Q4 2020 Dynavax Technologies Corp Earnings Call
Good day, ladies and gentlemen, and welcome to the <unk> technologies fourth quarter 2020 conference call.
As a reminder, this conference call is being recorded.
At the end of the company's per part prepared remarks, we will open the call for questions and provide specific instructions at that point.
I would now like turn the call over to Nicole Arndt Senior manager Investor Relations you may begin.
Thank you operator, good afternoon, welcome to the Diamondback fourth quarter and full year, 'twenty and 'twenty financial results and corporate update conference call. Joining me on the call today are Ryan Spencer Chief Executive Officer, Michael Armstrong, Chief Financial Officer, Rob Janssen.
Chief Medical Officer, and John <unk> Senior Vice President commercial before we begin I advise you that we will be making forward looking statements today, including statements regarding help assess the commercial profile revenue expectations potential peak revenue European launch and the completion.
Most of our being studied and regarding vaccine development and potential for CPG journey and and revenue expectations. These statements are subject to a number of risks and uncertainties that could cause actual results to differ materially.
These risks are summarized in today's press release and are detailed and the risk factors section of our current 10-Q and 10-K sure you're on a per reports filed with the FCC, which we encourage you all to reveal.
I'll now turn the call over to Ryan Spencer CEO Diamondback.
Thank you Nicole and thank you all for joining us today.
I'm excited to share both our 2020 results as well as our outlook for 2021.
The current global pandemic has highlighted the need for continued development of new or improved vaccine to help prevent the spread of infectious diseases.
Vaccine adjuvant.
The potential to boost the immune response to increase protection and provide longer lasting immunity made me adjuvant and important contributor to the success of these vaccines.
In addition increased awareness of the importance of protection against deadly diseases will expand the long term recurring revenue stream that vaccines provide.
Our first commercialized product surplus abbvie is and adult hepatitis B vaccine, which is adjuvant did with CPG and 18 and.
And was shown and three pivotal trials to provide higher levels of protection with fewer doses compared to the current market leader.
Hepatitis B is a highly infectious and potentially deadly virus with increasing infection rates over 250 million people worldwide are infected.
Thankfully it can be prevented with effective vaccination.
Challenges with compliance with the legacy <unk> products are well known with only approximately 22% to 54% of patients completing the three dose regimen.
Over the required six month schedule.
Hello, Sam Beast to dose one month schedule with the corresponding improvement and compliance and higher levels of protection give us confidence helpless Abbvie will eventually become the standard of care for adult hepatitis B vaccination in the U S.
And just to be enjoyed a strong fourth quarter with net product revenue of $11 5 million, which was up approximately eight 5% year over year, Despite a reduction and the overall utilization of Hep b vaccine of approximately 35% in the fourth quarter compared to the same period last year.
Market share and accounts targeted by the field sales team increased to 26% and the first quarter of 2020 up from 20% and the fourth quarter of 2019.
Demonstrating <unk> continued ability to take market share despite significant customer disruption due to the COVID-19 pandemic.
Additionally, we made continued progress and national accounts with a national dialysis chain, making a significant purchase and pep lists abbvie to be used for its employees, resulting in approximately $3 million and revenue in the quarter.
While we expect this customer to contribute meaningful recurring revenue over time the stock in order will likely cover their utilization for the first few quarters as they implement <unk> vaccination for their employees.
Our ability to continue to increase our market share.
And advanced National accounts, and provides us confidence and the value of helpless upbeat and its ability to become the market leader.
Looking ahead to the first quarter, we are seeing continued pressure on adult vaccine utilization as our nation and starts to significantly ramp up COVID-19 vaccine administration.
Current CDC guidance and recommends COVID-19 vaccines be administered alone with a minimum interval of 14 days before or after administration of another vaccine.
Market data in January and early February show reduced non COVID-19 vaccine utilization compared to fourth quarter of 2020.
As a result, we expect <unk> revenues and the first quarter to decrease from the fourth quarter.
Based on customer feedback and the expected timing of COVID-19 vaccination rollout, we believe the utilization of adult vaccines will be impacted throughout the first half of 2021.
But we will rapidly return and the second half of the year as the backlog of patients requiring non COVID-19 vaccines is addressed.
Despite the pandemic, we expect to capture additional market share and field targeted accounts and made significant progress in our national accounts and Furthermore, we believe our combination of our efforts and driving market share and converting national accounts as well as increased awareness of the importance of using the best available vaccines.
And will lead to significant revenue growth compared to 2020 with a large majority of <unk> revenue and 2021 coming and the second half of the year.
Another important highlight of continued progress for Hep with SEBI came this past Friday when the European Commission granted marketing authorization for helpless Abbvie and Europe, we anticipate launching <unk> in Germany, and the fourth quarter of this year.
Furthering our positive outlook for Hep B yesterday, the CDC Advisory committee on immunization practices or the CIP discussed the concept of and enhanced recommendation for adult hepatitis B vaccination.
Specifically, the CIP discussed recommending hepatitis B vaccination for all previously unvaccinated adults.
This universal recommendation would greatly expand the number of adults in the U S, who should be vaccinated against hepatitis B and.
For hepatitis B working group is targeting and eat CIP boats as soon as October 2021 on this major policy initiatives, we believe a universal recommendation would be a catalyst to support the growth of the adult hepatitis b market by significantly increasing the number of people recommended to be vaccinated and enabling.
Easier identification of those and need a vaccination.
<unk> provides an important foundation for our company. Additionally, our CPG, Tennessee, and adjuvant supply business is growing rapidly as a result of the COVID-19 pandemic, providing an additional source of revenue growth.
Underscoring CPG to and eighteens versatility, our collaborations span multiple technology platforms across varied indications, including COVID-19 tetanus.
Tetanus, diphtheria, and acellular, pertussis or TDAP and universal influenza.
These CPG and 18 collaborations provide a pipeline of opportunities for diamondback, either as a vaccine developer or as a supplier of adjuvant and both scenarios progressed from strategy to reality and 2020.
And the vaccine development category Diamondback is now evaluating 10, 18, and a phase one clinical trial other potentially improve teed up and vaccine and.
This clinical stage program developed out of a collaboration with serum Institute of India.
Data from this trial are anticipated in the fourth quarter of this year.
We've also made progress with our adjuvant supply business for COVID-19, vaccines, which is now generating significant revenues.
Before I provide an update on our specific COVID-19 partnerships I would like to briefly review the COVID-19 vaccine landscape and how we expect CPG and 18 to fit in.
The global demand for initial COVID-19 vaccine is massive.
And with the uncertainty regarding duration and protection and the emergence of new mutations it is likely that booster vaccination will be necessary.
And may need to contain antigens for multiple strength.
Adjuvant, and inactivated and adjuvant and protein and sub unit vaccine platforms provide a number of advantages to address the global demand.
First is that senior stored traditional refrigeration temperatures, unlike mrna vaccines and making them more accessible for the global population.
These platforms have historically been used for multivalent vaccines, while maintaining an acceptable safety and tolerability profile.
Inactivated and sub unit vaccine can be used for repeat dosing. Unlike some viral vector platforms and finally with adjuvant like CPG 17, we believe these platforms have the potential to deliver high levels of protection on par with mrna vaccine.
Our collaboration strategy has resulted in multiple opportunities for emergency use authorization in 2021 for CPG and 18 adjuvant in COVID-19 vaccines CPG.
Cpg's and 18 has demonstrated the ability to increase antibodies, while preserving our best in class Tolerability profile.
Our partnerships are moving forward for the next stage of development and preparation for commercial supply.
And the third quarter of last year, we executed our first commercial supply agreement for a COVID-19 vaccine candidate and began production of CPG tenant <unk> at scale for pandemic supply.
Under this agreement Diamondbacks as providing CPG 10, 18 for Bell <unk> COVID-19 vaccine candidate being developed under an agreement with the UK government.
Diamondback is scheduled to supply they'll NEVA CPG 10, 18, adjuvant for 100 million vaccine doses in 2021, which represents a revenue opportunity of up to $230 million. While this contract is contingent on continued successful development. It is potentially worth over $400 million for Dino <unk> through 'twenty and 'twenty four.
We recently executed another major agreement to support commercial supply in 2021 with the coalition for epidemic preparedness initiatives for Cepheid.
<unk> is providing significant support for the global response to the COVID-19 pandemic through many collaborations and partnerships around the world.
<unk> is providing diner Max manufacturing funding of up to $99 million to support stockpiling of CPG and 18 for future sales to separate grant teets.
Depending on the mix of semi grantees and the allocation to high and low income countries. The material produced under this agreement has the potential to generate approximately $125 million to $200 million and.
And CPG and 18 revenue for dine and backs in 2021.
Our most advanced partner is Clover biopharmaceutical, who is initiating a global phase III efficacy trial with their protein sub unit vaccine candidate adjuvant, it with CPG and 18.
This trial is expected to have an interim analysis for vaccine efficacy and the middle of 2021.
Efficacy study is being funded by Cepheid and as a semi grantee COVID-19 will have access to adjuvant produced under the separate funding arrangement.
In November.
Biological E. Another separate grant team initiated a phase one two clinical trial of its COVID-19 sub unit vaccine candidate adjuvant did with TPG Tennant team.
With results expected in March of this.
This year.
Biological he is one of the leading vaccine companies in India and partners with global health care agencies, including the W. H O UNICEF and Pan American Health organization and their efforts to make lifesaving vaccines accessible globally.
And finally met adjourn who's based in Taiwan is currently evaluating CPG to 18, adjuvant and protein and sub unit vaccine candidate in 3700 subjects and a phase II clinical trial data from this trial is expected in July of this year.
Based on the limited initial availability of COVID-19 vaccine compared to the world's population. We expect a period of initial vaccination will continue at least through 'twenty two.
Driving the need for additional vaccine options, particularly adjuvant to vaccines.
And with emerging variance, creating potential challenges for current vaccines the need for adjuvant and Covid vaccines may continue far beyond 2022.
Through the continued advancement of our multiple collaborations CPG and 18 could be utilized and up to $500 million to $1 5 billion doses of vaccine annually in 'twenty and 'twenty, two and beyond with additional capacity expansion available depending on the global demand.
And CPG 10, 18, a valuable additional revenue generating assets.
Yeah.
With that let me wrap up with a couple of final comments.
2020, with a very successful year for Daimler and despite the pandemic as we executed on the transformation that we initiated in 2019, we made tremendous progress on a number of fronts that we believe have laid a foundation for significant growth in 2021 and beyond.
The strength of the fourth quarter revenue per episode would be combined with a rapidly increasing revenue from CPG 10, 18, and reinforce our confidence and the Diamondbacks vaccine business model and our long term investment opportunity. It represents.
I'll now turn the call over to Michael to discuss our financial results and more detail.
Thank you Ryan.
Our financial results are included in the press release, we issued this afternoon and.
Detailed and the 10-K, we are filing with the SEC today, So I'll just touch on a few highlights.
Total revenues for the fourth quarter of 'twenty, and 'twenty were $19 $6 million, including $13 $1 million of net product revenue.
Net product revenue for <unk> B during the fourth quarter was $11.5 million up from $10.6 million for the fourth quarter of 2019.
Full year half for SAP be net product revenue increased from $34 6.002 million $19 million to $36 million for 'twenty and 'twenty the highest annual 5% fee revenue achieved since launch despite the ongoing reduction and vaccine utilization due to the pandemic.
And if the COVID-19 vaccines rollout.
Looking to the first quarter.
Of this year, we expect continued progress and key national accounts and continued growth and field targeted market share. However, we currently expect overall vaccine utilization to decline significantly and the first quarter of.
2021 for the fourth quarter of 2020 to around 50% of pre pandemic levels, which will result, and a decrease and help us half day revenues and the first quarter of 2021 compared to the fourth quarter for <unk> 'twenty 'twenty.
Utilization of adult vaccines will continue to be impacted throughout the first half of 'twenty, one but is expected to return to near pre pandemic levels and the second half of the year.
We're planning to supply Val and even with adjuvant for the first hundred million vaccine doses and 2021, representing a revenue opportunity of approximately $230 million and 2021.
Approximately 40% of the supply is planned for delivery and the first half with the remaining amounts and the fourth quarter.
With CPG 10, 18, and beginning to deliver significant revenue for the first time, we want to provide a comment on the near term magnitude of that revenue.
Based on currently planned deliveries, we expect CPG 10, 18 net product revenue for the first quarter of 2021 could range between $40 million and $60 million.
As with <unk> B, we do not plan to provide quarterly guidance for potential CPG tonnage and revenue on an ongoing basis.
Cost of sales product for the fourth quarter, 'twenty, and 'twenty increased to $4 $1 million compared to $2 $4 million for the fourth quarter of 2019 and.
And full year, 'twenty and 'twenty cost of sales product was $11 $4 million compared to $10 $2 million for the full year 2019, primarily due to higher unit costs for Hep B as we produce and sell inventory, reflecting the full cost of manufacturing.
R&D expenses for the fourth quarter of 2000, twenty's decreased to $9.5 million compared to $12 $3 million for the fourth quarter of 2019.
And full year 2020, R&D expenses decreased significantly from $62.3 million for the full year.
Two.
2019 to 28.
It's $6 million for 'twenty and 'twenty.
This decrease in R&D expenses is due to lower R&D head count, resulting from our restructuring and May 2019, and the winding down of our immuno oncology programs and it does include an increase and additional CPG and 18 development costs, Our third party manufacturing facility to support increased CPG.
And a chain demand from collaboration partners for use in their development or commercialization of COVID-19 vaccines.
SG&A expenses for the fourth quarter of 2020 decreased to $17.8 million compared to $23 million for the fourth quarter of 2019, and full year 2020, SG&A expenses were $79 $3 million compared to $75 million for the first for the for year 'twenty.
And 19.
Loss from operations for the fourth quarter of 2020 decreased to $11.9 million from $27.4 million and the fourth quarter of 2019.
And full year, 'twenty and 'twenty loss from operations decreased to $68 4 million compared to $134 8 million for the full year 2019.
Finally cash cash equivalents in marketable securities totaled $165 million at December 31, 2020.
Back to Ryan for closing remarks.
Thanks, Michael.
Despite the significant disruption of the past year, we continued to make good progress with both <unk> and CPG and <unk> and are looking forward to multiple important milestones in 'twenty and 'twenty, one, including a potential ACI P decision on a universal recommendation for adult hepatitis B vaccination and increasing the addressable market and.
And the U S and multiple COVID-19 vaccine data readouts for our CPG and 18 collaborators.
'twenty and 'twenty with a successful year for dine and Max and we look forward to updating you in 'twenty and 'twenty one as we continue building <unk> into a leading commercial stage vaccine company. We thank all of our investors and team members for their commitment to this goal operator, we'd now like to open the Q&A portion of today's call.
At this time, if you'd like to ask a question. Please press star followed by the one on your telephone keypad.
Withdraw your question press the pound key.
Our first question comes from the line of Matt Phipps.
Hi, Ryan and thanks for taking my question and congrats on a good quarter for and obviously a pretty important year for you guys.
Just a couple of clarifications on some of the CPG and 18 revenues first Michael I think you said, 40% of the supply is planned to be delivered and the first half with the remaining amount in Q4, just wanted to confirm that's I guess the valve and Eva.
Collaboration or does that also include the <unk> agreement and then if you could just provide any I guess more details on how that revenue recognition works with this that'd be granted under the separate grant.
Is it still when you deliver the material the CPG to 19 funnel material to the <unk> Grant to you that you would recognize it.
Just on the ladder so to speak.
So the projection with respect to the split was was specifically with respect to Val NEVA, we expect.
40% of the <unk>.
Planned deliveries will occur.
And the first half and.
And then the remainder in the fourth quarter.
With respect to Seppi arrangement.
That is a loan for us to produce the material and have it available for their clients and when we.
Enter into supply agreements with those clients and then sell to them we will.
Repay seppi for.
For that comparable portion of the material that we sell to their clients.
And that's when we would recognize the revenue similar to when we generally recognize revenue for CPG tenant chain, which is upon <unk>.
Delivery of the product.
Great. Thanks, Michael and then if I can also ask about kind of the discussion yesterday and they ship.
And I'm sure. There's limited things you can say given its ongoing but.
And the.
Committee members seem to be pretty positive and my opinion, universal recommendation and not really eliminating and age groups.
Yes. It is.
Positive vote comes through.
In October how much would you have to scale current manufacturing.
How much investment would you need and what that is until you wait until it comes through or could you would you started some of that earlier, if the discussion and June looks positive as well.
Well, yeah, exactly there and we're going to have a couple of looks at it right. It's going to progress through June and into October. So we'll see how it's progressing I think it's important to understand that we've been preparing for <unk>.
Success for this product from a manufacturing perspective, so we've made continued improvements and investment and dusseldorf to be able to meet.
And any demand that we think we could generate so.
Those investments have already kind of been going ongoing Matt. So I don't think that there is a major need to invest and manufacturing other than just continuing to stockpile material and we will have enough advance notice because what youll see with the ACI P recommendation.
We will be the recommendation and then and update and the mwr, which takes a little bit of time as well couple of months and so.
I think plenty of time for us to react both commercially and from a manufacturing perspective.
Great and then if I could ask one more on Europe.
Obviously.
Congrats on the approval and then I know youre submitting and manufacturing supplement so launch in Germany at the end of this year.
Just as you think about it now.
And you start and Germany, obviously, that's cash.
And procedure, but how and how quickly would you advanced and maybe another.
Country or how you know what would be the cadence of rollout and traditional countries. How many do you think you could do and legitimate and try to target by yourselves.
Oh.
And I think the cadence and that's really going to depend on which countries. We want to go to each other their own process for access initial access and pricing things like that so the overall pricing strategy between private and public will matter and so.
Don't think we can comment at this moment on the cadence or the specific countries beyond Germany.
But as we move through 2021.
We will be refining that overall European strategy.
Okay. Thank you.
Okay and last question comes from the line of Ed White.
Good afternoon, guys. Thanks for taking my questions. So.
When you were talking about the recovery of the market share.
Excuse me of market penetration and increased market share by year end.
The question I have to you is just how are you thinking about that why.
Are you confident that the second half will be stronger than the first half.
Which seems like it would be before that.
The Asa.
Guidelines for recommendations.
And.
When youre thinking of market penetration how are you getting the market penetration who is it coming from and why do you continue to believe that you were kind of.
Gather more share.
Thanks, and why do I take the first part of that question and I'll ask Don to be prepared to answer the second part, but as it relates to the market returning and we did even we did get to see some insights and how fast and market can rebound as evidenced by last year's Q3, moving up to about 75% R. R.
Our expectation of the market returning is not tied to a CIP, it's really tied to processing the vaccine rollout for COVID-19.
Q1 saw the resurgence of cases after the holiday period combined with the rollout of backs the vaccine program and we do think that the majority the vast majority of Americans will be vaccinated and the first half of this year and both for Hep B vaccines as well as other adult vaccines theres going to be significant.
And up demand.
Because of the fact that it's become clear that there's a number of people who are prioritizing COVID-19 vaccination over other adult vaccines.
The return and the second half of the year is really more tied to when we believe the mass vaccination campaign will.
Complete.
Don do you want to comment on penetration.
Yeah, and I guess that when we look back a quarter and we look at our market share.
And that 23% we grew from Q3 to Q4 three points.
And the disruption of the pandemic, we anticipate again, our ability to be successful with customers.
Every month.
And so the challenge is not being able to engage customers tend to Ryan's point, and it's really kind of the disruption around the and co administration with the Covid vaccine. So we continue to engage with customers. We are very confident and our ability to continue to win new business.
The market is going to be a little smaller here and the first half of the year, but we do anticipate continuing to drive market share, which will lead to certainly revenue and the second half of this year.
Okay. Thanks, and maybe if you can just discuss the.
And the hemodialysis.
Market opportunity.
And we know you're going to get the full safety data by year end 'twenty one and.
And just curious as to what that really means to potential sales and in 2022 and beyond and and how you're going to go about targeting that market opportunity.
I mean, the beauty of the dialysis market is it's highly concentrated amongst.
Amongst a few national providers and then obviously dialysis services provided by large integrated health systems.
And so the two national chains makeup, but about 80% of the overall dialysis market is we haven't kind of laid out you noted in our slide deck, we provided.
Segmentation there.
And so.
As far as how we resource that opportunity, it's pretty easy. It's there are two national accounts and make national decisions for all of their centers.
This is evidenced a little bit by what we had happen here in Q4 with one of the national providers.
Making a major purchase.
For for their their employees essentially at least that's how we've engaged them.
And the data that we that you referred referenced and the study will be used to support.
Interactions with the FDA to get that data into the label, which will strengthen our ability to capture that market. So because at that point, we'll be able to proactively engage with all dialysis customers from a commercial perspective at the moment and we are not doing that right now our conversations with them are only focused on employees.
Okay.
And perhaps just the last question for me can you give us just an update on the universal.
Flu vaccine and.
What we should expect to see.
Going forward.
Yeah that the development of that program was fairly impacted by COVID-19 in 2020 and.
So it's a.
And it's continuing to progress I believe that the clinical trial for that initial clinical trial would be targeted for next year.
Okay.
Thank you.
Sir.
Thanks, Ed.
Your next question comes from the line of Ernie Rodriguez.
Hi team. Thank you for taking my call and corporations on there and that probe on the program for it could be three.
Can you just called for in terms of the.
But we're preparing for a recommendation for <unk> from April one.
What else needs to happen.
I'd like now to October for these recommendations for these next year and what role do you guys play and that broker.
And similarly and Pennsylvania.
Supply contract with vault and Eva.
And what that must be produced and in by Q2 in order for the supply agreement to claim credit do you have any clarity on that.
Yes.
So, let's start with ACI or anything for the questions.
If you if you go back and look at the presentation.
You can see day sort of laid out the net steps the witness words, they present and initial concept like they did yesterday and as part of that that presentation. They basically solicited questions from the CIP, which they will then go back and provide and do more analysis.
To be able to support the E cips questions and concerns so that's what's going to happen next our involvement here.
Given this is a universal recommendation is is limited I mean, we obviously engage.
And as we can but they this is ed.
Working group a division of viral hepatitis and Asap working group agenda items. So our involvement is actually a little bit limited.
And in this but we will be supportive you can tell though as part of their assessment. They are considering the role the cheetos and vaccine plays and so we will continue to engage with the work group to present, our safety data.
And when it's available and in Q2. So the work group has the benefit of the safety data.
And as part of their overall analysis.
Round.
And <unk>.
Universal recommendation and then the appropriate recommendations around the two versus three dose products.
And then.
Moving to Bell NEVA.
Non Eva.
And we really just need to continue to deliver the doses I think the only point that we just sort of trying to make with all of these collaborations as we have to be able to have time to deliver the doses and we know about neither has a data readout coming here in April so.
While we believe that the.
UK government remains committed to the contract and the fact that they are inactivated approach adjuvant and inactivated approaches building. Although there is other and activated technologies out there that have demonstrated.
And the ability to drive protection, we believe that there is relatively low risk on that data readout, but there is still a data readout that has to come for that program and they just have to continue to move their program forward. It's really all of that has to happen.
For us to continue to recognize the revenue.
Alright. Thank you that's very helpful.
There are no further questions at this time I would now like turn the floor back over to Ryan Spencer CEO for any closing or additional comments.
Thank you operator.
Well, we believe adjuvant and vaccines will play a critical role to ensure the effective vaccination for all populations against COVID-19, having vaccine shown to be effective and clinical setting. There is really only the first step we must ensure there is adequate supply of these vaccines. We believe the evolving COVID-19 pandemic will require additional.
<unk> and manufacturing capacity beyond 2022, we.
We also believe CPG and 18 is well positioned to drive significant growth and value for <unk> and its shareholders.
And while the fight against COVID-19 is currently a key priority. We also continue to drive our business forward through the growth of sales and <unk>, which we believe will become the standard of care adult hepatitis B vaccine and the U S with a potential annual market opportunity growing to over $600 million.
With the combined strength of opportunities for <unk> and CPG to and 18, we believe <unk> 'twenty 'twenty, one will be a transformational year for diamondback.
And again for spending your time with US today, and we look forward to speaking again soon.
Operator, you may and Nicole.
Ladies and gentlemen, thank you for joining US today. This concludes today's conference call you may now disconnect.
Okay.
Technical.
And until the line's disconnected there.
First there is six six actually.
Yes.