Q1 2022 Dynavax Technologies Corp Earnings Call

Yeah.

Good day, ladies and gentlemen, and welcome to the Diana backs Technologies' first quarter 2022 financial results. 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 provide specific instructions at that time I would now like to turn the call over to <unk>.

Nicole Arndt senior manager Investor Relations you may begin.

Thank you good afternoon, and welcome to the Diamondbacks first quarter 2020 financial results and corporate update conference call. In addition to our press release issued today, a supplementary slide presentation that accompanies today's call is available.

One of our website before we begin I advise.

We will be making forward looking statements today based on our current expectations and beliefs, including but not limited to potential market size.

Sure impacting the CIP recommendation financial guidance and trends expected regulatory filings or approvals of our collaborators clinical readouts and potential future uses of <unk>.

These statements involve risks and uncertainties and our actual results may differ materially. These results. These risks are summarized in today's press release and detailed in the risk factors section of our SEC filings, including today's quarterly report.

On Form 10-Q, our forward looking statements speak as of today and we undertake no obligation to update these statements joining me on the call today are Brian sensor.

I can give officer, Tom <unk> senior Vice President of commercial and Rob Janssen, Chief Medical Officer, and our Chief Financial Officer, Kelly Macdonald I will now turn the call over to Brian . Thank.

Thank you Nicole and thank you all for joining US today, we are very excited to have this opportunity to review the progress we've made in our business during the first quarter I.

I will provide some corporate highlights and a brief review of our COVID-19 added supply business before I turn it over to Don Rob and Kelly, who will provide a bit more insight into their respective areas.

Following a year of record revenue in 2021, we are off to a great start in 2022, our team has demonstrated strong execution and driving growth.

And executing on our adjuvant supply business for COVID-19 vaccine driving total revenue of $114 million in the first quarter.

Which was up 37% from the same period last year.

For <unk>, we are seeing positive momentum driven by market growth as we emerge from the pandemic along with our continued successful engagement across our customer segments.

Through our efforts, we have achieved $21 million in product sales first quarter, providing us continued confidence in our expectation for annual revenue growth. Additionally, we continue to focus increasing effort on driving awareness of the expanded <unk> CIP recommendation, which we believe will result in significant market growth over.

The coming years.

In addition to help with that would be our global portfolio of CPG adjuvant agreements for COVID-19 vaccine generated $92 million as the largest driver of revenue in the first quarter.

We're very proud of our efforts to support the development of multiple COVID-19 vaccine or COVID-19 supplier partners have received multiple emergency use authorization and additional regulatory applications are under review with decisions anticipated in the second and third quarter of this year spanning multiple countries and regions.

Additionally, our partners continue to expand our clinical data to support broad utilization of their vaccine. This includes additional clinical trials or add a lot of it's boosting elderly and pediatric indications and research to evaluate new variant based vaccines.

Based on the impressive phase III datasets across our COVID-19 partnership portfolio. We believe the combination of high efficacy and Immunogenicity with favorable safety and Tolerability provides a very competitive profile as COVID-19 vaccine landscape evolves to recurring booster market.

We expect revenues of at least $550 million from our Asia supply business in 2022.

And our supply partners continued progress provides opportunity for future revenues as the epidemic COVID-19 vaccine market develops.

We are also leveraging CPG tenant profile in our clinical pipeline to develop new and improved vaccine. We've advanced two programs into the clinic teed up in shingle both of which are on track to generate additional clinical data. This year that we anticipate will highlight our high value pipeline designed to produce best in class products targeting.

Large markets.

Our performance this quarter puts us on track to achieve annual revenue growth in 2022 for both <unk> and CPG to 18 agent supply, which is expected to enable a second consecutive year of profitability.

This strong financial performance has resulted in sufficient capital for us to bring <unk> to profitability.

Well, if our existing pipeline and to continue to advance CPG Tennant team.

We are committed to taking advantage of all the strengths, we have including our commercial manufacturing and development expertise.

Our advancing clinical pipeline.

Our strong balance sheet, and our team's commitment to deliver value for public health and our shareholders I will now turn the call over to Don to provide more details on <unk> performance.

Thank you Ryan IMAX.

Im extremely excited to share the exceptional first quarter results were apples to abbvie.

<unk> is the first and only FDA approved adult hepatitis B vaccine that allows series completion with only two doses in one month.

There is completion is essential for high levels of protection.

Unfortunately, most adults never complete at three dose hepatitis B vaccine series.

Series completion is more critical now than ever in the era of Universal adult hepatitis B vaccination.

Help us that'd be can make series completion easier and protect more patients faster.

For Q1, <unk> net product revenue grew to $21 million, an increase of 151% from $8 million in Q1 of 2021.

Driving this increase were gains in market share.

<unk> total market share increased to 26% up from 14% during the same period last year, while fuel targeted market share increased to 33% up from 27% during the same period last year.

We are extremely proud of our commercial team's execution and ability to drive significant revenue growth and market share gains over the past year, despite the turbulent and challenging market conditions brought on by Covid.

While omicron had significant impact on health care delivery and hepatitis B market utilization from January to mid February of this year.

We saw a significant shift in turnaround in March.

We are very encouraged by this trend and expect to see continued progress with customers working their way back to normal throughout the remainder of 2022.

Over the past 12 months headless Abbvie grew faster than the overall hepatitis b market.

The doses the hepatitis B market grew by approximately 27% from Q1 of last year.

While <unk> grew by approximately 137%.

<unk> B is in an excellent position to realize additional revenue gains as the hepatitis B market continues its return to pre pandemic levels.

Furthering our long term positive outlook for Hep looks abbvie.

CVC Advisory Committee on immunization practices or ACP has now published its recommendation that all adult 19% to 59 years of age should receive hepatitis B vaccination.

This recommendation significantly expand the number of adults in the U S who should be back donated against hepatitis b compared to the prior risk based recommendation.

With the ACI P Universal recommendation.

Appetite is b vaccines now become one of the most widely recommended adult vaccines.

We believe the ACI T recommendation will be a significant catalyst for growth and we estimate the market opportunity could grow to approximately $800 million by 2027.

With <unk> that would be well position to secure a majority market share over time.

Many of our customers are updating vaccine protocols and internal operations to reflect the change in the universal adult hepatitis B recommendation.

The two dose in one month profile of helpless Abbvie has become an even more important consideration for customers now that they are faced with vaccinating a significant portion of their adult population.

We are increasing sales and marketing initiatives to support the long term process of building awareness among health care providers and patients to increase vaccination coverage rates in.

Importantly, we are reinforcing why the two dose in one month profile of helpless Abbvie is now the best option for customers to effectively operationalized, a universal adult hepatitis B vaccination program.

With a proven clinical profile and our team's strong commercial execution, we expect further market share gains and revenue growth in 2022.

We remain confident in our ability to generate momentum and look forward to continuing to drive long term growth for headless abbvie.

I will now turn the call over to Rob to take you through our clinical pipeline.

Thank you John Alright, adjuvant CPG.

<unk> has demonstrated exceptional characteristics of inducing a strong immune response combined with a very favorable tolerability profile.

This has been established through a wide range of clinical trials and now through extensive real world commercial use.

Very excited to advance our clinical pipeline leveraging CPG 2000 team to develop improved and new vaccines in indications with unmet medical needs during.

During 2022, our studies will generate early clinical data that we anticipate will begin to support meaningful differentiation from the existing vaccines.

Last year, we initiated a phase one clinical trial evaluating an improved tetanus diphtheria in pertussis or Pete FX.

It uses our CPG <unk> adjuvant.

Interim adult data from this ongoing study demonstrated the vaccine candidate was well tolerated without safety concerns.

Additionally, immunogenicity results were consistent with our expectations and support continued advancement of the vaccine candidate and.

<unk> data from the <unk> trial are expected in the second half of 2022.

We anticipate presenting the full data at a scientific conference sometime later this year.

Additionally, we're conducting a non human primate Pertussis challenge study and this is assessing the impact on prevention of both disease symptoms and nasal colonization of the pertussis bacteria data from this study are expected in early 2023.

And second is our shingles vaccine program, we believe that CPG <unk> has the potential to elicit strong CD four T cell responses and these are key and controlling reactivation of the zoster virus, while also providing improved tolerability compared to the current marketed product <unk>.

Late January we dosed the first patient in a phase one study designed to evaluate safety Tolerability and Immunogenicity.

Data from this trial are expected to be available by the end of 2022.

Finally in the second half of 2022, we anticipate initiating a phase II clinical trial for plagued vaccine that utilizes our CPG and <unk> management.

<unk> clinical trials being conducted in collaboration with and funded by the U S Department of defense.

We believe the proven profile of CPG <unk> enables us to develop vaccine candidates that have significant opportunities with lower development risks.

I'll now pass the call over to Kelly to review, our first quarter financial results and our 2022 financial guidance.

Thank you Ron.

Wonderful to be in a position to report another quarter of strong financial performance I'll walk through the key financial highlights and then review our full year 2020 guidance and provide a few closing thoughts.

Please note that all financial comparisons are versus the prior year period, unless otherwise noted and also please refer Additionally, each of our press release and 10-Q for detailed financial information.

Starting with revenue, we delivered total revenue of $114 million for the first.

On our 2020 up 37% year over year.

<unk> generated net sales of $21 million.

151%, which as others have mentioned as a positive trajectory that we are very pleased with.

Additionally, we achieved $92 million in CPG.

<unk> revenue up 23% from $75 million.

Period last year, driven by continued strong execution on our global portfolio of commercial supply agreements.

Now turning to expenses, our research and development expenses for the first quarter of 2020 were $11 million, reflecting continued advancement of our ongoing pipeline programs and channel and are fully funded acu contract with the Dod for adjuvant displayed not be.

Looking ahead, we continue to be very pleased with the progress we're making in our clinical pipeline and look forward to multiple potential data catalyst by the end of the year.

Selling general and administrative expenses for the first quarter of 2000, <unk> increased to $32 million compared to $22 million for the first quarter of last year, primarily driven by increased personnel related expenses, including stock based compensation, coupled with focused marketing investments to drive growth and help with therapy and support our glue.

Operation.

Moving on to profitability for the first quarter of 2020, we generated GAAP net income of $33 million or 26 cents per share basic and <unk> 22 per share diluted.

Turning to GAAP net income of 900000, or one penny per share basic and diluted for the first quarter 'twenty one.

I'd like to take a moment to point out two unique items impacting our profitability first we utilized approximately $33 million and net operating losses to reduce our key 2020, Q Q1 taxable income and second our GAAP net income includes approximately $2 million gain reflecting the final noncash.

The fair value adjustment for our previously outstanding warrant liability.

Looking ahead, we do not expect to record any further quarterly noncash fair value adjustment on all warrants have either been exercised or expired as of the end of Q1.

Now for a few quick remarks on cash we ended the first quarter with a very robust balance sheet. He put in cash cash equivalents and investments of $503 million and we continue to believe that we have sufficient capital to support our core business without the need to raise additional funds, which are especially important in a challenging market backdrop.

Lastly, I'm very pleased to reaffirm our previous 2022, all year financial guidance, particularly.

<unk> adjuvant revenue of at least $550 million, but approximately 50% gross margin for the year.

G&A expenses in the range of $120 million to $140 million.

R&D expenses in the range of $55 million to $70 million and interest expense of approximately $7 million.

Delivering shareholder value is at the heart of successfully executing on our strategic priorities.

We demonstrated strong execution on our core business objectives. During the first quarter and believe that continued execution on these priorities will drive value creation over time. Thank.

Thank you everyone for your attention today, operator, we would now like to open the Q&A portion of states.

Certainly as a reminder to ask a question you will need to press star one on your telephone to withdraw your question. Please press the pound key.

And our first question comes from Phil Nadeau of Cowen <unk> Company. Your line is open.

Hi, This is there any rodriguez for sale.

Cancellations on the same quarter. Thank you for taking my question.

First our foreheads.

In regards to the.

The trends that you mentioned.

<unk> seen utilization.

Early in the quarter versus versus March.

Do you have any numbers on that and I know you mentioned, 60% vaccine utilization.

Last quarter.

Now compared to that.

Hi, This is Ryan totally utilization in Q1 you have.

That number off hand, yes, so utilization was down for the entire quarter down 23%.

Just to give a little additional color on within the quarter.

January as I mentioned the first.

A few weeks of January into early February utilization was similar to what we saw in Q4.

Went down quite a bit more because of <unk> and then we saw the reversal. If you will in the latter part of February into March, which overall brought us to the <unk>.

Overall utilization of down about 23%.

Alright.

That's helpful and then one more question on that.

Do you have any visibility into how effectively.

It's a team's recommendation being implemented.

Are you able to see for example, they're more oriented in the healthy patient population versus the at risk population.

And also if you can share any updates on the progress.

Marketing efforts to push the implementation.

Yes, so I mean, it's a bit early it was just published during the quarter and February so.

As it relates to additional patients getting vaccinated, it's probably too early to tell but what I can say, though is that it's created a market event for our sales team with customers. As now this recommendation has provided us an opportunity to engage customers differently and the fact that customers now have to stop thank and change.

And so that's been a real catalyst for us to get in front of the appropriate customers to tell the story around help us to have the two dose help us out.

The aspect of operations and efficiency becomes a real reality to our customers and so we see some of the immediate effects around being able to accelerate market share first and foremost with a recommendation.

With regards to additional marketing efforts.

We will continue to.

Target both the healthcare providers now as I mentioned before.

We will start to embark on some market.

To consumer advertising and a handful of markets throughout the U S and test that.

With patients.

Requesting a helpless to have at the pharmacy.

Okay. Thank you that's very helpful. If I may one quick one on the CPG business.

The $550 million and coming in orders since that include.

Does that include any orders from vulnerable anticipation of an approval in Europe .

Anticipation of an approval.

Yes.

I think we've covered this a little bit in the back.

In prior discussions but remember.

We have our customers have to order from us in advance producing for their eventual formulation ruling and supply and so.

Without getting into the specifics by customer yes in general our customers have these orders have been placed in advance of approval.

And there's commitments in advance of approval across and that's been the case across all of our customers over 'twenty, one and 0.2.

Great Alright, thank you for taking my questions.

Sure. Thank you.

Our next question comes from Matt Phipps of William Blair. Your line is open.

Good afternoon, Thanks for taking my questions and congrats on a nice quarter again.

I guess I would help us a great year over year gains on market share, but looking back to Q1.

With the Q4, there wasn't a ton of movement across the different segments that you all breakout.

Slide so is there anything that maybe impacted that from Q4 to Q1.

And just you know it.

Should we.

Think about similar year over year gains go on for the rest of the year or any you know.

You take going forward and I assume again, we should expect kind of the.

The Dod impact in the summer.

So Mike I, just wanted to take that.

Yes, yes, sure Hey, Matt Thanks for the question and I'm glad you actually asked that question I think it's an important question.

So youre right from Q4 to Q1.

Relatively flat market share gains both for total and for field targeted however, when you look within the quarter and I think thats. The key here looking within the quarter as I mentioned before the first six weeks really in this quarter as we all know from Omicron, who had a significant impact on health care operations as well as our ability to engage customers.

<unk> with all the sick out student Omnicom. So when you look within quarter certainly there was a negative impact on market share. But then this turnaround if you will in the latter part of February into the month of March really allowed us to have the market share that we had for the quarter. Both for total Enfield targeted and really the trend in March.

He is a very positive trend, we see that trend continuing here into the second quarter as well, which gives us a lot of confidence as we think about the rest of the year and being able to make the statement that we anticipate quarter over quarter market share change for the rest of the year given the trend we've seen over the last six to eight weeks coming out of really omni.

So that was really the impact.

And it was real and we really felt in the first six weeks of the quarter.

And then the final question you had around seasonality, we do expect to continue to be seasonality to some degree within the market around.

Some research for Doj and then I think just frankly just to keep it everyone's mind. We also do realize there's some Q4 seasonality in this business as well.

Because of the holiday period.

I am really glad to see reiterating the guidance.

Got it so that you guys have talked.

Talked about the strength of the contract and put a lot of language in the last 10-K about that but clearly we're seeing headlines of <unk>.

Either.

Countries trying to get out of.

Grievance or other.

Talking about slowing down production or even potentially stopping production of their vaccines.

So just.

Maybe you can elaborate a little bit on if there is any flexibility or if you're having any conversations with with clients on flexibility.

No I mean, I think the best way to think about that.

We're not we pay attention to the headlines two I think but it's been like this since the beginning that there's they're all different for every company I think you have to really look into our collaborators progress. We've continued to see our collaborators again expand their clinical data.

File for regulatory approvals work hard to generate regulatory approvals that have offered discreet opportunities across the different regions and so I think you really have to look at it.

Partner by partner company by company as the whole Covid environment continues to evolve.

And then I also wanted to try to draw some attention to that that while there is some complexity to stockpiles as you mentioned in certain regional challenges, but also continues to be more evidence to support an ongoing current booster market.

With a question around maybe population in age and frequency and varying pace vaccines, but given the fact that the adjuvant is a consistent component even to various HFC makes us feel like there is continued opportunity depending on how the debit market evolves. So at the stage, where like you said we would.

Reiterated our guidance based on the contracted revenue that we have in place.

Thanks, Ryan and one last question.

To compare exactly what you said in the transcript, but it did sound like you're a little more excited or where.

But.

And did that kind of.

Annual market for COVID-19, what do you.

How are you thinking about potentially trying to bring something to the U S.

And what are your kind of what are you going to wait to see sort of shaking out I know, there's a ton of moving pieces regardless.

Yes, I mean, I think you are right. There is every quarter. We all have more information on how does it how the space is evolving I mean, you've seen some commentary from the FDA.

Certainly on how they are thinking about potential.

Need for annual boosters as it relates to us for the U S I.

I guess, we do have a number of collaborators who have products that could be could be useful here, but I think before we're willing to step into that.

In our particular specific way I'd like to I'd like to understand a little bit more around.

How the how the space is going to evolve and the other thing we haven't seen yet is the long term impact across different vaccine platforms.

Severe disease in the face of.

Wayne waning, meaning a severe disease, I think thats, where differential products could emerge that would have a big influence on how we would view the U S opportunity.

Okay. Good thanks Ryan.

And our next question comes from Madhu Kumar of Goldman Sachs. Your line is open.

Hey, everyone. Thanks for taking my question. This is Rob on for Madhu.

I guess I was just wondering on pertussis.

What do you believe constitutes clinical proof of concept and when would you expect to reach that point.

Rob would you like to take this one yeah. Thanks, Rob so.

The pertussis program has several steps in it.

First as we now have antibody data really compared with booz strikes, but the key readout as you're implying there is not an antibody. The key readouts are going to be from human baboon challenge models, and we'll be looking for the effect of the vaccines and disease symptoms on vehicle colonization and shifting of th.

<unk> response to a T H, one and teach 17 response and I think our best expectation of this is to see data from.

From the baboons potentially late this year and the human challenge model will be in 2023.

Thank you.

We have no further questions at this time I would now like to turn the call back to Ryan Spencer CEO for closing remarks, you may begin.

Thank you operator, we're very pleased with the successful execution, thus far against our plan with a strong first quarter under our belt as I mentioned earlier, we continue to anticipate another profitable year, driven by increasing revenue from our CPG items by business and from increasing <unk> sales. We believe the combination of our strong financial profile.

Revenue generating assets and an emerging pipeline of product candidates based on our proven adjuvant technology provides a solid foundation for our future.

Lastly, and in closing I would like to highlight the incredible diverse team and their commitment and effort towards our mission our achievements and the opportunities that we believe lie ahead are made possible by the hard work and dedication of this team. We look forward to updating you on our progress throughout the year. Thank you for joining US today. We appreciate your time.

Any interest in Diamondback, operator, you may end the call.

Ladies and gentlemen, thank you for joining US today. This concludes today's conference call you may now disconnect.

Goodbye.

Okay.

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