Q4 2022 Dynavax Technologies Corp Earnings Call

February 23, 2023

The conference will begin shortly to raising the lower Johan during Q&A, you can dial star one one.

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Good day, ladies and gentlemen, and welcome to the <unk> technologies fourth quarter and full year 'twenty 'twenty financial results.

As a reminder, this conference call is being recorded.

At the end of the company prepared remarks, we will open the call for questions and provide 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, and welcome to the fourth quarter and full year 2022 financial results and corporate update conference call. In addition to our press release issued today E. Supplementary slide presentation that accompanies today's call is available on the events section of our website before we begin.

And I try to you that we will be making forward looking statements today based on our current expectations and beliefs, including but not limited to potential market size and market share.

Recommendation impact market trend growth perspective, and rate manufacturing plans seasonality financial guidance and trends, including revenue profitability and efficiency of current capitalization.

We didn't result in a clinical trial starts and data readouts and potential future CPG 10, 18 adjuvant. These statements involve risks and uncertainties and our actual results may differ materially.

Risks are summarized in today's press release and detailed in the risk factors section of our SEC filings, including.

<unk> annual report on Form 10-K.

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.

Dawn <unk> senior Vice President of commercial.

Janssen, Chief Medical Officer, and Kelly Macdonald, Chief Financial Officer, I will now turn the call over to Brian .

Thank you Nicole and thank you all for joining US today, we're excited to have the opportunity to discuss the tremendous progress we've made in 2022 and with respect to our future.

We built a valuable and scalable company on the foundation of our first product.

Which continues to generate increasing revenue year over year in 2022, as a result of the overall market growth and continued market adoption of the product coupled that'd be revenue doubled compared to 2021.

This continued progress reinforces our confidence in the product and our ability to capture additional market share.

Looking forward into 2023, we anticipate that the annual revenue growth in the range of 30 to nearly 50% with sustained and meaningful annual growth expected for the coming years.

Additionally throughout the pandemic, we delivered CPG adjuvant for nearly $1 billion COVID-19 vaccine doses across all five of our commercial quiet partnerships.

Completing our obligations under our commercial supply agreements to support our pandemic response.

Our efforts resulted in $588 million of revenue in 2022 and is further validated the safety and efficacy of CPG adjuvant across a variety of protein based vaccine platforms around the world.

And then finally for 2022, we made great progress in executing on our clinical development plans delivering robust phase one data for both our shingles and SEDAR vaccine candidates and completed part one of the phase III <unk> trial. This is funded by the Vod.

You'll hear from Rob shortly met its primary endpoint.

We are now exiting the pandemic era in a stronger position than when it began.

Results of this team's commitment resolve agility and professionalism during.

During this period that we thought would be.

Made major market share gains, even though the healthcare system faced unprecedented disruption.

Our success generating over.

Generally the almost $1 billion of CTG.

Revenue. During this time was made possible by the impressive teamwork and collaboration across the company.

We have successfully built a pipeline of preclinical and clinical assets focus on leveraging our proven adjuvant to drive long term value.

All of our success was accomplished while also strengthening our corporate infrastructure governance, and overall capabilities across our fully integrated organization, allowing us to run a successful business for managing our growth.

Im incredibly proud and confident in our team and considering the result.

And delivered in this particularly challenging environment I believe this organization combined capability is a tremendous asset that we will leverage as we advance and grow our business.

In 2023, we will build on our strong foundation late 'twenty two with.

New product revenue growth from <unk>, and advancement of our clinical development and preclinical pipeline leveraging our CPG.

Thanks.

Additionally, we are prioritizing our business development efforts with a goal of adding late stage or commercial assets to further leverage our comprehensive organizational capability and to accelerate value creation.

We will continue to take a highly disciplined approach to identifying opportunities that we believe can make an even greater impact on our mission to help protect the world against infectious diseases.

I'll now turn the call over to Don to provide more details on <unk> performance.

Thank you Ryan I am thrilled to share the incredible progress and strong results for <unk> B and details about the exciting future and growth opportunities for the brand.

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

During completion is essential for high levels of protection.

In an era of Universal hepatitis B recommendation kudos hemlo therapy can make series completion easier and protect more patients faster than any three dose regimen.

In 2022 full year net product revenue for <unk> grew 104% from 2021.

This significant revenue growth in the U S was driven by continued gains in market share.

We estimate <unk> total market share increased to 35% compared to 25% during the same period last year, while prioritize integrated delivery networks and clinics increased to 47% up from 33% during the fourth quarter of 2021.

Strong performance in the fourth quarter was driven by two critical segments retail pharmacy, and integrated delivery networks or Ibs.

Within the retail segment, we continue to receive positive feedback from customers about the <unk> universal recommendations.

Additionally, we saw increases in initial purchases and reordering across several large national chain.

Likewise in the <unk> segment, several customers began implementing processes to adopt the <unk> universal recommendation, which led to meaningful increases in their hepatitis b purchases that far exceeded 2019 levels.

The momentum is building segments led to our strong performance in the fourth quarter. Despite the capable end of year seasonality.

The <unk> recommendation that all note 19 to 59 years of age received hepatitis B vaccination significantly expands the number of adults in the U S who are recommended to be vaccinated against hepatitis B.

In fact, hepatitis B vaccination now has the second highest addressable adult population across vaccine.

More than shingle and pneumococcal vaccination and is second only to flu.

We continue to believe this recommendation will be a significant catalyst for growth and estimate the hepatitis C market opportunity could grow to over $800 million by 2027 with half of that would be well positioned to secure a majority market share.

We believe the IGN and retail segments, we'll see most of the market growth from the <unk> Universal recommendations.

Both segments have the required institutional control infrastructure capabilities and patient volumes that can drive universal uptake.

We expect these two segments will represent approximately 60% of the hepatitis C market by 2027 compared to approximately 44% in 2022.

We are well positioned in both segments with established long term relationships with key vaccine decision makers, along with a deep understanding of the buying process and operational levers that can help us drive ACI to universal recommendations uptake.

Additionally, headless abbvie is approaching 50% market share across the two segments with most of the nation's top IBM and several national retail chain, making hetzel therapy their preferred hepatitis b vaccine.

This exciting progress has supported our shift in strategy from a market share only approach to increasing our focus on market expansion in the retail and IBM segment.

In 2023, we forecast the hepatitis C market opportunity will grow 15% to 25% from 2022 levels.

2019 utilization.

In addition to market growth, we expect <unk> will continue to increase its market share across all segments.

Most notably IBM and retail.

With a proven clinical profile and our team's strong commercial execution, 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 dawn.

We believe there is a tremendous amount of potential in our pipeline focusing on best in class products targeting large markets by combining our CPG pen 18, adjuvant with established antigen.

Currently advancing programs for three adjuvant in Backseats, Cedar shingles and pipe.

We believe CPG 1018, adjuvant has the potential to improve the durability of protection against pertussis by redirecting T cell responses and enhancing protected antibody responses in a booster vaccine.

We recently completed a phase one clinical trial evaluating an improved tetanus, diphtheria and pertussis or TDAP vaccine that utilizes our CPG <unk> adjuvant.

Adult and adolescent safety from this study demonstrated the vaccine candidate was well tolerated without observed safety concerns.

Adult Immunogenicity results were consistent with our expectation and the support continued advancement of the vaccine candidate.

This year, we're completing a nonhuman primate for test is challenge study that we designed to assess the impact on prevention of disease symptoms and nasal colonization as well as T cell responses with data anticipated mid 2023.

At the same time, our collaborator in Canada is identifying the appropriate challenge Joseph pertussis bacteria to be used in our human challenge study with planned initiation by the end of this year. This.

This will be the first ever vaccine per test as human Challenge study and is designed to assess the feasibility of such a study to evaluate vaccine prevention of pertussis symptoms effect on these'll colonization, and immune responses, including pertussis toxin neutralization and T cell responses.

In addition to Chile, we continued to advance our shingles vaccine program we.

Believe the CPG <unk> adjuvant mechanism of action is ideal for an improved shingles vaccine due to its demonstrated good tolerability and its ability to generate high levels of antibodies in CD four positive T cells, which are key in controlling reactivation of the zoster virus and preventing shingles.

In January we reported promising top line results from our phase one clinical trial designed to evaluate our investigational singles backseat utilizing different regiments of CPG adjuvant.

Hi, antibody and CD four positive T cell vaccine response rate, we're seeing in all arms and there were similar to the comparator.

Robust increases in CD positive T cells were observed in all of the CPG <unk> adjuvant in arms as well, although lower than comparator.

In the first half of this year, we plan to submit an abstract with a full set of data for presentation at an upcoming medical meeting and we plan on meeting with FDA to discuss the regulatory path forward.

Over the course of the year, we expect to complete GMP manufacturing of GE antigen to support initiation of subsequent clinical trial.

Based on our initial data we plan to advance our shingles vaccine candidate with CPG adjuvant into a phase one two study in early 2024 to evaluate various dose levels of the GE antigen and further evaluate immune responses over a longer period of time.

Now transitioning to our third program, we are conducting a phase III trial evaluating the immunogenicity safety and Tolerability of <unk> deep plagued vaccine candidate adjuvant with CPG.

In collaboration with and funded by the U S Department of defense.

The CPG <unk> adjuvant vaccine candidates mechanism of action has the potential to speed up time to protection with fewer doses compared to the three dose vaccine under development by the Dod.

In January we successfully completed part one of the clinical trial.

Both CPG 10, 18 adjuvant at Arm's method, one primary endpoint and demonstrated a greater than two fold increase in antibodies over the alum adjuvant and control arm after two doses.

<unk> has approved continuing to part two of the study using the bedside mix of CPG and a team with the alum adjuvant at our F. One b like back seat.

The advancement of our clinical candidate is a core <unk> priority.

Confident in our strategy to leverage the proven profile with CPG Kenny team to develop new and improved vaccine candidate that provides significant opportunities to address important unmet medical needs.

I'll now turn the call over to Kelly to review our financial results.

Thank you, Rob I'm very happy to report another quarter and full year of strong financial performance.

I'll highlight the key annual financial results and then share our full year 2023 guidance and provide a few closing thoughts. Please note that all financial comparison, there versus the prior year period, unless otherwise noted. Please also refer to our press release and Form 10-K for detailed financial information.

Starting with revenue total revenue for 2020 with $723 million.

Compared to $439 million for 2021, representing an annual increase of about 64%.

This was driven both by sandy as well as CPG tenant in Hudson Bill as we successfully executed all five of our COVID-19 pandemic commercial supply agreements.

Starting with total of 17, we reported full year net product revenue of $126 million compared to $62 million in the prior year, representing annual growth of 104%.

What is equally impressive for the brand is the continued improvement in gross margin, which is approximately 68% for the full year compared to 66% for 2021.

Turning to CPG anything adjuvant revenue revenue recognized under our commercial supply agreements for COVID-19 vaccine totaled $588 million gross margin of 62% for 2022, achieving the high end of our previously stated guidance range for both revenue and gross margin.

Looking ahead for our COVID-19 partnerships our customers are managing their initial stockpiling CPB any team is forward looking as the global pandemic of all.

Specifically for 2023, we believe our customers have sufficient stockpile to fulfill their near term demand translating to minimum to as little as zero COVID-19 related adjuvant sales for <unk> in 2023.

We expect to share additional insight on the execute future commercial supply agreement and gain better clarity around the endemic demand of COVID-19 vaccines for our customers for 2024 and beyond.

Now turning to expenses.

Our research and development expenses for 2020 sales or $47 million compared to $32 million in 2021. The increase was primarily driven by continued advancement in our pipeline program and shingles. During the completion of phase one clinical trial.

<unk> top line data plus the continued advancement of our fully funded phase II contract annuity for additives and playback.

Selling general and administrative expenses for 2020, Q4 $131 million of lighting and at the low end of our previously issued guidance compared to $100 and compared to $100 million for 2021.

The increase was primarily driven by increased head count in hospital sales and G&A, coupled with focused marketing investments targeting growth and help with that as the market share as well as margin expansion in key segments that we believe will benefit.

Sure.

Moving on to profitability for the full year of 2020, we generated GAAP net income of $393 million or $2 32 per share basic and $1 97 per share diluted compared to GAAP net income was $77 million or 62 per share basic and <unk> 57 per share diluted.

For the full year 2021.

Turning to the balance sheet, we ended the year with cash and investments of approximately $624 million. We continue to believe this level of capital is sufficient to support our core business, enabling us to drive sustainable growth.

And bring our our R&D portfolio of vaccine candidates, our balance sheet to return to the capital markets.

Our 2023 full year financial guidance, we anticipate the following.

<unk> net product revenues between $165 million and $185 million R&D.

R&D expenses to be between $55 million and $70 million and SG&A expense to be between $135 million and $155 million.

Lastly, and in closing before we turn to Q&A, we're very proud of the way that we executed on our priorities throughout 2020.

Our strong balance sheet position combined with a disciplined approach to capital allocation enables us to focus on selected investments.

On the top line growth and help them be.

Thoughtfully advanced our clinical pipeline and support our business development objectives, all of which we believe will generate long term shareholder value.

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

Thank you.

To ask a question you will need to press star one one on your telephone.

And wait for your name to be announced.

So withdraw your question. Please press star one again.

Please standby, while we compile the Q&A roster.

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

Good afternoon, congrats on a successful year and thanks for taking my question a couple of commercial questions for Martin and then one quick one on the.

Commercial side in your prepared remarks, and the press release, you mentioned that you are seeing signs that the ACP ACP guidelines or grow the market can you talk a little bit more detail about what those signs are in.

What gives you confidence that youre beginning to see the impact of the guideline change.

Absolutely so within the integrated delivery network segment. So some of the signs we're seeing a shift.

<unk> increases.

We're looking at the volume increases in several of these customers that are exceeding 2019 levels.

We're also monitoring implementation.

And so it's around how they implement the guidelines so are they communicating with guidelines out across the clinic, we're seeing signs of that.

Are they.

Evaluating progress against those communications, we're seeing signs of that as well within the <unk> segment. So those are all positive signals.

As well as the growth as I mentioned before.

Within retail retail we continue to engage at the headquarter level within retail and they continue to want to be willing to do different types of initiatives focusing at all hepatitis B vaccination. So that's obviously very positive signs retail fees.

Recommendation as an opportunity certainly, especially in the 30% to 50 year old age cohorts.

As an opportunity to do a companion vaccination strategy, that's been communicated to us by several of the large national retailer. So all very positive signs as we head into 'twenty three.

That's really helpful.

And then second commercial questions on CPG two <unk> your guidance for 2023 is pretty clear, but I'm thinking longer term as the pandemic ends.

In the past <unk> suggested it was hoping to get 30% to 40% of the economics on.

The vaccine sold using CPG Tennant team.

Commercially sold for using CPG to 19.

Is that possible under your current supply contracts with the Korean manufacturers or do you need to renegotiate new contracts for the post pandemic era.

Assuming some of those vaccines may eventually be be available.

Commercially.

Well I think firstly it depends on what actually happens in a post pandemic era I think when you think of the.

Low middle income countries, the economics post pandemic.

And certainly at an ever frankly colleagues similar it's the middle income and upper <unk>.

It also can come in high income countries and how our collaborators will fare in those private markets that could be different in the way those.

Marketing during the pandemic government sponsored purchasing so I actually don't think we would need to comment any differently.

The ability to volumes indicated captured it seems consistent I think what's more challenging to understand is how does that 1 billion doses and supply.

Get utilized over the next through the pandemic through 'twenty three 'twenty five before there's additional supply to support the endemic market.

And at that time, we'll be able to understand.

Where the endemic pricing is settled out at and volumes to be able to negotiate.

The appropriate economics.

Got it okay. That's helpful.

Youre out basically over the long term, but I don't I don't think Theres anything major any major change in how we position that.

The economics.

That is useful and then last question on the pipeline in terms of the 2014.

Personally so that discussed the topline data as noted that the <unk> positive T cells some of lower for <unk>.

Then the comparator regimens.

What any thoughts on the significance of that finding and do you think the <unk> positive T cell levels could be related to glycoprotein D dose and therefore as you go to higher doses.

Haps you get more.

Levels more similar to the competition.

Yes.

To be looking at it with our G protein in our phase one two trial. So we'll have to see I mean, we use a reasonably high dose in this one so I don't think that we would highlight that as an expectation but.

But we'd like to see it in this next phase one two trial will get your first question is the importance of it and as you can tell by our continued interest in the program.

It's unknown right and we want to continue to do work arounds around.

Around that endpoint, but the bottom line as we saw robust response.

And recognizing that it's lower than the comparator, we still saw very robust response.

And believe it has the opportunity to deliver high levels of efficacy.

So we need to continue to do work in.

And Thats, a program and think of ways to Derisk that ultimate efficacy trial, but.

We can't really comment more than what we said around the fact that they were lower but we did see robust responses.

Great. Thanks for taking my for anything else you want to add to that.

No I think you've covered it we certainly will be looking at higher doses of antigen.

The new phase one study.

<unk>.

Essentially other changes to look at how we can improve the CD four responses.

Great. Thanks for taking for taking my questions.

Thanks, Phil.

Thank you.

Our next question comes from the line of Madhu Kumar from Goldman Sachs.

Your line is open.

Thanks for taking our question. So I think we'll start with a financial one kind of as you think about gross margins for <unk> as I mentioned gross margins of 68% should we expect further margin improvements in 2023 and on the forward for <unk>.

Sure. Yes, we are really happy with the continued expansion in margin.

We've been making.

Barry.

<unk> disciplined investments in our manufacturing facility in Germany. So we're happy to see those yield improvements over time, and we would like we would like to continue to see some eyes.

As an extension through 2023 and 2024, namely on scale continues to improve I think in the low 70%.

Turning to stare estimate for the next couple of years.

Okay, and then a follow up question on the CPG tenant sorry, so really clear about kind of expectations for STB major CBD today's teen sales in 2023, I guess ultimately do you think with the kind of long term opportunities you mentioned the pandemic market here.

Have your customers talking about plans for the endemic market if they were to need more adjuvant and what kind of timeframe would you expect them to be placing these orders and when kind of would you have a sense of when that demand might emerge.

Thank you for the question.

Again, it depends on how fast they burn through their stockpile of adjuvant, but we are very close contact with our collaborators recognizing that there is lead time, leading secure.

<unk> manufacturing supply side, we do have inventory I think it's worth noting that we do have some inventory of ads that we purposely maintained to be able to help navigate the transition from utilizing stockpile and manage the timelines to securing manufacturing slots. So that we can be supportive of our collaborators broadly.

So.

I think we'll be able to see it coming at the point as they use their debit market.

<unk> clear more clear as to what the volume demand will be and as our collaborators utilized their inventory I think there'll be plenty of time to see any future demand coming to be able to manage.

There their needs for their in depth markets without having to run the risk of not having a sense of that.

Okay, great. Thanks very much.

Thank you.

Our next question comes from the line.

Excuse me comes from the line of Matthew Phipps from William Blair. Your line is open.

Good afternoon, Thanks for taking my questions Congrats on the great into 'twenty two.

Following up on Phil's question on the antigen dose.

GE for shingles vaccine Jessica published a study in 2014 that looked at different doses advantage of it.

At least in that study as it looked like there was a dose response for the humoral response, but maybe not for the cellular response is that.

What you would expect when youre changing antigen or there may be differences in ranges being looked at or something different.

The CPG to 18 adjuvant to change that.

Bob.

Yes.

I think it's hard to know because the adjuvant work in very different ways.

So yes in that paper Gsk's paper $50 100 books the same for <unk>.

Don't know that thats going to be true for us. So the purpose of the phase one that we've completed was just looking at.

A fixed dose of antigen, but various CPG to the team.

<unk> formulations to see could we get close to the comparator.

I think at this point now because now we have to look at it now we have to look at that antigen dose I don't think we can assume that based on the GSK experience, that's what we're going to see with synergy.

Got it okay Bob.

You mentioned kind of the prioritizing.

Which is good to hear.

Balance sheet and I know you can't talk too much about at this point, but should we be thinking about adult vaccines pharmacists administered I guess, just where do you think there's the most overlap with kind of your current infrastructure.

I think practically the reality is it's a suite of opportunities in the industry that it is going to be more meaningful as opposed to the specific overlap while it would be great to find something that overlap perfectly with our commercial infrastructure.

The reality is it's a it's the whole combined entity that has value and the key leverage including leadership high quality manufacturing Pharmacovigilance clinical development policy commercialization Medical affairs commercial leadership distribution. So I think we're looking for ways to leverage that entire entity more so than.

Just focusing on leveraging our field footprint, which can be augmented in many directions as needed depending on the products that are available.

You've heard in our comments from a business perspective, we believe the best use of our of our capital as well as our capabilities focusing on late stage or commercial assets that.

And that would be obviously within the vaccine.

Each business ideally, but we also might have to be opened.

A little bit broader.

Per view as well so we'll have to kind of manage through that over time as we consider all the opportunities.

Alright sounds good thanks, Brian .

Thank you.

Our next question comes from the line of Roy Buchanan from JMP Securities Your.

Your line is live.

Thanks for taking the question.

I've got a handful in the singles.

Program I, just want to make sure I heard Rob correctly, I think you said meet with the FDA.

This half is that correct and do you plan to announce the outcome of that meeting outside of Fas earnings call.

And then if that's true do you also think you can file that idea this half.

This is Ryan let me just take the cognitive communication needs of the FDA pre IMD meeting to move into a clinical trial in the U S.

And so we will.

The outcome of that meeting will help that.

Dictate our future development program, which we will always be concerned about as we continue to refine it.

You should expect that we have a specific announcement related to the completion of that meeting. So the communication of that outcome will be through how we talk about our programs and our traditional <unk>.

<unk>.

So I think Thats, just very very clear about that Rob you can comment on the timing of IND filings, yes timing. So yes, we do anticipate that we'll be able to meet with FDA in the first half of the year, we certainly will be submitting our pre IMD meeting request.

And then we do anticipate submitting their R&D later in the year, there will be the second half of the year.

Got it okay and anything else you guys can say about that.

Central venue for the data.

This half it sounds like maybe you havent submitted the abstract is that is that correct.

If you can give us on that and then anything you could say about what you've seen as far as the adjuvant I know youre looking at with and without all of them.

Anything you can say at this point, whether you expect to go forward with Alamo without.

Well, let me, let me comment on on the abstract.

<unk> second half to be accepted before we can commit to where we are going to present. So I think frankly at this point.

Most appropriate for us to explain our plans as fits we will be submitting an abstract.

With expectations for a medical meeting that will be held in the first half of this year I don't think we can really comment more on that because we don't control, but ultimate acceptance of that abstract.

And then we.

We haven't commented on our decision around.

<unk> adjuvant with or without album, Yes.

One thing that I will.

Highlighting some of the commentary you saw in a previous press release.

All of our comments were around all of those so there were there was we did see some differences which will be highlighted in the eventual poster presentation, but they're not significant.

To where there is necessarily an obvious decision. So we will continue to work through that decision as we progress towards our phase one two trial, there's just not a lot of urgency to make that decision yet really so we haven't we haven't prioritized it.

Okay, great. That's it thank you.

Thank you.

We have no further questions at this time.

I'd like to now turn it back to Ryan Spencer CEO for closing remarks.

Thank you operator, and thank you all for your attention today. The important takeaway for you is that we believe the combination of our revenue generating assets a highly experienced an execution focused team our strong financial profile and an emerging pipeline product candidates based on our proven adjuvant technology provide a solid foundation for our future.

Our success this past year and the opportunities. We see ahead are made possible by the dedicated teams diamondback or people are everything and I'd like to thank them for their commitment and effort towards our mission. Thank you for joining US today. We appreciate your time and interest in diverse 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.

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The conference will begin shortly to raise and lower Johan during Q&A, you can dial star one one.

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Good day, ladies and gentlemen, and welcome to the <unk> technologies fourth quarter and full year 2020 financial results.

As a reminder, this conference call is being recorded.

At the end of the company prepared remarks, we will open the call for questions and provide specific instructions at that point.

I would now like to turn the call over to Nicole <unk>.

Senior manager Investor Relations you may begin.

Thank you operator, good afternoon, and welcome to the <unk> fourth quarter and full year 2022 financial results and corporate update conference call. In addition to our press release issued today <unk> <unk> slide presentation that accompany today's call is available on the events section of our website before we.

Again I think.

We will be making forward looking statements today based on our current expectations and beliefs, including but not limited to <unk> market sizes and market share ACI recommendation impact market trend growth perspective and rates manufacturing plans.

Any financial guidance and trends, including revenue profitability and efficiency of current capitalization timing and result of clinical trial starts and data readouts and potential future use of the <unk> adjuvant.

These statements involve risks and uncertainties and our actual results may differ materially. These risks are summarized in today's press release and detailed in the risk factors section of our SEC filings, including including <unk> Annual report on Form 10-K, our.

Our forward looking statements speak as of today, and we undertake no obligation to update such.

Joining me on the call today are Ryan Spencer Chief Executive Officer.

John <unk> Senior Vice President of commercial from Janssen, Chief Medical Officer, and Kelly Macdonald, Chief Financial Officer, I will now turn the call over to Brian .

Thanks, Nicole and thank you all for joining US today, we're excited to have the opportunity to discuss the tremendous progress. We've made in 2022 and what you expect as we look to our future.

The valuable and scalable company on the foundation of our first product held therapy.

Which continues to generate increasing revenue year over year.

In 2022, as a result of the overall market growth and continued market adoption of the product <unk> revenue doubled compared to 2021.

This continued progress reinforces our confidence in the product and our ability to capture additional market share.

Looking forward into 2023, we anticipate that the annual revenue growth in the range of 30 to nearly 50% with sustained and meaningful annual growth expected for the coming years.

Additionally throughout the pandemic, we delivered <unk> 18, adjuvant for nearly $1 billion COVID-19 vaccine doses across all five of our commercial supplier partnerships.

Completing our obligations under a commercial supply agreement to support dependent response.

Our efforts resulted in $588 million of revenue in 2022 and is further validated the safety and efficacy of CPG 17, adjuvant across a variety of protein based vaccine platforms around the world.

Youll hear from Rob shortly met its primary endpoint.

We are now exiting the pandemic era in a stronger position than when it began as a result of this team's commitment resolve agility and professionalism during.

During this period <unk> has made major market share gains, even though the healthcare system faced unprecedented disruption.

Our success generating over <unk>.

Generating almost $1 billion of CTG to AC.

Net revenues. During this time was made possible by the impressive teamwork and collaboration across the company. We have successfully built a pipeline of preclinical and clinical assets focus on leveraging our proven adjuvant to drive long term value all of our success was accomplished while also strengthening our corporate infrastructure governance and overall capabilities.

Across our fully integrated organization, allowing us to run a successful business, while managing our growth I'm incredibly proud and confident in our team and considering the result.

That has been delivered in this particularly challenging environment I believe this organization combined capability is a tremendous asset that we will leverage as we advance and grow our business.

In 2023, we will build on our strong foundation laid in 2002 with the continued product revenue growth from <unk> and advancement of our clinical development and preclinical pipeline leveraging our CPG hesitance. Additionally.

Additionally, we are prioritizing our business development efforts with a goal of adding late stage or commercial asset to further leverage our comprehensive organizational capability and to accelerate value creation. We will continue to take a highly disciplined approach to identifying opportunities that we believe can make an even greater impact on <unk>.

Our mission to help protect the world against infectious diseases.

I'll now turn the call over to Don to provide more details on <unk> performance.

Thank you Ryan I am thrilled to share the incredible progress and strong results for <unk> B and details about the exciting future and growth opportunities for the brand.

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

During completion is essential for high levels of protection.

Era of Universal Hepatitis B recommendation.

Who knows hemlo therapy can make series completion easier and protect more patients faster than a three dose regimen.

In 2022 full year net product revenue for <unk> grew 104% from 2021.

This significant revenue growth in the U S was driven by continued gains in market share.

Strong performance in the fourth quarter was driven by two critical segments retail pharmacy, and integrated delivery networks or Ibs.

Within the retail segment, we continue to receive positive feedback from customers about the Asia Universal recommendation.

Additionally, we saw increases in initial purchases and reordering across several large national chain.

Likewise in the IBM segment, several customers began implementing processes to adopt the <unk> universal recommendation, which led to meaningful increases in their hepatitis b purchases that far exceeded 2019 levels.

The momentum in both segments led to our strong performance in the fourth quarter. Despite the capable end of year seasonality.

In fact, hepatitis B vaccination now has the second highest addressable adult population across vaccine.

More than shingles, and pneumococcal vaccination and is second only to flu.

We believe the IGN and retail segments, we'll see most of the market growth from the ECP Universal recommendation.

Both segments have the required institutional control infrastructure capabilities and patient volumes that can drive universal uptake.

We expect these two segments will represent approximately 60% of the hepatitis C market by 2027 compared to approximately 44% in 2022.

Additionally, <unk> is approaching 50% market share across these two segments with most of the nation's top IV and.

And several national retail chain, making hetzel therapy their preferred hepatitis b vaccine.

This exciting progress has supported our shift in strategy from a market share only approach to increasing our focus on market expansion in the retail and IBM segment.

In 2023, we forecast the hepatitis C market opportunity will grow 15% to 25% from 2022 levels NXT 2019 utilization.

In addition to market growth, we expect catalyst that we will continue to increase its market share across all segments, most notably IBM in retail.

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

Thank you Dawn, we believe there's a tremendous amount of potential in our pipeline focusing on best in class products targeting large markets by combining our CPG <unk> adjuvant with established antigens.

Currently advancing programs for three adjuvant vaccines, cedar shingles and play.

We believe CPG <unk> adjuvant has the potential to improve the durability of protection against pertussis by redirecting T cell responses and enhancing protected antibody responses in a booster vaccine we've.

We recently completed a phase one clinical trial evaluating an improved tetanus, diphtheria and pertussis or TDAP vaccine that utilizes our CPG <unk> adjuvant.

Adult and adolescent safety from this study demonstrated the vaccine candidate was well tolerated without observed safety concerns.

Adult Immunogenicity results were consistent with our expectation and the support continued advancement of the vaccine candidate.

This year, we're completing a nonhuman primate pertussis challenge study that we designed to assess the impact on prevention of disease symptoms and nasal colonization as well as T cell responses with data anticipated mid 2023.

This will be the first ever vaccine per test. This human challenge study and is designed to assess the feasibility of effective study to evaluate vaccine prevention of pertussis symptoms effect on these'll colonization, and immune responses, including pertussis toxin neutralization and T cell responses.

In addition to <unk>, we continued to advance our shingles vaccine program.

We believe the CPG <unk> adjuvant mechanism of action is ideal for an improved shingles vaccine due to its demonstrated good tolerability and its ability to generate high levels of antibodies in CD four positive T cells, which are key in controlling reactivation of the zoster virus and preventing shingles.

In January we reported promising top line results from our phase one clinical trial designed to evaluate our investigational singles.

Between different regiments of CPG adjuvant.

Hi, antibody and CD four positive T cell vaccine response rates, we're seeing in all arms and there were similar to the comparator.

Robust increases in CD positive T cells were observed in all the CPG <unk> adjuvant in arms as well, although lower than comparator.

Over the course of the year, we expect to complete GMP manufacturing of GE antigen to support initiation of subsequent clinical trial.

Based on our initial data we plan to advance our shingles vaccine candidate with CPG 10, 18 adjuvant into a phase one two study in early 2024 to evaluate various dose levels of the GE ended June and further evaluate immune responses over a longer period of time.

Now transitioning to our third program, we are conducting a phase III trial evaluating the Immunogenicity safety and Tolerability of in our F. One deep plagued vaccine candidate adjuvant with CPG team in collaboration with and funded by the U S Department of defense.

The CPG two <unk> adjuvant vaccine candidates mechanism of action has the potential to speed up time to protection with fewer doses.

Paired to the three dose vaccine under development by the Dod.

In January we successfully completed part one of the clinical trial.

Both CPG 1018, adjuvant at Arm's method, one primary endpoint and demonstrated a greater than two fold increase in antibodies over the alum adjuvant and control arm after two doses.

<unk> has approved continuing to part two of the study using the bedside mix of CPG team with the alum adjuvant at R. F <unk> like back seat.

The advancement of our clinical candidate is a core <unk> priority, we're confident in our strategy to leverage the proven profile with CPG.

To develop new and improved vaccine candidate that provides significant opportunities to address important unmet medical needs.

I'll now turn the call over to Kelly to review our financial results.

Thank you, Rob I'm very happy to report another quarter and full year of strong financial performance.

Highlight the key annual financial results and then share our full year 2023 guidance and provide a few closing thoughts. Please note that all financial comparisons are versus the prior year period, unless otherwise noted. Please also refer to our press release and Form 10-K for a detailed financial information.

With revenue total revenue for 2020 with $723 million.

Compared to $439 million for 2021, representing an annual increase of about 64%.

This was driven both by helping them be as well as CTG, Tennessee has been bill as we successfully executed all five of our COVID-19 pandemic commercial supply agreements.

Starting with total of 17, we reported full year net product revenue of $126 million compared.

Compared to $62 million in the prior year, representing annual growth of 104% zinc.

Really impressive for the brand is the continued improvement in gross margin, which is approximately 68% for the full year compared to 66% for 2021.

Turning to CPG anything adjuvant revenue rec.

<unk> recognized under our commercial supply agreements for COVID-19 vaccine totaled $588 million gross.

<unk> of 62% for 2022, achieving the high end of our previously stated guidance range for both revenue and gross margin.

<unk> ahead for our COVID-19 partnerships our customers are managing their initial stockpiling ctg's any team with forward looking need as the global pandemic of all.

Specifically for 2023, we believe our customer cost efficient adjuvant stockpile build their near term demand translating to minimum to as little as zero COVID-19 related adjuvant sales for <unk> in 2023.

We expect to share additional insight as we execute future commercial supply agreement and gain better clarity around the endemic demand of COVID-19 vaccines for our customers for 2024 and beyond.

Now turning to expenses.

Our research and development expenses for 2020 sales or $47 million compared to $32 million in 2021. The increase was primarily driven by continued advancement in our pipeline program and channel clearly completion of phase one clinical trial of the successful top line data plus the continued advancement of our fully funded.

Phase II contract with EOG for additives and playback.

Selling general and administrative expenses for 2020, Q4 $131 million of lighting and at the low end of our previously stated guidance compared to $100 and compared to $100 million for 2021.

Increase was primarily driven by increased head count in hospital sales and G&A, coupled with focused marketing investments targeting growth and help with that as the market share as well as margin expansion in key segments that we believe will benefit help us update.

Moving on to profitability for the full year 2020, we generated GAAP net income of $293 million or $2 32 per share basic and $1 97 per share diluted compared to GAAP net income was $77 million or 62 per share basic and 57.

Per share diluted for the full year 2021.

And bring on our R&D portfolio of vaccine candidates, our without needing to return to the capital markets.

For 2023 full year financial guidance, we anticipate the following outlook.

<unk> net product revenue between $165 million and $185 million.

R&D expenses to be between $55 million and $70 million and SG&A expense to be between $135 million and $155 million.

Lastly, and in closing before we turn to Q&A, we're very proud of the way that we executed on our priorities throughout 2020.

Our strong balance sheet position combined with a disciplined approach to capital allocation enables us to focus on selected investments kind of sustainable top line growth and help them be thoughtful we advanced our clinical pipeline and support our business development objectives, all of which we believe will generate long term shareholder value.

Everyone for your attention today, operator, we would now like to open the Q&A portion of today's call.

Okay.

Thank you.

To ask a question you will need to press star one one on your telephone.

For your name to be announced.

So withdraw your question. Please press star one again.

Please standby, while we compile the Q&A roster.

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

Good afternoon, congrats on a successful year and thanks for taking my question a couple of commercial questions from US and then one quick one.

On the commercial side in your prepared remarks, and the press release, you mentioned that you are seeing signs that the ACP ACP guidelines or grow in the market can you talk a little bit more detail about what those signs are in.

What gives you confidence that youre beginning to see the impact of the guideline change.

Absolutely so.

Within the integrated delivery network segment. So some of the signs we're seeing as just volume increases.

We're looking at the volume increases in several of these customers that are exceeding 2019 levels.

We're also monitoring implementation.

And so it's around how they implement the guidelines so are the communicating with guidelines out across the clinics, we're seeing signs of that.

Are they.

Evaluating progress again that those communications, we're seeing signs of that as well within the <unk> segment. So those are all positive signals.

As well as the growth as I mentioned before.

Within retail.

Retail we continue to engage at the headquarter level within retail and they continue to want to be willing to do different types of initiatives focusing on all hepatitis B vaccination. So that's obviously a very positive sign retail fees. The recommendation is an opportunity certainly, especially in the 30 to 50 year old age.

Cohorts.

As an opportunity to do a companion vaccination strategy, that's been communicated to us by several large national retailer. So all very positive signs as we head into 'twenty three.

That's really helpful.

Then second commercial questions on CPG <unk> your guidance for 2023 is pretty clear, but I'm thinking longer term as the pandemic ends.

In the past <unk> suggested it was hoping to get 30% to 40% of the economics on.

The vaccine sold using CPG Tennant team.

Commercially sold for using CPG.

Is that possible under your current supply contracts with the Covid manufacturers or do you need to renegotiate new contracts for the post pandemic era.

Assuming some of those vaccines may eventually be be available.

Commercially.

Well I think totally dependent on what actually happens in the post pandemic era I think when you think of the.

Low middle income countries, the economics post pandemic.

And as a Franklin Covey similar it's the middle income and upper Middle income in high income countries and how our collaborators will stir in those private markets that could be different in the way those.

Marketing during the pandemic government sponsored purchasing so I actually don't think we would need to comment any differently on.

The ability of the volumes and can't capture it seems consistent.

What's more challenging to understand is how does that 1 billion doses <unk> supply.

Get utilized over the next through the pandemic through 'twenty three 'twenty four 'twenty five before there's additional supply to support the endemic market.

And at that time, we'll be able to understand.

Where the endemic pricing has settled out at and volumes to be able to negotiate.

The appropriate economics.

Got it Okay, Hey, youre out basically over the long term, but I don't think there's anything major any major change in how we position that.

The economics.

That is useful and then last question on the pipeline in terms of the 2018.

So that discuss the topline data as noted that the <unk> positive T cells some of lower for <unk>.

Then the comparator regimens.

Any thoughts on the significance of that finding and do you think the <unk> positive T cell levels could be related to kweku protein E dose and therefore as you go to higher doses.

Perhaps you get more.

Levels more similar to the competition.

Yes.

Need to be looking at it with our G protein in our phase two trial. So we'll have to see I mean, we use a reasonably high dose in this one so I don't think that we would highlight that as an expectation.

We'd like to see it in this next phase one two trial and the first question is the importance of it and as you can tell by our continued interest in the program.

It's unknown right and we want to continue to do work arounds around.

Around that endpoint, but the bottom line is we saw a robust response.

And recognizing that it's lower than the comparator, we still saw a very robust response.

Believe that that has the opportunity to deliver high levels of efficacy.

So we need to continue to do work in.

And invest the program in solid waste, a derisked that ultimate efficacy trial, but.

We can't really comment more than what we said around the fact that they were lower but we did see robust responses.

Great. Thanks for taking my question anything else you want to add to that.

No I think you've covered it we certainly will be looking.

At higher doses advantage in the new phase one study.

Potentially other changes to look at how we can improve the CD four responses.

Great. Thanks, again for taking our questions.

Thanks Bill.

Thank you.

Our next question comes from the line of Madhu Kumar from Goldman Sachs.

Your line is open.

Hey, Thanks for taking our questions. So I think I'll start with a financial one kind of as you think about gross margins for <unk> as I mentioned gross margins of 68% should we expect further margin improvements in 2023 and on the forward for <unk>.

Sure. Yes, we are really happy with the continued expansion in margin.

We've been making.

Very specific and disciplined investments in our manufacturing facility in Germany. So we're happy to see those improvements over time, we would like we would like to continue to see some nice margin expansion through 2023, and 2024, namely a scale continues to improve I think in the low 70% is in this area.

Turning to stare estimate for the next couple of years.

Okay, and then a follow up question on the CPG tenant sorry, so really clear about kind of expectations for STB features CBD today's teen.

Sales in 2023, I guess ultimately do you think with the kind of long term opportunities you mentioned the endemic Mark can we hear some of your customers talking about plans for the endemic market. If they were to need more adjuvant and what kind of timeframe would you expect them to be placing these orders and when kind of would you have a sense of when.

That demand might emerge.

Thanks for the question again.

Again, it depends on how fast they burn through their stockpile of adjuvant, but we are very close contact with our collaborators recognizing that there there is lead time, leading secure.

<unk> manufacturing supply side, we do have inventory I think it's worth noting that we do have some inventory of ads that we purposely maintained to be able to help navigate the transition from utilizing the stockpile and manage the timeline to securing manufacturing slots. So that we can be supportive of our collaborators broadly.

So.

I think we'll be able to see it coming at the point as they use there as the endemic market.

Comes clear more clear as to what the volume and demand will be and as our collaborators utilized their inventory I think there'll be plenty of time to see any future demand coming to be able to manage.

There their needs for their in depth market without having to run the risk of not having a sense of that.

Okay, great. Thank you very much.

Thank you.

Our next question comes from the line.

Excuse me comes from the line of Matthew Phipps from William Blair. Your line is open.

Good afternoon, Thanks for taking my questions Congrats on the great into 'twenty two.

Following up on Phil's question on the antigen dose.

GE for shingles vaccine Jessica published a study in 2014 that looked at different doses advantage of it.

At least in that study and it looked like there was a dose response for the humoral response, but maybe not for the cellular response is that.

What you would expect when youre changing antigen or is there may be differences in ranges being looked at or something different.

The CPG today tangible to change that.

Bob.

Yes.

I think it's hard to know because the adjuvant work in very different ways.

So yes in that paper Gsk's paper 50, and 100 looks the same for CD fours I don't know that thats going to be true for us. So the purpose of the phase one that we've completed was just looking at it.

Fixed dose of antigen, but various CPG team.

Formulations to see could we get close to the comparator.

And I think at this point now because now we have to look at it now we have to look at that antigen dose I don't think we can assume that based on the GSK experience, that's what we're going to see with Tennessee.

Got it okay about it.

You mentioned kind of the prioritizing BD.

Which is good this year.

Alex sheep and I know you can't talk too much better at this point, but should we be thinking about adult vaccines pharmacists administered I guess, just where do you think there's the most overlap with kind of your current infrastructure.

I think practically.

Reality is that if the suite of opportunities in the industry that it is going to be more meaningful as opposed to the specific overlap well it would be great to find something that overlap perfectly with our commercial infrastructure.

The reality is it's a it's the whole combined entity that has value that deleverage, including leadership high quality manufacturing Pharmacovigilance clinical development policy commercialization Medical affairs commercial leadership distribution. So I think we're looking for ways to leverage that entire entity more so than.

Just focusing on leveraging our field footprint, which can be augmented in many directions as needed depending on the products that are available.

You've heard in our comments, we from a business perspective, we believe the best use of our of our capital as well as our capabilities focusing on late stage or commercial assets.

That would be obviously within the vaccine.

Each business ideally, but we also might have to be opened.

A little bit broader.

Per view as well, so we'll have to kind of manage through that.

Over time as we consider all the opportunities.

Alright sounds good thanks, Brian .

Thank you.

Our next question comes from the line of Roy Buchanan from JMP Securities.

Line is what.

Thanks for taking the question.

I've got a handful in the singles.

Program, just want to make sure I heard Rob correctly, I think you said meet with the FDA.

This half is that correct and do you plan to announce the outcome of that meeting outside of Fas earnings call.

And then if that's true do you also think we can file the IND this half.

This is Ryan let me just take the positive communication needs of the Fda's pre IMD meeting to move into a clinical trial in the U S.

And so we will.

The outcome of that meeting will help.

Dictate our future development program, which we will always be transparent about as we continue to refine it I don't think you should expect that we have a specific announcement related to the completion of that meeting so they.

Patient of that outcome will be through how we talk about our programs and our traditional.

Dialogue.

So I think thats just to be very very clear about that Rob you can comment on the timing of IND filings.

So yes, we do anticipate that we'll be able to meet with FDA in the first half of the year, we certainly will be submitting our pre IMD meeting request.

And then we do anticipate submitting the R&D later in the year there'll be the second half of the year.

Alright, Okay, and anything else you got to say about that.

Potential venue for the data.

This half it sounds like maybe you havent submitted the abstract is that is that correct.

Details you can give us on that and then anything you can say about what you've seen as far as the adjuvant I know youre looking at with and without our own.

Anything I would say at this point, whether you expect to go forward with Alamo without thanks.

Well, let me, let me comment on on the abstract.

<unk> second half to be accepted before we can commit to where we're going to present. So I think frankly at this point, it's most appropriate for us to explain our plans as we will be submitting an abstract.

With expectations for a medical meeting that will be held in the first half of this year I don't think we can really comment more on that because we don't control the ultimate acceptance of that abstract.

And then.

Haven't commented on our decision around.

The adjuvant with or without album, Yes.

One thing that I will.

<unk>.

Yes.

Highlighting some of the commentary you saw in a previous press release.

All of our comments were around all of those groups. So there were there was we did see some differences which will be highlighted in the eventual poster presentation, but they're not significant.

So where there is necessarily an obvious decision. So we will continue to work through that decision as we progress towards our phase one two trial, there's just not a lot of urgency to make that decision yet really so we haven't we haven't prioritized it.

Okay, great. That's it thank you.

Thank you.

We have no further questions at this time.

Like to now turn it back to Ryan Spencer CEO for closing remarks.

Thank you operator, and thank you all for your attention today.

The important takeaway for you is that we believe the combination of our revenue generating assets, a highly experienced and an execution focused team our strong financial profile and an emerging pipeline of product candidates based on our proven adjuvant technology provide a solid foundation for our future.

Our success this past year and the opportunities. We see ahead are made possible by the dedicated teams added back our people are everything and I'd like to thank them for their commitment and effort towards our mission. Thank you for joining US today. We appreciate your time and interest in diverse 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.

Q4 2022 Dynavax Technologies Corp Earnings Call

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