Q1 2020 Earnings Call

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Good day, ladies and gentlemen, and was comes to Dynavax first why they plenty plenty conference call I tell you minded. This conference call is being recorded at the end of the company's prepared remarks, well open the call for questions and provide specific instructions at that point I would like change.

Well I'd like to any color I see your manager Investor Relations you may begin now.

If you're getting good afternoon, welcome to the dining back 2021st quarter financial results and corporate update conference call. Joining me on the call today are right Spencer Chief Executive Officer, Michael Aastroms, Chief Financial Officer, Doc sell Vice President commercial before we begin I'd invite that we believe.

Forward looking statements today, including statements regarding hepatitis B commercial profile revenue expectation potential peak revenue the completion of post marketing studies and going back in development with CTG anything.

And are subject to a number of rent in Turkey and could cause actual results to differ materially.

[noise] risks are summarized in today's press release and are detailed in the risk factors.

Section of the current 10-Q, and 10, Hey, periodic reports filed with the S. P C, which were encouraging to overview I will now turn the call Overtrain Spencer Chief Executive Officer buybacks.

Thank you Nicole and thank you all for joining us today for an update on our business and to review first first quarter financial results.

We appreciate your spending time with us given how much is going on in the world.

The current global health crisis reinforces dine in that mid to our mission up developing back see that provides protection for an unpredictable world. We're building a leading vaccine company on the foundation of our organization significant experience and expertise and vaccine development and commercialization with a focus on Apple.

Be our adult hepatitis b vaccine with its outstanding safety profile and faster and consistently higher rates to protection across all sub groups and CPG said 80 with its potential as a broad they see added platform.

No more than ever the world is acutely aware of the crucial role that these play protecting our families and communities. We urgently needed vaccines for the current probably 90 10, Devon and it is critical that any chronic virus vaccine is able to protect those at highest risk for severe complications or debt.

Unfortunately, the elderly and people with other chronic conditions are often the hardest groups to protect the succeed.

Based on its effectiveness with hepatitis B, we believe CPG 10, 18 should be evaluated as an essential component of a corona virus that see that is capable of rapidly predicting those at highest risk from coping 90.

The ability of CPG tune 18 to boost the immune response.

And he will have a south beach provide protection to a higher percentage of the elderly and those who are hard to protect and multiple head to head clinical trial.

More rapidly and with fewer doses.

For them and people between 16 70 years old 92%, we're protected after only two doses of hepatitis b compared to 73% after three doses of the comparative vaccine.

In fact supposed to be has demonstrated higher levels of protection in groups known to be less responsive divesting, including smokers, the obese and importantly people living with diabetes.

We believe CPG can 18 can play an important role in the development of a safe and effective Corona virus vaccine and we are committed support these development efforts globally.

We have worked diligently to safeguard the health and safety of our employees and customers, while continuing effective operations to ensure patient access to help us SB.

We've been implemented remote working operations for our employees at our headquarters here in California are.

Our manufacturing facility in Germany is employing special measures. So they can continue operations, while focusing on safety for workers there.

We have shifted from in person interactions, but field sales force to virtual field calls in order to allow dynavax to continue to serve the need of physician.

Mission customers during this critical time.

Operationally, we have focused on ensuring access epic study, we continue to produce hepatitis b surface antigen at our facility in Germany, and CPG 10, 18 accident at our contract manufacturing organization here in the U.S.

As a result, we have a secure supply chain that we are confident can be can markets demand now and in the future.

Finally, while the coping they see pandemic has impacted access to hospitals and clinics affecting implementation of clinical trial costs across the pharmaceutical and biotech sectors Dynavax is fortunate to have.

Hepatitis B post marketing observational studies fully enrolled and continuing uninterrupted.

Due to the design and the conduct of these studies, we do not anticipate an impact to the integrity of the data as a result shelter in place orders are help with that'd be dialysis study continues to enroll patients with enrollment is expected to complete this month.

Well, there's a tremendous amount of uncertainty caused by this endemic.

I have acted in the business of preventing deadly infectious diseases and as such we believe we are uniquely positioned to emerge from this pandemic stronger as a result of the world increased awareness of the risk of infectious diseases and focus on prevention.

Let's review our business, starting with Keppel assessed the and then moving onto our CPG connecting Ashton.

To understand why we're so confident in the long term value Divests offers.

As you know helpless Abbvie is a two dose adult hepatitis b vaccine, which delivers faster at higher rates of protection when compared to the current market leader.

Our as you've ended vaccine is the only hepatitis b vaccine that offers protection to adult in one month.

Compared to other hepatitis b vaccine that require six months.

Based on this profile couple OSAT be is well positioned become the standard of care for adults in the U.S. would help with that'd be higher levels of protection and improved dosing regimen, along with our marketing efforts, we expect to drive significant market growth from currently under vaccinated populations.

The U.S. adult hepatitis B vaccine market has three major segments, starting with monovalent hepatitis B vaccine followed by twin risks, which is a combination hepatitis a and b vaccine and then finally formulations and dosing regimens for patients on hemo dialysis.

Based on the data in our label that demonstrates tell us up these improved profile versus the current market leader. Our initial focus has been on converting the motivated monovalent segment.

To optimize our efforts our commercial organization is focusing on retail and national accounts as well as high value field targets, which is approximately 60% of the overall customer universe.

The CDC recommends that all healthcare workers emergency personnel and other individuals who are exposed to blood or bodily fluids on the job should be protected against hepatitis b.

However, our competitors three dose regiment required over six months and that are far too many.

Who do not receive a complete three those hepatitis B vaccine series.

Effective protection for health care professionals Hospital staff first responders and other occupations with risk of exposure must be a priority and is our core focus to win the monovalent marketing.

Focusing on the occupational health segment provides a high value clean ventured into health systems and clinics nationally, where we continue to expand usage of hepatitis b the on staff to patients as well.

Additionally, we have continued to advance our efforts in the retail pharmacy setting with the conversion of monovalent business in five national retail pharmacies.

We estimate that the combination hepatitis, a and hepatitis b product generates a majority of sales from travelers to traveling to areas with a high prevalence of hepatitis, a and hepatitis b who seek.

Vaccination prior to the trip.

Due to the recent events international travel is likely to decline 2020. We believe this will also be it accompanied by an increased interest in seeking out vaccination guidance for those who do travel internationally and will ultimately have a positive impact on the travel vaccine market.

Most of these rapid protection provides travelers a valuable option for protection against hepatitis B. It allows for completion of a series in just 30 days, we believe heightened consumer awareness of the risk associated with infectious disease will enhance our ability to leverage that have would that be profile within the travel segment at this.

Business return to normal historical levels.

To address the hemo dialysis market segment, we are conducting a clinical study to establish an appropriate dosing regimen for this population.

Results from the interim analysis of our ongoing study evaluating couple of study in patients undergoing hemodialysis demonstrated an 86% show protection rate at week 20, after four standard doses of hepatitis B.

We believe this dosing regimen compares positively with the dose regimen required by the current market leader and direct up nicely for long term growth in this segment.

Based on the growth and expansion opportunities we see in the years ahead, we believe the U.S. market opportunity for hepatitis B has the potential to ultimately increased to over $700 million in gross sales.

Outside the U.S., we see potential for hepatitis B in Europe, China, and some other markets.

In Europe, we have filed marketing authorization application with the M&A and in China, We are working to identify a partner preclinical development as well as commercialization.

With this overview I think you can see why we are excited about hep b opportunity and.

As a foundational asset for building, a leading backseat company.

Now shifting to additional growth opportunities as you know, we're developing CPG 10, 18 as abroad vaccine has of its platform.

With that has the goal we've embarked on a strategy to establish multiple research collaboration aimed at demonstrating the capability of CPG to 18 to enhance the immune response to a variety of vaccine antigen.

The first such collaboration is an ongoing program with CRM Institute of India, the world's leading manufacturer of vaccine.

This program is focused on the development of an improved pertussis vaccine using CPG 10, 18, combined with antigens manufactured by Tier Institute.

With the Cobiz 19 pandemic.

Demand for Cpgs, and 18 and Dynavax. This vaccine development expertise has increased dramatically in the last 10 weeks, we have entered multiple collaborations supporting the development of Kobin 19 vaccines.

Underscoring CPG tenneco team potential versatility. These collaboration span multiple technology approaches to vaccine development.

Order to ensure a successful development and availability of a safe and effective krona by respect seen multiple approaches must be developed in parallel we will continue to work to ensure CPG 10, 18 is evaluated broad we expect to announce additional research collaborations and we anticipate CPG 10 18.

Will be included in at least one throughout of adverse vaccine phase one clinical evaluation this year.

Over the course of the year, we aim to enter multiple additional strategic relationships focused on advancing a variety of vaccine candidate and establishing a broad utility of CPG 10, 18 students approach. We can increase the number of product opportunities for dynavax to leverage CPG Tenb 18, along with our clinics.

All development manufacturing and commercial capabilities.

Let me now touch briefly on recent financial results, which Michael will cover in more detail in a moment.

I would that be net sales during the first quarter were $10.5 billion up from $5.6 million in the same period in 2019.

We were pleased with the sales level given the headwinds of the code 90 endemic.

During the quarter, we saw continued increase in new ordering sites consistent with prior quarters.

By mid March most medical centers have restricted routine patient access to their facilities and focused on providing care for only the most severely affected patients.

Since then there has been a significant reduction in the utilization of vaccines across the board.

We are obviously monitoring the expected timing health care operations, returning to normal which based on our commercial teams interaction with clients and healthcare providers, maybe in the June or July timeframe.

Our field sales force continues to have good engagement with their customers and target and are actually able to make good progress on awareness and implementation planning as certain customers have more time available due to reduced patient lows.

With the current heighten awareness of the risk of infectious diseases. Our team is focused on setting the stage to accelerate capturing market share as the U.S. returns to normal operations, we think the value proposition for epicel be really resonates in the current environment.

Despite these short term disruptions the company's long term value proposition remains unchanged and is potentially enhance vaccine to offer a tremendous value to the healthcare system. The current koby 19 endemic is reinforcing the need for better prevention and preparedness, we're hopeful that societal learnings.

This pandemic will increase support for adult immunization and highlight the importance of providing rapid protection to our healthcare workers and others, who may be exposed to Debbie viral diseases that are preventable.

The potential for all stakeholders government policymakers healthcare systems and consumers understand the benefits of vaccines and prevention, we'll have a significant long term positive impact on public health.

With that I'll now turn the call over to Michael to discuss our financial results in more detail.

Thank you Ryan our financial results are presented in the press release issued this afternoon. So I'll just touch on the key highlights here and provide some additional color.

As we reported today Epicel being net sales for the first quarter of Twentytwenty were $10.5 million the substantial increase from the $5.6 million recorded in the first quarter of 2019, driven primarily by higher sales volume as additional health care.

Dividers completed operational activities required to switch to help us be an existing customers place repeat orders.

Although first quarter revenues ended up roughly flat compared to Q4, we had been on track to achieve the Q1 targets underlying our previous annual guidance and to increase sales over Q4 until we began to see the impact recorded 19 in the last few weeks of March.

The pandemic has resulted in significantly reduced utilization of vaccines, including Epicel B, which is likely to continue until the U.S. returns to more normal conditions.

Research and development expenses were $4.7 million for the first quarter constituency compared to $21.2 million for the first quarter was 29 team.

Excluding noncash stock based compensation R&D expenses decreased to $6.2 million in the first quarter compared to $19 million in the first quarter of 2019.

These decreases resulted from significant reductions in R&D headcount and the winding down of our immuno oncology programs following our may restructuring.

Best DNA expenses for the first quarter Twentytwenty.

Were $20.9 million compared to $18.3 million for the first quarter 2019, the increase was primarily related to costs related to the helpless FP post marketing study and an increase in facility costs due to higher overhead allocation to SGN hay and changes in noncash.

Talk based compensation, resulting from the restructuring.

Cash cash equivalents and marketable securities totaled $129.5 million at March 31 Twentytwenty.

The past quarter was remarkably successful, particularly in view of the challenges created by the pandemic.

Until the last few weeks was March we were on our way to our most successful sales quarter ever.

We have already achieved the revenue necessary to satisfy the current years revenue covenant and the loan agreement.

We have substantially completed the restructuring and we have rapidly established multiple collaborations to advance our efforts to establish CPG 10, a team as a leading patch of them now I'll turn the call back to Ryan.

Thank you Michael.

As highlighted by recent events infectious diseases represents significant threat to public health.

Seem to offer a tremendous value to healthcare system and they also represent a valuable long term business with the potential for steady recurring revenue, making for a tremendous opportunity for long term investments.

Dynavax is well positioned for the long term with an FDA approved vaccine that has a large current market opportunity and clear drivers for future growth.

In addition, we believe there is a rapidly expanding opportunity for our vaccine has been CPG to 18 and multiple pandemic and endemic diseases.

While we are closely monitoring evaluating in working to mitigate the impact of the current endemic we also continued to execute initiatives to advance the commercialization helpless FC and expand opportunities for CPG Tenb 18. This year, we remain on track for several important milestones including.

Advancing the ongoing study of hepatitis b in patients on hemo dialysis.

With final Immunogenicity data expected in the fourth quarter of this year.

The completion of safety follow up for analysts that the post marketing studies in Q4, 2020, which supports consideration of a preferential recommendation by AC IP in 2021.

Completion of phase one, enabling animal studies in toxicology for an improved pertussis vaccine with CPG can 18.

Developing CPG 10, 18 as a pandemic adds event in at least one corona by respect seeing phase one clinical study.

And finally, we expect to enter multiple additional strategic relationship focused on preclinical research in a variety of vaccine candidate to establish CPG to 18 as a leading adjustment.

The Kobin 19 pandemic is reinforcing the knee globally for better prevention and preparedness for infectious disease and Dynavax mission is aligned with that purpose. We think all our team members and shareholders for their commitment to Dynavax. We look forward to all we will accomplish together over the course of 2020 and the years ahead as we bill.

Dynavax into a leading acting company.

Operator, we would now like to open the Q and a portion of today's call.

Ladies and gentlemen, if you have the questions at the time police brand to start and then the number one key on your Thats doing telephone sequencing has been and Kate are you wish theme of yourself from the Q basketball team.

We don't have that both first question from the line House feel NAD Gill from Cowen and company. Your line is open you may ask your question.

Yes, thanks for taking my question.

Boring Caribbean run on the vaccine.

First on the impact of corporate appreciate the use of the.

Utilizations down what are your efforts to get on formulary and.

Convert customers to hepatitis effort cannot continue.

People are working virtually or because the healthcare systems are busy doing recovered in many places has the process of converting accounts also slowdown.

Thanks, Phil I'm going ask on console, our vice President sales and marketing head of commercial to answer that question Don.

Hey, Phil Thanks for the question.

We found that actually many of our customers and stakeholders are they're very open to remote and virtual meeting.

We found that many have more time now.

Then the limited patient loan and demand.

So we've been able to make a lot of progress mainly around implementation.

Again, because the fact that gives no patient there we're finding a lot of success. So all in all from a from a virtual standpoint.

The team is able to engage and get with key stakeholders and continue to essentially band the sales cycle for Epicel B.

From a script.

And then second cobot impact question is.

On that utilization.

Can I appreciate you should significantly reduced can you give us any sense was significantly reduced users we.

But to adjust our models for for two to two free.

Yes, well, we're not going to physician at this point too.

Predicting the market will return to it.

Normal since is dependent on how chronic viral pandemics progressive and in the state federal government policies.

So our interactions with our large health system suggest the clinics, we'll hope to begin to open up for more traditional services in June or July.

So it's not really something we can comment on as far as how it's going to impact the quarter or beyond this point.

Fair enough and then last question you mentioned in the milestones.

Maybe phase one trial for the current Overstretching crewmembers fixing pure might as well.

Which are your partners have suggested there could be in her through phase one.

By the under 2020.

In phase one.

University of Queensland has sort of in the earliest.

Let me most publicly at least early they are funded early buy steffi and Clover Clover Biopharma have all both targeted being in the clinic in 2020.

The sinovac.

Program I think we'd also would be targeting that kind of timeframe I, although I can't remember what they said specifically.

But we do believe there's a number of opportunities for us and as I mentioned, we are continuing to work on identifying other collaboration.

And.

In the meantime.

Great. Thanks for taking my questions.

Thanks, Phil.

I can never be why do you feel with Michael asked a question Keith grass is part and then the number one key on your that's still in telephoned. We don't have another question from the line and that is from the line up in that sense from William Blair Your line.

Good afternoon, Thanks for taking my question.

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