Q1 2021 Dynavax Technologies Corp Earnings Call
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Good day, ladies and gentlemen, and welcome to the Diamond backs technologies first quarter 2021 conference call. As a reminder, this conference call is being recorded at the end of the company's prepared remarks, we will open the call for questions and Goodbye.
And specific instructions at that point I would now like to turn the call over to Nicole Arndt Senior manager Investor Relations you may begin.
Thank you operator, good afternoon welcome for the Diamondbacks first quarter, 2020, one financial result for us.
Conference call joining me on the call today are Ryan Spencer.
Got it and officer, Kelly and Mcdonald, Chief Financial Officer, Barbara <unk>, and Chief Medical Officer, and Don for Salt Senior Vice President commercial before I begin and I advise you that we will be making forward looking statements today, including statements regarding help us SP commercial profile and its potential to become the standard of care and for.
For Universal recommendation revenue expectations and financial outlook from our products are helping us to be European launch effort post marketing studies and other vaccine development and with our collaborators and 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 a detailed and the risk factors section of our current 10-Q and 10-K periodic reports filed with the S. E T, which we encourage you to review I will now turn the call over to Ryan Spencer CEO of diabetics.
Thank you Nicole and thank you all for joining us today I'm very happy to welcome Kelly for the team as well.
I'm excited to share our first quarter results during which we generated our highest quarterly product revenue and the company's history at $83 $3 million.
And to discuss our outlook for 2021, which we believe has the potential to be a transformational year for Dynamo.
The ongoing pandemic as focus worldwide attention on the need for continued development of new or improved vaccine to help prevent the spread of infectious diseases.
Adjuvant and the potential to boost the immune response to increased protection and provide longer lasting immunity Jamaica.
Can make adjuvant and important contributor to the success of vaccine.
And I know back to the vaccine company with two unique and valuable assets first our marketed best in class two dose adult hepatitis B vaccine couple of therapy with a profile that gives us the potential to become the standard of care and the U S.
The U S represents a large current existing market.
With the potential for growth from improvement and regimen compliance and overall coverage rates for recommended populations.
Importantly, the CDC Advisory Committee on immunization practices is evaluating significantly increasing the number of adults and a recommended for Hep B vaccination.
Establishing a universal recommendation for all previously unvaccinated adults to support the CDC goal of eventually eliminating hepatitis b as a public health threat.
Our second asset and CPG and <unk>.
Advanced advent, which contributes to the impressive profile of purpose upbeat.
We are utilizing CPG and 18 adjuvant to help develop new and improved vaccines for various diseases through internal development and through collaborations with multiple vaccine developers globally. Our COVID-19 vaccine collaborations have already begun to generate significant revenue for the company and have the potential to provide a meaningful long term revenue stream.
Let's walk through each of these important assets to take you through our update on <unk> I will turn the call over to Don to Salt.
Non.
Thank you Ryan.
I'm pleased to provide and update on our continued progress within the U S market.
That would be our first commercialized product is and adult hepatitis b vaccine, which are adjuvant.
With CPG and a team.
Couple therapy with engineered to deliver higher rates for protection and a shorter period of time.
Despite the availability of traditional three dose hepatitis b vaccine over three decades.
Hepatitis B rates continue to be on the rise and the United States.
Given a similar safety profile and significantly higher rates of protection over and <unk> be.
With only two doses and one month.
Couple therapy is an important advancement and hepatitis B prevention.
Since March of last year, the health care industry has faced significant disruption from the COVID-19 pandemic.
Despite the challenging market condition Hecla February was able to continue to grow market share over the last 12 months.
And is positioned for continued growth as the country emerges from the pandemic.
First quarter net product revenue for heavily that'd be was $8 3 million compared to $10 $5 million and the first quarter of last year.
The hepatitis C market was down 41% and the quarter from the same period last year, which expectedly had an impact on revenue performance.
Importantly, while utilization was down field targeted market share increased to 27% and the quarter and all time high.
And an increase of 7% from the first quarter of last year.
We are encouraged by the progress of market share and considering the disruption and the health care industry over the past year.
Based on recent market trends and customer feedback, we expect a continued recovery and utilization throughout the remainder of the year as COVID-19 vaccinations are completed.
With the rate at which COVID-19 vaccination programs are beginning are being administered across the United States.
Back to other health care services, such as immunization.
We believe will help drive a positive trend and hepatitis b vaccine utilization.
Additionally, we believe there will be an increased level of awareness around the importance of vaccine.
Due to the COVID-19, pandemic that will help support broad consumer demand for vaccine.
All of which leads to a terrific opportunity to capitalize on the strong clinical profile of Hecla therapy, as part of and effective vaccination strategy.
A few other highlights during the quarter for Hecla therapy.
As we shared on the last earnings call, we received marketing authorization from the European Commission.
We are focused on launching help us that would be in Europe by the end of the year, starting and Germany first followed by additional markets and we identify commercial strategies for individual countries to capture the benefit of purple therapy.
For the initial launch in Germany, we are evaluating commercial partnering approaches and look forward to keeping you updated on our progress.
Also in April to help us that'd be abstracts were presented at the 2021 annual conference on Vaccinology research.
And our ongoing clinical trial evaluating type of therapy and patients undergoing hemodialysis.
And our new for dose regimen.
And final Immunogenicity analysis demonstrated thorough protection rate of 89, 3%.
Interim safety data showed that <unk> was well tolerated with no safety concerns.
And our post marketing observational surveillance study and over 69000 patients Hecla therapy showed no evidence of increased risk of acute myocardial infarction compared to and <unk> peak.
The positive results of both studies further support our confidence that <unk> will become the standard of care in the United States.
And finally, furthering on our positive outlook for Hecla therapy and <unk>.
DC Advisory Committee on immunization practices, our ACI key reviewed.
And reviewed a universal hepatitis B recommendation for all previously unvaccinated adults during their February meeting.
And its recommendation for what helps simplify the identification of patients who need a hepatitis b vaccine compared to the current risk based recommendation.
And significantly expand the number of adults in the United States, who should be vaccinated against hepatitis B.
2021 is an important year for <unk>.
As we continue to see a return and vaccine utilization increase.
And increasing market share and potential for significant market expansion we.
We are very excited about both the near and long term prospects for the brand.
I will now turn the call back over to Ryan.
Thanks, Don.
As you see from Dawn's update <unk> provides an important foundation for our company our second assets CPG and 18 is our advanced adjuvant is being used and a variety of other vaccine targets.
I was just wondering CBD to 18 versatility, our collaboration and development efforts span multiple technology platforms across various indications, including COVID-19 tetanus.
Tetanus, diphtheria, and acellular pertussis or teed up and.
Universal influenza.
These CPG for anything collaborations and provide a pipeline of opportunities for diamondback, either as a vaccine developer or as a supplier of adjuvant through commercial supply agreements.
As a supplier of our adjuvant, we have made dramatic progress with our efforts to enable development of COVID-19 vaccines. Despite.
Despite the success of the initial vaccination campaign and the west.
And the ongoing global need for COVID-19 vaccine is massive and.
Even with the emergency or conditional authorizations of multiple vaccines and some of the world's most dense population centers lack sufficient quantities of vaccine.
With the uncertainty regarding duration protection and the emergence of new mutation. It is likely that additional vaccine supply will be needed and the booster vaccination will be necessary, providing continued demand for multiple vaccines.
CPG 10, 18, and demonstrated the ability to increase neutralizing antibodies and stimulate T cells with and especially favorable tolerability profile.
Our collaboration strategy has resulted in multiple opportunities for conditional for emergency use authorization in 2021 for CPG, <unk> adjuvant and COVID-19 vaccine.
Our partnerships are moving forward for the next stage of development and preparation for commercial supply.
And specifically and preparation for commercial supply in 2021, our agreement with the coalition for epidemic preparedness initiatives or SEBI has recently been expanded.
Under the terms of the expanded agreement semi will increase funding by $77 million to a total of $176 million, which will increase the available volume of CPG and <unk> 2021 for semi funded COVID-19 vaccine development program.
This agreement represents a key strategic investment by SEBI to increase overall availability of COVID-19 vaccine doses in 2021.
It is anticipated that SEBI grant is benefiting from our agreement will have the potential to create hundreds of millions of vaccine doses in 2021, which will be available for procurement and allocations, who kovacs kovacs as a global initiative to ensure rapid and equitable access to COVID-19 vaccines for all countries regardless of.
Income levels.
Our COVID-19 collaboration partners continue to make good progress and our clinical development programs.
And April <unk> reported positive initial results from part a of the phase <unk> clinical trial of their COVID-19 vaccine candidate and subsequently initiated a pivotal phase III trial.
And neither has stated that subject to successful phase III data they aimed to make regulatory submissions for initial approval and the fall of 2021.
And March clever biopharmaceutical has initiated a global phase III efficacy trial.
This trial is expected to have an interim analysis for vaccine efficacy and the mid 2021 time frame.
And this efficacy study is being funded by SEBI and as a separate grant T for broad access to adjuvant produced under the 70 funding arrangement.
In April biologically another separate grant <unk> announced that the results of their phase one two trial were positive and that they have received authorization from the Indian regulatory authorities to begin phase III studies.
Finally medicine.
Based and Taiwan has completed enrollment of over 4000 participants and phase II clinical trial evaluating its vaccine.
Data from this trial is expected in July of this year.
Based on the availability of COVID-19 vaccines compared to the World population. We expect a period of initial vaccination will continue into 2022 driving the need for additional vaccine options as soon as possible and with emerging variance and the <unk>.
<unk> need for booster doses the demand for COVID-19 vaccines is expected to continue beyond 2022.
We have developed capacity for CPG and 18 manufacturing to support over 1 billion doses of vaccine annually in 2022 and beyond with additional capacity expansion available depending on the global demand.
And CPG to 18, and potentially valuable additional revenue generating assets and and important part of the global response to the pandemic.
We continue to make tremendous progress on a number of fronts that we believe will generate substantial growth and 2021 and beyond.
I'll now turn the call over to Kelly to discuss our financial results in more detail.
Thank you Ryan.
Our financial results are included in the press release, we issued this afternoon and details and the 10-Q filed with the SEC today. So I'll just touch on a few highlights.
Total revenues for the first quarter of 2021 for $83 3 million, a significant increase from $10 $5 million and the first quarter of 2020.
As a reminder for first quarter of 2020 only included product revenue from Hello, Pesky compared to the first quarter of this year, which includes net product revenue of $8 $3 million from have per basket and $74 $6 million from CTG and he can add sale and.
As Don mentioned, we have seen overall hepatitis a vaccine utilization declined by about 41% and first quarter of 2021 compared to the first quarter of last year.
We expect utilization of adult vaccine to continued to be impacted throughout the first half of 2020. One. However, we do expect for recovery and utilization throughout the remainder of the year as initial COVID-19 Destiny nations are completed.
Under our supply and our commercial supply agreement with Areva, we supply of CTG team for Val and EBIT COVID-19 vaccine candidate being developed under an agreement between El Nina and and UK government.
We are scheduled to supply and neither with CTG and easy and adjuvant for up to 100 million vaccine dose and in 2021.
This agreement represents a revenue opportunity of up to $230 million and in 2021 with about 40% of the 2020, one supply being delivered and the first half of this year and the remaining 60% and the fourth quarter, assuming continued success and the development program.
Additionally, as of March 31, 2021, we have approximately $52 million and current deferred revenue primarily related to our CTG and 18 adjuvant iron ores Almeida.
As well as approximately $64 million and long term deferred revenue associated with our agreement with Duffy.
Cost of product sales and the first quarter of 2021 increased to $24 $6 million compared to $2 $4 million. During the first quarter of 2020. This increase is in connection with increased CTG and 18 adjuvant product sales.
We do anticipate cost of product sales to increase substantially in 2021 and connection with continued supply of CTG and 18 to our global partners.
Research and development expenses for the first quarter of 2021 increased $7 8 million.
Compared to $4 $7 million for the first quarter of 2020. The increase is primarily due to development activities related to the yield and process improvements at our interest with our facility as we prepare for global expansion and help us abbvie and a potential universal recommendation for adult hepatitis B vaccination.
Income from operations for the first quarter of 2021 of $28 $5 million.
Compared to a loss from operations of $19 $3 million from the first quarter of 2020, we.
We are very pleased with a profitable first quarter of 2021 with net income of $900000 compared to a net loss of $12 $6 million and the first quarter of 2020.
During the first quarter of 2021, we recorded a charge change in fair value of our warrant liability of approximately $25 $6 million. This was a noncash adjustment, but did impact our net income for the quarter.
Basic and diluted net income per share was one <unk> for the first quarter of 2021 compared to a basic net loss of <unk> 15 per share and a diluted net loss per share of <unk> 25, and the first quarter of 2020.
Cash cash equivalents and marketable securities totaled $232 $7 million as of March 31st 2021.
Our strong execution for the quarter has bolstered our cash position further enabling investments to drive long term growth for the public Duffy and TPG tenant Kim.
We continue to make significant progress with both <unk> and our CTG 10, 18, avid and partnerships and we are looking forward to multiple important milestones and anticipated catalysts in 2021.
Including a potential aci's decision on universal recommendations for adult hepatitis C and explanation.
As well as multiple COVID-19 vaccine data readouts from our CPG and collaborators.
Our success and the first quarter and further validates the corporate strategy for our two valuable assets and.
And we look forward to updating you on our progress throughout the rest of the year.
We thank all of our investors and team members for their commitment to Dynamo.
Operator, we would now like to open the Q&A question on today's call.
Yeah.
Ladies and gentlemen, if you have a question at this time. Please press star one on your telephone keypad again that stars and the number one and your telephone keypad.
And while we compile the Q&A roster.
Okay.
Your first question comes from the line of maps and rates from William Blair. Your line is now open.
Hi, good afternoon, congrats on a nice quarter and thanks for taking my questions.
First of all I guess for done and you said, 41% impact for the quarter on HBV.
Vaccines broadly have you seen a moderating at all.
And of the quarter and merger or early into April and it read on if its recovery.
This is quickly or if you think it'll be at 41% kind of through the first half and then more of a.
Improvement in the second line.
Hey, Matt Yeah, so as it relates to the first quarter actually we saw utilization down about 50% and January and February and March we saw an uptick in utilization to have and overall of 41%.
The initial read on April and it continues to be hovering around that 40% mark improving slightly.
So our viewpoint on the second quarter is that we see.
A moderate increase in utilization and our second quarter and and accelerating into the second half of the year as it relates to utilization.
So good things and then I.
Yes for Kelly the gross margin that you can.
Could cut it back into for COPD today P and Q1.
Is that something we should assume it will stay constant throughout the year and into next year or do you think that could improve our scale up continues.
Sure. Thanks for the question Matt.
And our CTG, Tennessee and profit for the quarter as you alluded share was around 71% and and consisted predominantly of around <unk>.
Suppliers for valley and the partnership.
And.
And we continue to supply our partners and we can expect revenue and corresponding profit can vary based on the mix of high income first of all income pricing of course of low income pricing coming with higher volume and then also we of course can't be can't be certain of ongoing profitability, which will be highly dependent on continued clinical success and are very pleased with.
With the performance and the quarter.
Okay. Thanks, and then I guess to COVID-19 vaccine related questions for me.
For.
So the phase III for Bell NEVA is obviously interesting because of the.
Superiority trial.
And then in response and.
And I guess what are your thoughts on that end point, and that's something that could allow them to get approval beyond the U K and do you think or.
And discuss that with other regulatory bodies that you know.
Alright, and I'll take this and Rob you cannot and color as you see fit.
Non Eva and their agreement with inventory on even and UC study was one of the first.
And because.
From a pretty good developed country regulators and Bonnie So I think they are kind of ahead of the game on that one and we're going to see how other regulators respond and that trial moves forward as well as other programs.
Okay, and then I guess the last question just you mentioned that <unk> will have access to adjuvant produced from the scope of the agreement.
How would you how and revenue.
For you guys for that is that mean, it's already almost like pre purchase adjuvant or is that still.
Hey.
For the Kovacs program service.
Program and there would be for revenue for you all but when you send them for their formulations and stuff would you recognize some revenue from them.
Sure.
And just to be clear it's for all subsequent teams, which includes <unk> true.
True.
But the concept of Hussein and at Cepheid pre funding the production and <unk>.
And so it's not that it's not just necessarily the Siemens for full cost and risk.
And my agreements with our collaborators.
And can see it's allowing us to manufacture and.
Enable capacity in 2021 now.
And.
And our collaborators having.
Pre purchase that material. So it really makes it available for them.
Non purchasing and materials from our schools and.
Turnaround and reimbursed separately.
To the extent, we sell them and all of the adjuvant setting guarantees.
And so as rent revenue is going to be as you can I think you kind of highlight and can be a little tricky here is for <unk>.
Periods reported.
And will be based on a number of factors around the collaboration and and when we receive the cash from our partners so to the extent.
And you kind of nailed it and there's some level of pre purchase for the $176 million with an additional component of revenue coming.
And as we look forward to our.
And our collaborators, but there will be no revenue recognized until we actually deliver the product to them.
Okay, great. Thanks, Ryan.
Thank you Matt.
Your next question comes from the line of Phil <unk> from Cowen and co. Your line is now open.
Hi, Tim This is there any rodriguez for Phil Thank you for taking my call.
Uh huh.
And just to follow quickly on from an.
On the therapy funding, you mentioned and it sounds like the terms are the same months would there with it.
Or regional agreement.
Hum.
Am I correct in saying that from pick them.
How it would be either fund and distribute it for the first original agreement you had mentioned that there was going to be for payment.
First half with their gear and then and second one Q3 should we expect the same kind of distribution.
Yes, let me I'll put a little bit about its the same structure as you noted.
This is for manufacturing of material through Q3 to be delivered in Q4 post release and so it's not that's why we called it and the expansion and extension. This isn't a time base, we've identified additional capacity and separately.
And who is willing to support the additional manufacturing so we basically extend and expanded the existing agreement through an amendment and.
And so the timing is actually similar to what we saw before as far as team.
Thanks.
In terms of the post marketing studies I was curious if you you know because they always have.
For example, and there.
And my preferential recommendation and maybe like there.
Have you also have feedback from institutions in terms of like conferences and earnings for Cardiome.
Cardiovascular safety of the drug that are now being addressed by these positive results.
Well, thanks for that over to Don to give you a quick review and how the Army post marketing study impacted our commercial engagement throughout the launch and it.
And to the extent it will be meaningful going forward.
Yes, no I mean, it's obviously the result that I shared we're very excited about the results certainly but from a day to day engagement with customers.
And that topic has not been a topic that's been any type of barrier as it relates to conversion with help us out and.
Initially when we first launched certainly the questions were out there.
But over the last.
And the 12 months that really hasn't been a topic or a part.
Of the discussion and dialogue with customers as it relates to help us out base, and whether or not they're going to convert to.
And to help us out.
Got it. Thank you that's helpful. Thank you for taking my questions.
Questions. Thanks Arnie.
Yeah.
Your next question comes from the line of Charles Schumer from Evercore. Your line is now open.
And thanks for taking the questions for first universal recommendation for.
And for Hep B vaccines, and how do you handicap the probability that that will be recommended recommended.
Do you have into that and that process as we think about it.
The ability of that.
And what impact would you expect that to have on and.
The market for hepatitis B vaccine for <unk>.
And then on.
2018, adjuvant, how should we be thinking about quarter to quarter year to year revenue potential.
And I feel like the.
The error bars are extremely wide and we're supposed to have some kind of assumption and our model and maybe you can help us think about what the appropriate assumptions are at this point in time and and what the rationale and might be for them.
Sure, Thanks, Josh and why do I see.
Yes and.
And that's also supported by the fact that day, so lines with a CDC goal around eliminating viral hepatitis and the public health threat. So to a very very positive about the trajectory and the likelihood of success for this recommendation.
And why don't you take the impact.
Yeah. So so Josh I mean, one of the things I think it's important to note regarding the recommendation is you know as you know right now and it's a risk based recommendation so what for Universal recommendation. When do is certainly make the either the recommendation at the provider level much easier and so it's sort of that's gonna have an impact as it relates to coverage right.
From from a size and and opportunity and depending on the recommendation is Ryan mentioned and whether it's up to 859 or beyond 60.
It can be upwards of the dreadful market three at what it is today, but to put that into context, one of the things that consider certainly is current coverage right for happy vaccine and approximately 25 per cent for those 19 years of age and older and one of the things that that it probably gonna look at is whether it be influenza.
For pneumococcal kind of the ceiling. If you will coverage rates and you see that upwards of 60 to 65 per cent covered great things started kind of a mess with that potential opportunity can be from those types of and number. So we see it as a as a significant opportunity certainly and it depends on what that recommendation will look like but certainly.
Certainly can expand the opportunity for us.
Thanks.
Josh I'm going to say Janine, assuming you'll have a follow up on those points.
Okay.
Any obvious and forget.
Any obvious reason why the AC CIP may not follow the recommendations to work and group.
Oh, I mean, I don't think we have any insight into why that would be the case based on dialogue that we heard and February.
If I had to pick a risk factor and it would be continued distraction from the Kobe pandemic for people involved musicians, but honestly I think that risk is continuing to decline as the vaccination programs and the us continue to be successful.
Got it thank you.
If you like any teen and pre.
The question and I just need to start by saying, we're very excited about the loans from opportunity and but we also have to recognize there's a ton of complexity in how this rules out, especially given the number of partnerships we have.
But there is a lot of demand and the globe.
Uhm.
Let's just walk through what we kind of share today, we have developed NEVA contract, which the economics and timing and that I think we've been fairly clear on the total opportunity about the $230 million. This year with the with 60 per cent of the doses being delivered and some for and 40% and.
And the first half of the year.
And then beyond that I think the best thing I can do for now given that we're still in the process and negotiating commercial supply agreements and their collaborators and they are still in the process and negotiating either bilateral deals or deals with kovacs. It doesn't allow me to provide any specific color on on those economic relationships, but but as far as.
Order of magnitude the day.
Quantity of CPG that and <unk> I'm, just happy relationship is hundreds of millions of doses.
And the separate relationship is supporting the manufacturers CPG at around cost and that that being $176 million gives you a baseline that which you can provide a margin assumption on top of him to highlight the opportunity that just arrangement provides for near term revenue Uhm assuming continued success.
<unk> and <unk> and then as as we move forward with the clinical development and as well as the <unk>.
Commercial supply agreements and our collaborators arrangements with either governments or kovacs, we can be and the physician to provide more clarity on the long term.
We have no further questions with next time I would now like to care and the call. Thank you Ryan Spencer C E O for clothes and move my ex let me begin.
Thank you operator, well, we believe the evolving COVID-19 pandemic requires additional vaccine to support the global demand.
Our cpg's energy and as Vince through our global collaborations as well positioned to be part of the solution Cpg's and 18 is already driven the largest quarterly revenue and the company's history and we believe it has further potential to drive significant growth and value for dining backs and its shareholders.
And was supporting the fighting it's COVID-19 is currently a key priority. We're also continuing to drive our business forward to the growth of sales of herbal 70, which we believe is a source of continued value creation as we grow revenue along our path to be and the market, leading adult vaccine hepatitis B vaccine.
And to take advantage of the potential market expansion with and enhanced national recommendation.
With the combined strength of opportunities from Apple's happy and CPG to any team. We believe 2021 will be a transformational year for dining box and.
Thank you again for spending your time with US today, and we look forward to speaking and soon.
Operator, you may close the call.
Ladies and cancel and then thank you for joining US today. This Complicities conference calls and you may now disconnect.
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