Q2 2022 Dynavax Technologies Corp Earnings Call
Yeah.
Okay.
Good day and welcome to the Diana box technologies second quarter 2022 financial results 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 provide specific instructions at that point.
I'd now like to turn the call over to Nicole Arndt Senior manager for Investor Relations you may begin.
Thank you good afternoon, and welcome to the <unk> second quarter of 2022 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 in the events section of our website before we begin I advise you that we will be.
Making forward looking statements today based on our current expectations and beliefs, including but not limited to potential market sizes and market share market trends impact of ACI P recommendation and timing of such impact financial guidance and trends, including revenue profitability and sufficiency of current.
Capitalization timing and results of clinical trial starts and data Readouts and potential future uses of CPG 10, 18 adjuvant. These statements involve risks and uncertainties and our actual results may differ materially.
As a result 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 such statements joining me on the call today are Ryan Spencer.
Chief Executive Officer, Don <unk>, Senior Vice President of commercial Rob Janssen, Chief Medical Officer, and Kelly Macdonald, Chief Financial Officer, I will now turn the call over to Ryan.
Thank you Nicole and thank you all for joining us today.
Cited to have the opportunity to review the progress we've made during the second quarter.
I'll start by providing a brief overview of our highlights before turning it over to Don Robin Kelly, who will provide a bit more insight to their respective areas.
The short summary of the quarter is that we continue to execute well on our core priorities, which has us on track for a second consecutive year of profitability with record revenues expected towards <unk> and our CPG adjuvant.
Based on strong execution from the team the total revenue for the quarter grew 386% compared to the second quarter of last year.
Importantly, we continue to see market adoption of <unk>, driven by successful engagement across our customer segments, resulting in increased market share and revenue.
We achieved over 32 million and <unk> net product sales in the second quarter.
Supporting our expectations for another year of growth for <unk> revenues.
We're also paying close attention to the evolving landscape for COVID-19 vaccine globally.
New COVID-19 variance have driven increases in infections. However, vaccines continue to provide protection against severe diseases diseases that lead to hospitalization and deaths.
Our collaborators have demonstrated that their COVID-19 vaccine platforms adjuvant it with CPG <unk> can provide a combination of high efficacy and immunogenicity with favorable safety and Tolerability.
In the second quarter, our global portfolio of CPG to 18 adjuvant supply agreements for COVID-19 vaccine generated over $220 million of revenue.
We anticipate full year 2022 revenue for CPG <unk> to be between 550 and $600 million.
Which represents the remainder of orders from our partners under our commercial supply agreement. We continue to work with each of our partners to understand and clarify potential demand for 2023 and beyond.
Now beyond COVID-19, we are leveraging our proven CPG to 19 adjuvant to advance our pipeline of new and improved vaccine.
Our current clinical programs are focused on delivering meaningful improvement over existing vaccine by adding our CPG to 18 adjuvant to establish antigen.
We expect our TDAP in shingles program will generate initial phase one data this year, which we anticipate will highlight the value of our pipeline and strategy to produce best in class products targeting large markets.
In reflecting on the past few years, we are extremely proud of the execution on our strategy to grow <unk> revenue and broadly develop our CPG adjuvant to build a strong foundation for future growth.
Over a relatively short period of time, we are drastically expanded the long term opportunity for our CPG to 18 adjuvant transformed our financial profile and have demonstrated our ability to successfully commercialize epithet beef. We are proud of our progress and equally excited for our future, where we will continue to provide advancements.
Benefit of public health and drive value for our shareholders.
I'll now turn the call over to Don to provide more details on <unk> performance.
Thank you Ryan I am extremely proud of the hard work and dedication of our commercial team and thrilled to share the extraordinary second quarter results for Hecla.
But that is a first and only FDA approved adult hepatitis B vaccine that allows series completion with only two doses in one month here.
Serious completion is essential for high levels of protection and.
Unfortunately, most of adult never completed three dose hepatitis B vaccine theory.
<unk> can make series completion easier and protect more patients faster.
In the second quarter <unk> generated net product revenue of $33 million.
Its highest single revenue quarter since launch and an increase of 139% from $14 million in Q2 of last year.
This includes approximately $1 million in revenue from the launch in Germany by our commercialization partner a very normal.
This significant revenue growth in the U S was driven by our continued gains in market share.
We estimate <unk>, all the market share increased to 32%.
Up from 19% during the same period last year, while field targeted market share increased to 39% up from 30% during the same period last year.
Total market share gains were supported by significant progress in the retail pharmacy segment.
Quarter over quarter dose growth in this segment increased by approximately 167%.
During Q2, we expanded our commercial engagement with top national retail chains and have now successfully executed purchase contract with all of the top 10 retail pharmacy chain.
These top 10 <unk> represent over 97% of the hepatitis B market opportunity in this segment.
Additionally, we executed several sales and marketing initiatives and leveraged the ACP universal recommendation to drive increased stocking across pharmacy chain.
Retail customer review, the ACP University recommendation as a significant lever for driving expanded vaccination and continue to express an interest in working with us to implement hepatitis B immunization initiative.
We are very excited by our progress in this segment and believe that retail pharmacy will be a critical growth driver to expand the hepatitis b vaccine market.
Another important segment that led to significant increases in Q2 market share was the integrated delivery network or <unk> segment.
In Q2, we were able to convert several top National Hospital systems Hypnotherapy we.
We believe the unique clinical profile of <unk> therapy as the only two dose option in an era of Universal recommendation is accelerating <unk> adoption and conversion to help with Abbvie.
We are encouraged by the uptake and anticipate continued positive momentum within this segment.
In addition to increases in market share, we continue to see a positive trend in the hepatitis C market returning from pandemic mode.
In Q2, we estimate that the hepatitis b market utilization was down 19% from pre pandemic levels.
Looking ahead for the remainder of the year Q3, Mark utilization will likely remain at or near the same level seen in Q2 due to ongoing COVID-19 booster campaign.
We also anticipate some market utilization impact in the fourth quarter due to typical year end seasonality.
We are focusing our commercial efforts on driving awareness of the expanded.
ACP recommendation, which we believe May result in significant market growth over the coming years.
Aci's. These recommendations that all adult 19 nine years of age to receive hepatitis B vaccination significantly expands the number of adults in the U S who should be vaccinated against hepatitis B.
Compared to the prior risk based recommendation.
We continue to believe that the ASW recommendation will be a significant catalyst for growth and estimate the hepatitis C market opportunity could grow to approximately $800 million by.
By 2027 will help us be well positioned to secure a majority market share over time.
With a proven clinical profile and our team's strong commercial execution, we expect further market share gains and continued annual growth for Hecla FASB.
We remain confident in our ability to generate momentum and look forward to continuing to drive long term growth for the brand.
I will now turn the call over to Rob to take you through our clinical pipeline.
Thank you Don or ongoing studies and teed up and shingles are progressing nicely. These studies are expected to generate early clinical data later this year that we believe will begin to support meaningful differentiation from the existing vaccines.
We're currently conducting a phase one clinical trial evaluating an improved tetanus, diphtheria and pertussis or TDAP vaccine that utilizes our CPG 10 18 adjuvant.
Previously we reported interim adult data from the study that demonstrated the vaccine candidate was well tolerated without safety concerns and that Immunogenicity results were consistent with our expectations and support continued advancement of the vaccine candidate.
Adolescent data from the same trial are expected in the fourth quarter of 2022.
We're also conducting a nonhuman primate pertussis challenge study to assess to assess the impact on prevention of disease symptoms and nasal colonization of the pertussis bacteria.
Now moving onto our shingles vaccine program, we recently completed enrollment in our ongoing phase one study evaluating safety tolerability and immunogenicity compared with <unk>, a commercially available shingles vaccine in the United States and other countries.
We believe that our vaccine candidate with CPG <unk> has the potential to elicit strong CD four T cell responses, which are key in controlling reactivation of the zoster virus, while providing improved tolerability compared to the current marketed product.
Top line data from this clinical trial are anticipated in the fourth quarter of 2022.
Lastly, we anticipate enrolling this month the first participants in our phase II clinical trial evaluating the Immunogenicity safety and Tolerability of a plagued vaccine candidate utilizing CPG to any gene adjuvant <unk>.
Clinical trial is being conducted in collaboration with and funded by the U S Department of defense.
We are pleased with the advancement of our clinical candidates and confident in our strategy to leverage the proven profile of CPG team to develop new and improved vaccine candidates that have potentially significant opportunities addressing important unmet medical needs.
I'll now pass the call over to Kelly to review, our second quarter financial results and our 2022 financial guidance.
Thank you Rob I'm very pleased to report on another quarter of strong financial performance.
Delight the key financial items, and then review our updated full year 2022 guidance and provide a few closing thoughts.
Please note that all financial comparisons are versus the prior year period, unless otherwise noted.
Please refer additionally to our press release and 10-Q for the detailed financial information.
Beginning with our revenue performance, we delivered total revenue of $256 million for the second quarter of 2022 up 386% year over year. We are extremely excited about the commercial progress of Hep B in the U S and now also in Germany.
The second quarter marked another record breaking quarter of total <unk> net sales of $33 million, including approximately $1 million of sales associated with commercialization in Germany and represents significant year over year growth of 139% for the franchise.
Additionally, we continue to execute across our global portfolio of CPG <unk> adjuvant commercial supply agreements for COVID-19 vaccine.
<unk> $223 million in CPG, 10, 18, adjuvant revenues with a gross margin of 67%.
Included in this amount is approximately $55 million in revenue at 100% gross margin associated with the final delivery under our commercial supply agreement with them either.
Now turning to expenses.
Our research and development expenses for the second quarter of 2022 were $10 million, reflecting.
Continued advancement of our ongoing pipeline programs and teed up and shingles as well as our funded phase II contract with the Dod for an adjuvant that plagued vaccine.
Looking ahead, we are very encouraged by the continued progress in our clinical pipeline and look forward to multiple potential data catalysts across our portfolio by the end of the year as Rob highlighted.
Selling general and administrative expenses for the second quarter of 2022 increased to $36 million.
Compared to $22 million for the second quarter of last year, primarily driven by increased head count across field sales and G&A, coupled with focused marketing investments to drive growth and help us abbvie.
Moving on to profitability for the second quarter of 2022, we generated GAAP net income of $129 million.
Our $1 <unk> per share basic and <unk> 87 per share diluted compared to GAAP net income of $4 million or.
<unk> <unk> per share basic and <unk> <unk> per share diluted in the second quarter of 2021.
Now turning to the balance sheet, we ended the second quarter with a robust balance sheet, including cash cash equivalents and investments of $518 million.
We believe this level of capital is sufficient to support our core business without the need to raise additional funds.
Lastly, I am pleased to refine our 2022 full year financial guidance, including.
CPG 10, 18, adjuvant revenues of between $550 to $600 million.
With approximately 60% gross margin for the year, which reflects the economics associated with the remaining firm orders under our commercial supply agreements for 2022.
R&D expenses in the range of $50 million to $60 million SG.
SG&A expenses in the range of $130 million to $140 million and we are reiterating our previously guided interest expense of approximately $7 million.
These refinements to our operating expense guidance reflect our disciplined approach to capital allocation focused on selective investments to drive growth and help us FDA and thoughtfully advance our clinical pipeline to drive long term shareholder value.
We remain on track for another great year with anticipated record revenues for both of our commercial assets continued progress and meaningful catalysts across our clinical portfolio and a second consecutive year of profitability. Thank.
Thank you everyone for your attention today, operator, we would now like to open the Q&A portion of today's call.
As a reminder to ask a question you will need to press star one on your telephone please standby, while we compile the Q&A roster.
Your first question comes from the line of Madhu Kumar from Goldman Sachs. Your line is open.
Hi, This is Rob on for Ritu. Thanks for taking my question and congrats on a great quarter.
We are just wondering to what extent, whereas the episode the revenue gains driven by the CDC, a sip recommendation versus deeper use among prescribers and Additionally, just one more question like what should we look for for Q T DAC and shingles data in terms of like key markers of immunity.
Thanks, Rob.
I'll answer the first one briefly given the gains in <unk>, primarily tied to market share.
<unk> recommendation.
For market growth, we expect to take some more time, Dan would you like to provide a little bit more commentary on on how the safety recommendation has supported that increase in market share.
Yes, absolutely what's the recommendation has done and really created a market event for field sales team to leverage with customers. It's allowed us to get back engaged with critical stakeholders are decision makers around driving market share. So at least right now what that has done is provided that that market event and also.
Allows us to really highlight the true benefit of the <unk> clinical profile pebble therapy, and many of our customers are starting to realize how that will be really important in a universal reality. So that's what's driving the market share and folks have converted to <unk>.
Bill using that that market event.
Right now.
And then Rob would you mind, providing some context for what expectations around the data releases the ship, Yes, Hi, hi, Rob So for teed up what we'll be looking at as antibodies to purchases and adjourn induced by our CPG $2 18, adjuvant vaccine compared to boost strikes. In addition, we'll be looking at.
Ability to be certain that the addition of <unk> induces similar tolerability to that a boost strict.
And Thats the first of a package of a comprehensive package of TDAP data that we'll be developing over time.
Shingles, what we expect to see will be immunogenicity data, but most importantly, CD four data compared with Xing bricks.
In addition, what's going to be critical there and what we think will differentiate us from Sheng bricks is tolerability data so.
<unk> is notorious for having.
Sure.
Challenges with Tolerability, and we're very confident that we'll be able to find a formulation that has equal efficacy to shing bricks, but better.
Tolerability.
Thanks.
Your next question is from the line of <unk> Rodriguez from Cowen Your line is open.
Hi, Thank you for taking my question and congrats on the quarter.
This is a follow up question.
<unk>.
Yes.
Given that most of the gains are related to the market share, but we should expect.
The.
Adult vaccine and utilization to remain flat.
For the rest of the year than Howard.
What would be the magnitude that you would think that.
Pat.
We will have on the on the growth in the next couple of quarters.
Thanks, Thanks for the question.
Obviously at this point, we're still not comfortable providing financial guidance for the second half of the year for <unk>.
I think.
You've got the points.
Accurately, though that the market is still.
A big driver of how we expect revenue to perform and while we're pleased with the return to date no.
The COVID-19 booster programs out there provides another variable in trying to predict the return to previous levels.
Share gains are.
Pretty sizable from Q1 to Q2, but we tried to draw your attention to the trends we see annually, while we focus on driving revenue annually for the brand. We do expect to continue to take market share each quarter, but obviously the trend quarter over quarter can vary.
Okay. Thank you that's helpful and I know youre not.
Provide the guidance for next year.
<unk>, but.
Thinking about how what do you know about of your partners under orders and how they've been progressing in their sales are in their farming the regulatory environment.
Any sort of directional.
Prediction.
To be more of that.
For the year or more.
Yes.
I can't give you a prediction I mean I can give you the facts that we know and that I think we all can observe from the COVID-19 landscape and that is obviously the vaccine landscape continues to evolve.
Including.
Policies around vaccination and government.
Program supporting boosters and.
And how and how future vaccines will evolve with the potential to eventually move to.
Variant based vaccines and that is all very dynamic at the moment I think one thing I can draw your attention to is our and as we noted in our revenue guidance revenue guidance represents the orders that we have for 'twenty, two and the majority of our contracts except for the one that we recently executed with PT Biopharma, where only for pandemic supply which ended in 2022. So we'll continue.
To work with our collaborators to identify any potential demand in 2023.
And then just Directionally. Another point to note is there has been a large amount of agent supply in 'twenty two that we do believe if you look across our partners.
Developments, which I'll get into a second can carry them into supplying satisfying some demand for 'twenty three so it's pretty dynamic.
Across all of those factors, but just briefly.
Biological you continues to make advancements with their program. The <unk> has opened up a pathway for <unk>.
Pre qualification based on Immunogenicity, which by OE has.
<unk> four.
In addition to the progress they've made within India, where they have also recently got a recommendation to be approved for <unk>.
<unk> largest boosting and then global biopharmaceutical is also is continuing to move forward down the regulatory path in the second half of the year to obtain approval, where they filed in both the EU and China.
And they also continue to develop clinical data to support.
Long term advancement of that program.
So there is definite movement across the collaborators in progress I think.
The fact of the matter is it's a very dynamic environment around policy.
And innovation that will make 'twenty three hard to predict and I do think that we'll see more settling out of the endemic market as we move forward into 'twenty four 'twenty five.
Thank you so much very helpful and congrats on the quarter again.
Thank you.
Your next question is from the line of Matthew Phipps from William Blair. Your line is open now.
Hey, good afternoon, thanks for taking my questions Congrats on the grid.
Great numbers in the quarter.
Can you, maybe just give us a sense of how much revenue in the quarter came from the channel or at least if you expect a similar level of activity in Q3, and then maybe that moderates in Q4 is typical seasonality.
Yes, we're not going to be able to breakout revenue by channel.
And then while I make a quick comment done if you have anything to add let me know.
And Matt I think some of the commentary is based on our historical.
Trends, where the Dod's seasonality had a big impact in our numbers because we had early success in a couple of key accounts and Vod as we grow the broad book of business. The Dod's seasonality becomes a little less impactful than it had historically.
So I think there is definitely this summer surge that could take place and drive up some volumes in our theory accounts, but it won't be seen as discretely necessarily in our revenue numbers as it has historically when it made up a larger portion of the total percentage Don is there anything that you.
You'd like to add.
Hey, Matt the only have added regarding the seasonality is not limited.
Just anymore more so a market piece of vaccine market piece and a sense of what you see in the fourth quarter given the holidays. This year a few weeks, where you don't have as much health care utilization, so that would be the typical seasonality that we expect again for the heavy market.
Going into Q4, but less so around the concept of safety.
Brian point around the fact that it is less of a contributor to the overall revenue moving forward.
That's helpful. Thank you.
The new Biopharma.
CPG revenue source.
<unk>.
I guess, how much is committed.
<unk>.
This of course, and there is really the upside potential from $5 50 to 600 or is that really coming from.
Options from Biopharma.
No that is.
Specific to Biopharma, Matt I mean, obviously, they're in they're in their projection.
The reason for that range and Kelly please add to this if needed is.
That still has there is still execution of manufacturing and shipments and if anything were to slip quarter over quarter. We have been careful about making sure. We have the right range just kettle just general operations.
But.
<unk> Biopharma is included in that range.
So is there anything you want to add to that.
Okay.
Alright, that's great. Thanks for my questions.
Our next question is from the line of Ed White from H C. Wainwright. Your line is open.
Okay.
Good afternoon, and thanks for taking my questions.
Just a question on the <unk> study the first patient is to be dosed this month.
Perhaps you can give us your thoughts on the timeline to data and the path forward to approval.
And any thoughts that you have on potential stockpiling.
Stockpiling.
Sure Ed.
The timeline there is a number of different readouts in this trial the timeline I think there'll be a potential interim readout towards the end of next year.
There's multiple elements to this trial, if theres a bedside mixed component versus co administration that we have to get through before we move into the next stage of trial. So there are some operational elements I think more importantly is the utility of the overall data eventually for potential revenue for CPG, two <unk> and the way we would view this trial as enabling.
A discussion around.
Stockpile.
Or a a product purchased in conjunction with antigen.
For a stockpiling plagued vaccine.
There is not a.
This is the first step in the process before we could figure out the exact path to probably be an emergency use.
Authorization given that this is not going to necessarily be a commercial vaccine. This would be only used in certain.
Settings, where in response to a bio threat.
We would like to get through the data package first and then we can become more clear on the.
The path forward to a potential line of revenue.
Okay. Thanks, and then a second question if I may just on hepatitis B sales.
You recorded sales in Germany, how should we be thinking about whats next stop in Europe as far as company Rollouts go or any sales expectations or the market that you can tell us about thank you.
Sure.
Obviously, Germany is the focus and our partnership with Bavarian Nordic is really getting underway now with this initial launch we're very excited about about that opportunity and they are focused in Germany and with their sales team.
So I think the the.
The best opportunity for us to continue to drive revenue is going to be through that collaboration.
Beyond that.
Europe is challenging from a pricing perspective, which we've not we've been transparent about.
For a long time here, we do continue to look for opportunities to find new ways to bring the product into different countries. We think the United Kingdom is likely the next best opportunity.
Particularly because some of the other lower priced countries within Europe would create a referenced price challenge for our pricing strategy in Germany.
As.
The U K does not have that challenge. So we're actively looking at opportunities to move forward into the UK.
And like I said excited to see Bavarian Nordic as progress with the brand in Germany.
Okay, great. Thanks, Brian for taking my questions.
Thanks, Ed.
We have no further questions at this time I would now like to turn the call over to Ryan Spencer CEO for closing remarks.
Thank you operator.
We believe that the combination of our revenue generating assets and highly experienced team our strong financial profile and an emerging pipeline of product candidates based on our proven adjuvant technology provide a solid foundation for <unk> future.
Finally, while it may stay this repeatedly cannot be emphasized enough our achievement the <unk>.
Opportunities. We believe lie ahead are made possible by the hard work and dedication of the incredible <unk> team I'd like to highlight them and thank them for their commitment and effort towards our mission. We look forward to updating you on our progress throughout the remainder of the year. Thank you for joining US today. We appreciate your time and interest in <unk> operator, you may end the call.
Thank you ladies and gentlemen, thank you for joining US today. This concludes today's conference call you may now disconnect.
The conference will begin shortly to raise Johan during Q&A you can dial one one.
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Good day and welcome to the <unk> technologies second quarter 2022 financial results 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 provide specific instructions at that point.
I'd now like to turn the call over to Nicole Arndt Senior manager of Investor Relations you may begin.
Thank you good afternoon, and welcome to the <unk> second quarter 2022 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 in the events section of our website before we begin I advise you that we will be.
Making forward looking statements today based on our current expectations and beliefs, including but not limited to potential market sizes and market share market trends impact of ACI P recommendation and timing of such impact financial guidance and trends, including revenue profitability and sufficiency of current.
Capitalization timing and results of clinical trial starts and data Readouts and potential future uses of CPG 10, 18 adjuvant. These statements involve risks and uncertainties and our actual results may differ materially.
As a result 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 such statements joining me on the call today are Ryan Spencer.
Chief Executive Officer, Banca saw senior Vice President of commercial Rob Janssen, Chief Medical Officer, and Kelly Macdonald, Chief Financial Officer, I will now turn the call over to Ryan.
Thank you Nicole and thank you all for joining us today I'm excited to have the opportunity to review the progress we've made during the second quarter.
I'll start by providing a brief overview of our highlights before turning it over to Don Robin Kelly, who will provide a bit more insight to their respective areas.
The short summary of the quarter is that we continue to execute well on our core priorities, which has us on track for a second consecutive year profitability with record revenues expected for <unk> and our CPG to 18 accident.
Based on strong execution from the team the total revenue for the quarter grew 386% compared to the second quarter of last year.
Importantly, we continue to see market adoption of help with that be driven by successful engagement across our customer segments, resulting in increased market share and revenue.
We achieved over $32 million <unk> net product sales in the second quarter.
Porting our expectations for another year of growth for <unk> revenues.
We're also paying close attention to the evolving landscape for COVID-19 vaccines globally.
New COVID-19 variance have driven increases in infections. However, vaccines continue to provide protection against severe diseases diseases that lead to hospitalization and deaths.
Our collaborators have demonstrated that their COVID-19 vaccine platforms adjuvant with CPG two <unk> can provide a combination of high efficacy and immunogenicity with favorable safety and Tolerability.
In the second quarter, our global portfolio of CPG to 18 adjuvant supply agreements for COVID-19 vaccines generated over $220 million of revenue.
We anticipate full year 2022 revenue for CPG <unk> to be between 550 and $600 million.
Which represents the remainder of orders from our partners under our commercial supply agreement. We continue to work with each of our partners to understand and clarify potential demand for 2023 and beyond.
Now beyond COVID-19, we are leveraging our proven CPG to 19 adjuvant to advance our pipeline of new and improved vaccine. Our current clinical programs are focused on delivering meaningful improvement over existing vaccine by adding our CPG to 18 adjuvant to establish antigen we.
We expect our <unk> and shingles program will generate initial phase one data this year, which we anticipate will highlight the value of our pipeline and strategy to produce best in class products targeting large markets.
In reflecting on the past few years, we are extremely proud of the execution on our strategy to grow <unk> revenue and broadly develop our CPG to 18 adjuvant to build a strong foundation for future growth over a relatively short period of time, we are drastically expanded the long term opportunity for our CPG to.
<unk> 18, adjuvant transformed our financial profile and have demonstrated our ability to successfully commercialize <unk>.
We are proud of our progress and equally excited for our future, where we will continue to provide advancements to benefit of public health and drive value for our shareholders.
I'll now turn the call over to Don to provide more details on <unk> performance.
Thank you Ryan I am extremely proud of the hard work and dedication of our commercial team and thrilled to share the extraordinary second quarter results for Hep B.
<unk> be 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 adult never completed three dose hepatitis B vaccine theory.
Crude oil type of therapy can make series completion easier and protect more patients faster.
In the second quarter <unk> generated net product revenue of $33 million its highest single revenue quarter since launch and an increase of 139% from $14 million in Q2 of last year.
This includes approximately $1 million in revenue from the launch in Germany by our commercialization partner Bavarian Nordic.
This significant revenue growth in the U S was driven by our continued gains in market share.
We estimate <unk> all the market share increased to 32% up from 19% during the same period last year, while field targeted market share increased to 39% up from 30% during the same period last year.
Total market share gains were supported by significant progress in the retail pharmacy segment.
Quarter over quarter sales growth in this segment increased by approximately 167%.
During Q2, we expanded our commercial engagement with top national retail chains and have now successfully executed purchase contract with all of the top 10 retail pharmacy chain.
These top 10 <unk> represent over 97% of the hepatitis B market opportunity in this segment.
Additionally, we executed several sales and marketing initiatives and leverage the ACP universal recommendation to drive increased stocking across pharmacy chain.
Retail customer review, the ACP University recommendation as a significant lever for driving expanded vaccination and continued to express an interest in working with us to implement hepatitis B immunization initiative.
We are very excited by our progress in this segment and believe that retail pharmacy will be a critical growth driver to expand to hepatitis b vaccine market.
Another important segment that led to significant increases in Q2 market share was the integrated delivery network or <unk> segment.
In Q2, we were able to convert several top national hospital system, a handful of therapy.
We believe the unique clinical profile of <unk> therapy as the only two dose option in an era of Universal recommendation is accelerating <unk> adoption and conversion to help with Abbvie.
We are encouraged by the uptake and anticipate continued positive momentum within this segment.
In addition to increases in market share, we continue to see a positive trend in the hepatitis C market returning from pandemic mode.
In Q2, we estimate that the hepatitis C market utilization was down 19% from pre pandemic levels.
Looking ahead for the remainder of the year Q3, Mark utilization will likely remain at or near the same level seen in Q2 due to ongoing COVID-19 booster campaign.
We also anticipate some market utilization impact in the fourth quarter due to typical year end seasonality.
We are focusing our commercial efforts on driving awareness of the expanded <unk> recommendation, which we believe may result in significant market growth over the coming years.
ACI feed recommendation that all adult 19, nine years of age to receive hepatitis B vaccination significantly expands the number of adults in the U S who should be vaccinated against hepatitis B.
Compared to the prior risk based recommendation.
We continue to believe that the ASW recommendation will be a significant catalyst for growth and estimate the hepatitis C market opportunity could grow to approximately $800 million by.
By 2027 will help us that would be well positioned to secure a majority market share over time.
With a proven clinical profile and our team's strong commercial execution, we expect further market share gains and continued annual growth for Hep with Abbvie.
We remain confident in our ability to generate momentum and look forward to continuing to drive long term growth for the brand.
I will now turn the call over to Rob to take you through our clinical pipeline.
Thank you Don or ongoing studies and teed up and shingles are progressing nicely. These studies are expected to generate early clinical data later this year that we believe will begin to support meaningful differentiation from the existing vaccines.
We're currently conducting a phase one clinical trial evaluating an improved tetanus, diphtheria and pertussis or TDAP vaccine that utilizes our CPG 10 18 adjuvant.
Previously we reported interim adult data from the study that demonstrated the vaccine candidate was well tolerated without safety concerns and that Immunogenicity results were consistent with our expectations and support continued advancement of the vaccine candidate.
Adolescent data from the same trial are expected in the fourth quarter of 2022.
We're also conducting a nonhuman primate pertussis challenge study to assess to assess the impact on prevention of disease symptoms and nasal colonization of the pertussis bacteria.
Now moving onto our shingles vaccine program, we recently completed enrollment in our ongoing phase one study evaluating safety tolerability and immunogenicity compared with <unk>, a commercially available shingles vaccine in the United States and other countries.
We believe that our vaccine candidate with CPG 2018 has the potential.
<unk> to elicit strong CD four T cell responses, which are key in controlling reactivation of the zoster virus, while providing improved tolerability compared to the current marketed product.
Topline data from this clinical trial are anticipated in the fourth quarter of 2022.
Lastly, we anticipate enrolling this month the first participants in our phase II clinical trial evaluating the Immunogenicity safety and Tolerability of a plagued vaccine candidate utilizing CPG and 18 adjuvant.
The clinical trial is being conducted in collaboration with and funded by the U S Department of defense.
We are pleased with the advancement of our clinical candidates and confident in our strategy to leverage the proven profile of CPG team to develop new and improved vaccine candidates that have potentially significant opportunities addressing important unmet medical needs.
I will now pass the call over to Kelly to review, our second quarter financial results and our 2022 financial guidance. Thank.
Thank you Rob I'm very pleased to report on another quarter of strong financial performance.
Slight the key financial items, and then review our updated full year 2022 guidance and provide a few closing thoughts.
Please note that all financial comparisons are versus the prior year period, unless otherwise noted please refer additionally through our press release and 10-Q for the detailed financial information.
Beginning with our revenue performance, we delivered total revenue of $256 million for the second quarter of 2022 up 386% year over year. We are extremely excited about the commercial progress of Hep B in the U S and now also in Germany.
The second quarter marked another record breaking quarter total <unk> net sales of $33 million, including approximately $1 million of sales associated with commercialization in Germany and represents significant year over year growth of 139% for the franchise.
Additionally, we continue to execute across our global portfolio of CPG <unk> adjuvant commercial supply agreements for COVID-19 vaccine.
<unk> $223 million in CPG, 10, 18, adjuvant revenues with a gross margin of 67%.
Included in this amount is approximately $55 million in revenue at 100% gross margin associated with the final delivery under our commercial supply agreement with OMNOVA.
Now turning to expenses our.
Our research and development expenses for the second quarter of 2022 were $10 million, reflecting continued advancement of our ongoing pipeline programs and teed up and singles as well as our funded phase II contract with the Dod for an adjuvant that plagued vaccine. Looking ahead. We are very encouraged by the continued progress in our clinical pipe.
And look forward to multiple potential data catalysts across our portfolio by the end of the year as Rob highlighted.
Selling general and administrative expenses for the second quarter of 2022 increased to $36 million compared.
Compared to $22 million for the second quarter of last year, primarily driven by increased head count across field sales and G&A, coupled with focused marketing investments to drive growth and help us abbvie.
Moving on to profitability for the second quarter of 2022, we generated GAAP net income of $129 million or $1 <unk> per share basic and <unk> 87 per share diluted compared to GAAP net income of $4 million or <unk> <unk> per share basic and <unk> <unk> per share diluted.
In the second quarter of 2021.
Now turning to the balance sheet we.
We ended the second quarter with a robust balance sheet, including cash cash equivalents and investments of $518 million we.
We believe this level of capital is sufficient to support our core business without the need to raise additional funds.
Lastly, I am pleased to refine our 2022 full year financial guidance, including CPE.
CPG 10, 18, adjuvant revenues of between $550 million to $600 million.
With approximately 60% gross margin for the year, which reflects the economics associated with the remaining firm orders under our commercial supply agreements for 2022.
R&D expenses in the range of $50 million to $60 million.
SG&A expenses in the range of $130 million to $140 million and we are reiterating our previously guided interest expense of approximately $7 million.
These refinements to our operating expense guidance reflect our disciplined approach to capital allocation focused on selective investments to drive growth and help us upbeat and thoughtfully advance our clinical pipeline to drive long term shareholder value.
We remain on track for another great year with anticipated record revenues for both of our commercial assets continued progress and meaningful catalysts across our clinical portfolio and a second consecutive year of profitability. Thank.
Thank you everyone for your attention today, operator, we would now like to open the Q&A portion of today's call.
As a reminder to ask a question you will need to press star one one on your telephone please standby, while we compile the Q&A roster.
Your first question comes from the line of Madhu Kumar from Goldman Sachs. Your line is open.
Hey, this is Rob on for Ritu. Thanks for taking my question and congrats on a great quarter.
We are just wondering to what extent, whereas the episode the revenue gains driven by the CDC ACI recommendation versus deeper use among prescribers and Additionally, just one more question like what should we look for from the for Q T DAP and shingles data in terms of like key markers of immunity.
Thanks, Rob.
I'll answer the first one briefly given that the gains in <unk>, primarily tied to market share.
The <unk> recommendation.
For market growth, we expect to take some more time, Dan would you like to provide a little bit more commentary on on how the CIP recommendation has supported that increase in market share.
Yes, absolutely what the recommendation has done and really created a market event for the field sales team to leverage with customers. It's allowed us to get back engaged with critical stakeholders at <unk>.
Makers around driving market share so at least right now what that has done is provided that that market event. It also allows us to really highlight the true benefit of the two dose clinical profile that both abbvie and many of our customers are starting to realize how that will be really important in a universal reality. So that's what's.
Driving the market share and folks have converted to <unk>.
It's really using that that market event.
Right now.
And then Rob would you mind, providing some context for what expectations around the data releases the ship, Yes, Hi, hi, Rob So for teed up what we'll be looking at as antibodies to purchases and adjourn induced by our CPG adjuvant vaccine compared to boost strikes. In addition, we'll be looking at.
<unk> ability to be certain that the addition of <unk> induces similar tolerability to that a boost strict.
Yes.
And Thats the first of the package of a comprehensive package of TDAP data that we'll be developing over time.
For shingles, what we expect to see will be immunogenicity data, but most importantly, CD four data compared.
Compared with Xing bricks.
In addition, what's going to be critical there and what we think will differentiate us from Xing bricks is tolerability data so.
<unk> is notorious for having.
Challenges with Tolerability, and we're very confident that we'll be able to find a formulation that has equal efficacy to shing bricks, but better tolerability.
Thanks.
Your next question is from the line of <unk> Rodriguez from Cowen Your line is open.
Hi, Thank you for taking my question and congrats on the quarter.
This is a follow up.
Hmm.
That's it.
Given that most of the gains are related to the market share, but we should expect.
Adult vaccine and utilization to remain flat.
For the rest of the year than how.
What would be the magnitude that you would think that that.
We will have on the on the growth in the next couple of quarters.
Thanks. Thanks for the question obviously at this point, we're still not comfortable providing financial guidance for the second half of the year for <unk>.
I think.
You've got the point.
Accurately, though that the market is still.
A big driver of how we expect revenue to perform and while we're pleased with the return to date knowing that there is the COVID-19 booster programs out there provides another variable in trying to predict the return to the previous levels.
Share gains are.
Pretty sizable from Q1 to Q2, but we try to draw your attention to the trends we see annually, while we focus on driving revenue annually for the brand. We do expect to continue to take market share each quarter.
But obviously the trend quarter over quarter can vary.
Okay. Thank you that's helpful and I know youre not providing guidance for next year for CPG, but.
Do you have.
Thinking about how what do you know about.
Our partners in their orders and how they've been progressing in their sales are in their finding the regulatory environment do you have any sort of like directional.
<unk>.
Prediction.
To be more of the same as this year or more.
Yes.
To give you a prediction I mean I can give you the facts that we know.
We all can observe from the Covid landscape and that is obviously the vaccine landscape continues to evolve.
Including.
Policies around vaccination and government.
Program supporting boosters.
And how and how future vaccines will evolve with the potential to eventually move to Varian.
Variant based vaccines and Thats all very dynamic at the moment I think one thing I can draw your attention to is our and as we noted in our revenue guidance revenue guidance represents the orders that we have for 'twenty, two and the majority of our contracts except for the ones that we recently executed PT Biopharma, where only for pandemic supply which ended in 2022. So we'll continue.
To work with our collaborators to identify any potential demand in 2023.
And then just Directionally. Another point to note is there has been a large amount of agent supply in 'twenty two but we do believe if you look across our partners.
Developments, which I'll get into the second can carry them into supplying satisfying some demand for 'twenty three so it's pretty dynamic across.
Across all of those factors, but just briefly buyer.
Biological <unk> continues to make advancements with their program that <unk> has opened up a pathway for.
Pre qualification based on Immunogenicity, which by the way has.
<unk> four <unk>.
In addition to the progress that they've made within India, where they have also recently got a recommendation to be approved for <unk>.
A lot of it's boosting and then global biopharmaceutical is also is continuing to move forward down the regulatory path in the second half of the year to obtain approval, where they filed in both the EU and China.
And they also continued to develop clinical data to support.
Long term advancement of that program.
There is definite movement across the collaborators in progress I think the fact of the matter is it's a very dynamic environment around policy.
And innovation that will make 'twenty three hard to predict and I do think that we'll see more settling out of the endemic market as we move forward into 'twenty four 'twenty five.
Thank you so much very helpful.
That's on the quarter again.
Thank you.
Your next question is from the line of Matthew Phipps from William Blair. Your line is open now.
Hey, good afternoon, thanks for taking my questions Congrats on.
Great numbers in the quarter.
Can you, maybe just give us a sense of how much revenue in the quarter came from the channel or at least if you expect.
Similar level of activity in Q3, and then maybe that moderates in Q4 is typical seasonality.
Yes, we're not going to be able to breakout revenue by channel.
And then what.
I'll make a quick comment and done if you have anything to add let me know.
Matt I think some of the commentary is based on our historical.
Trends, where the Dod's seasonality had a big impact in our numbers because we had early success in a couple of key accounts and Vod as we grow the broad book of business. The Dod's seasonality becomes a little less impactful than it had historically.
So I think there is definitely the summer surge that could take place and drive up some volumes in our CRE accounts, but.
It won't be seen as discretely necessarily in our revenue numbers as it has historically when it made up a larger portion of the total percentage Don is there anything that you'd like to add.
And Matt the only have added regarding the seasonality is not limited Vod piece anymore more so a market piece of vaccine market piece and a sense of what you see in the fourth quarter given the holidays. It's just a few weeks, where you don't have as much health care utilization, so that would be the typical seasonality that we expect again for the heavy market.
Going into Q4, but less so around the concept of safety.
<unk> point around the fact that it is less of a contributor to the all of our revenue moving forward.
That's helpful. Thank you.
For the new Biopharma CPG.
CPG revenue source.
Yes.
I guess is the how much is committed for.
<unk>.
This of course, and there is really the upside potential from $5 50 to 600 or is that really coming from.
Options from Biopharma.
No that is not specific to biopharma, obviously theyre in theyre in their projection.
The reason for that range and Kelly please add to this if needed is.
That still has there is still execution of manufacturing and shipments in.
If anything were to slip quarter over quarter, we just have to be careful about making sure. We have the right range just a cattle just general operations.
But.
<unk> Biopharma is included in that range.
So is there anything you want to add to that.
Okay.
Alright, that's great. Thanks for my questions.
Our next question comes from the line of Ed White from H C. Wainwright. Your line is open.
Okay.
Good afternoon, and thanks for taking my questions.
Just a question on the <unk> study the first patient is to be dosed this month.
Perhaps you can give us your thoughts on the timeline to data and the path forward to approval and any thoughts that you have on potential stockpiling.
Stockpiling.
Sure Ed.
So the timeline there is number of different readouts in this trial the timeline I think there'll be potential interim readout towards the end of next year.
There's multiple elements of this trial, if theres a bedside mixed component versus co administration that we have to get through before we move into the next stage of the trial. So there is some operational elements I think more importantly is the utility of the overall data eventually for potential revenue for CPG, two <unk> and the way we would view this trial as enabling.
A discussion around.
Stockpile.
Or a <unk>.
<unk> purchased in conjunction with the antigen.
For a stockpiling plagued vaccine.
There is not.
This is the first step in the process.
Before we could figure out the exact path two will probably be an emergency use.
Authorization given that this is not going to necessarily be a commercial vaccine. This would be only used in certain certain settings, where in response to a bio threat.
So we would like to get through the data package first and then we can become more clear on the path forward to a potential line of revenue.
Okay. Thanks, and then a second question if I may just on hepatitis B sales.
You recorded sales in Germany, how should we be thinking about whats next stop in Europe as far as company Rollouts go or any sales expectations or the market that you can tell us about thank you.
Sure. So obviously, Germany is the focus and our partnership with the very Nordic is really getting underway now with this initial launch we're very excited about about that opportunity and they are focused in Germany and with their sales team.
I think the.
The best opportunity for us to continue to drive revenue is going to be through that collaboration.
Beyond that.
Europe is challenging from a pricing perspective, which we've not we've been transparent about.
For a long time here, we do continue to look for opportunities to find new ways to bring the product into different countries. We think the United Kingdom is likely the next best opportunity, particularly because some of the other lower priced countries within Europe .
Create a reference price challenge for our pricing strategy in Germany, whereas.
UK does not have that challenge. So we're actively looking at opportunities to move forward into the UK.
And like I said excited to see the very Nordics progress with the brand in Germany.
Okay, great. Thanks, Brian for taking my questions.
Thanks, Ed.
We have no further questions at this time I would now like to turn the call over to Ryan Spencer CEO for closing remarks.
Thank you operator.
We believe that the combination of our revenue generating assets and highly experienced team our strong financial profile and an emerging pipeline of product candidates based on our proven adjuvant technology provide a solid foundation for <unk> future finally.
Finally, while it may stay this repeatedly cannot be emphasized enough our achievement. The opportunities. We believe lie ahead are made possible by the hard work and dedication of the incredible <unk> team I'd like to highlight them and thank them for their commitment and effort towards our mission. We look forward to updating you on our progress throughout the remainder of the year. Thank you for joining us.
We appreciate your time and interest in Diamondback, operator, you may end the call.
Thank you ladies and gentlemen, thank you for joining US today. This concludes today's conference call you may now disconnect.