith
Well that was my question now. So I guess but to your point you know where's the strategic priority for those conversations you know when you talk to somebody who's maybe interested in the vaccine adjuvant platform I mean where's your head at when you're entering those conversations?
John Jacobs
It's a very good question and look our pillar three that we talked about all year was really expanding the value of our technology platform, showcasing it to the world. One great example was the R21 malaria vaccine authorized by the WHO launching this year in Africa. Jim, you mentioned 1,300 children dying needlessly every day in Africa. One of the good reasons and most important things actually just personally for me and for the team was getting beyond the Gavi dispute because that was a distraction from saving these kids and shame on us if another day went by without us providing our Matrix-M and saving these lives. You can imagine the interest is significant in our Matrix-M from multiple sources. We actually have multiple collaborations around the world with universities. We announced publicly in the public domain, Bill and Melinda Gates Foundation. We signed an agreement with them on a technology approach to them to work with Matrix-M on several vaccines. They've expressed even more interest in continuing that partnership. So those are just some examples. Obviously we'll be open to things that drive shareholder value and help us achieve our vision of becoming a leader in the global level of the elevator. And eventually, through the successful launch of our combination vaccine, should we succeed there and do that, our vision is that drives enough revenue and it brings us to profitability. We can inorganically grow a portfolio as well.
Brendan Smith
Okay. So maybe walk us through the Gavi settlement, just to your point. It really was kind of a distraction for a lot of people. But I mean, the way that the structure's kind of played out now, I mean, how has this impacted your financial outlook for this year, but also just strategically how you're now planning the capital that you have on board now to get you through the next 18, 24 months?
John Jacobs
Well, certainly removing uncertainty is critical for any business if you can do it and that permanently removed that uncertainty from our books. So that was really important to be able to make that move and do so in an amicable way with an organization we frankly and truly respect who was a new CEO who came after that disagreement. I came after the disagreement originally occurred, though it was communicated after I arrived, which is part of our going concern that we put on the company. But I'd say that we put the past behind us and it's a look forward. So it allows us to better manage our cash, Jim, it allows us to pay down the settlement importantly with doses, and the original intent of the agreement was to provide our vaccine, which is the alternative to mRNA in the COVID world to consumers and people who need it in low and middle income countries. So the way we contemplated the agreement with Gavi, our partner in this, was to make sure that we could provide doses at our COGS and also at a retail price that we set in alignment with the spirit of providing things through UNICEF to low and middle income countries without being egregious about that. But we get to control that price and therefore the margin that goes there. And we would pay down the settlement at that actual retail price, including that margin, not at our COGS. So in other words, if we're able to pay it all off with doses, it's even less for us to pay that off. And it preserves cash. I don't know, Jim, if you wanted to add anything else.
Jim Kelly
I'll tell you, I'll begin with what we're hearing from investors. You know, they were exceptionally interested in learning more and investing in our commercial activities with COVID in commercial markets, and also on CIC, they didn't want to invest on an outcome of an arbitration. So having a better characterization in a business-like manner that John described, it does so much to make the company more investable. And it certainly aligns our missions. When you look at what the economics are of the settlement, we have it as estimated present value, cost of capital of that settlement in the 300 million to 400 million range, it can get better when you deliver doses instead of cash. And so for our mission and for our desire to build markets in the AMC 92, of course, we'd love to deliver doses. And when you think about what it means for our cash flow, my goodness, spreading out any potential payments over half a decade does wonders, right, for just cash management. And so now we're back focused on, hey, COVID market this fall, advancing CIC. And a lot of questions come up about our going concern. We still have the going concern. I think the best opportunity to lift the going concern comes with evidence of our performance this fall in the commercial markets. So really look forward to this fall.
Brendan Smith
Okay. So I do want to ask a little bit about just the vaccine credit for the annual actual settlement, right? Maybe how does this work? And maybe more importantly, if you're able to pay down the settlement through the annual vaccines, does this have any kind of impact on your ability to kind of deliver those doses to commercial markets, to your APAs? Do you anticipate any of that?
John Jacobs
We're not concerned about capacity. And we actually started competing for the UNICEF RFP. They had a 90 million dose RFP that went out last year. And before we had reached any settlement with Gavi or had this level of contemplation around it, we were already competing for that and understand we have full capacity and more to meet any needs that would come from that. Now in anything we've projected on revenues, we have not included any potential win of a portion of that RFP from UNICEF. So that would be upside to us, but go ahead, Jim.
Jim Kelly
That's exactly right. So we started with that RFP last year. It came out mid last year. So a couple of things when it comes to our capacity, you know, the key to capacity is not antigen. We got plenty antigen. It's about drug product, right? And if you think about the drug product that could go to a UNICEF, it's five-dose vial. Our commercial markets are single dose presentations, so they don't conflict with each other. And that's important. In addition to the RFP in discussion, as John noted, hey, what's our price, We also talk about capacity and when and so you address both as a part of the RFP process.
Brendan Smith
All right. Great. I think in the last minute or so here I do want to ask I mean you mentioned this at the beginning some pretty aggressive cost cutting measures that were frankly impressive to get to where you are now, but obviously you've laid out a plan to do even more, right. So from an external perspective, we obviously don't have all of the insight into the day-to-day, what you've actually focused on. But what else is there left for you to continue to cut like that in the same time, in the same breath, as then increasing and frankly maximizing your commercial.
John Jacobs
Two things along those lines. When I joined the company last year, we had an immediate conversation with leadership that we certainly want to be cautious about what we promise externally and put ourselves in the best position to deliver and exceed expectations wherever possible. So, you know, when we shared our cost cut targets, we came off a $1.7 billion expense basis at the end of '22. We shared our targets with everyone last year. When we ended the year, we exceeded those targets by $150 million. So we showed that we can do it, we can do more than we said we could do, and do so while improving our systems, our processes, and our ability to execute. Through that journey, I myself, as well as a leadership team, looked into every corner of this organization around the world with a microscope, if you will, or an analogy, and we saw additional opportunity to continue to scale and cut. The goal is to continue to do so without hurting our capabilities from strain selection to shots in arms and our clinical capability to bring the next vaccine forward. So we'll make appropriate investment and maintain scale there. Plenty of room to hit the targets we intend, including about 100 million in supply chain through rationalization, including the contemplated sale of our CZ plant, which we talked about, and about 200 million or more in SG&A and R&D.
Jim Kelly
Focused ex-US markets, exceptionally focused US market, this learning about retail meant, hey, you don't need to invest in non-retail. And then other areas, it's just about scaling it right.
Brendan Smith
Okay. All right. I think with that we're just about over time a little bit. So thanks for sticking around for an extra minute. I know everybody's in a long day. So thanks for joining us.
John Jacobs
Thanks everyone for joining us today.
Brendan Smith
It was a pleasure.
John Jacobs
Appreciate it. Thank you.
Brendan Smith
Right. Great to see you. Thank you.
John Jacobs
Thank you. Bye.