Q2 2024 Dynavax Technologies Corp Earnings Call
Good day, ladies and gentlemen, and welcome to the Guy who backs technologies second quarter 2024 financial results Conference call. As a reminder, this call is being recorded.
Paul box: We ended the Companys prepared remarks, we will open the call for questions and provide specific participation instructions at that time I would now like to turn the call over to Paul box, Vice President Investor Relations and corporate Communications you may begin.
Unknown Executive: Thank you for participating in today's call. Joining me from Dynavax are Ryan Spencer, Chief Executive Officer; Donn Casale, Chief Commercial Officer; Rob Janssen, Chief Medical Officer; and Kelly MacDonald, our Chief Financial Officer. 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.
Speaker Change: Thank you for participating in today's call joining me from China backs or Ryan Spencer Chief Executive Officer, Don <unk>, Chief Commercial Officer, Rob Janssen, Chief Medical Officer, and Kelly with dollar Chief Financial Officer.
Speaker Change: Earlier today <unk> released financial results for the second quarter ended June 32024.
Speaker Change: Copies of the press release and a supplementary slide presentation are available on <unk> website.
Speaker Change: Before we begin I advise you that we will be making forward looking statements today based on our current expectations or beliefs, including but not limited to.
Speaker Change: Potential market sizes market segmentation effective marketing efforts future expected market share and related growth rates and related CIP recommendation impact on each financial guidance and trends, including revenue profitability cash flow and sufficiency of current capitalization.
Speaker Change: Timing and results of FDA submissions clinical trial starts and data readouts.
Speaker Change: Potential future uses off our demand for our CPG adjuvant.
Speaker Change: These statements involve risks and uncertainties and our actual results may differ materially.
Speaker Change: 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.
Speaker Change: Our forward looking statements speak as of today, and we undertake no obligation to update such statements.
Speaker Change: And with that I will now turn the call over to Brian.
Brian: Thanks, Paul.
Good afternoon, everyone and thank you for taking the time to join US to review our second quarter 2024 results.
Brian: We achieved another record quarter for <unk> net product sales as we strengthen our leadership position in the U S adult hepatitis B vaccine market.
Brian: Continued year over year market share gains for the total market and in key market segments.
Brian: Based on our strong results in Q2, and the continued strengthening of the hepatitis B vaccine market across Q2 and into early Q3, we are reaffirming our <unk> product revenue guidance for the full year 2024.
Brian: Longer term, we are highly optimistic about the adult hepatitis b vaccine market of over 130 million eligible patients, which is one of the largest addressable patient populations for vaccines in the U S.
Brian: In fact, the market opportunity for <unk> to grow to over $800 million by 2027 with.
With continued growth in both market share and market size to the end of the decade.
Brian: We also anticipate long term demand for <unk> beyond 2030, as a result of the continued penetration of the <unk> dose cohort as well as expanding market share providing a substantial long term revenue opportunity for <unk>.
Brian: For our pipeline development, we're pleased to have recently initiated our phase one two trial for our novel shingles vaccine program.
Brian: We're excited for several upcoming milestones, including Readouts from the shingle study as well as our key that can play vaccine programs expected across 2024 and 2025.
Ryan Spencer: In addition to this progress and bolstered by our strong financial position, we continue to evaluate strategic opportunities to grow beyond our internal organic pipeline within the infectious disease space, which we believe would enable us to further diversify our product portfolio and create future commercial opportunities.
Brian: In addition to this progress and bolstered by our strong financial position, we continue to evaluate strategic opportunities to grow beyond our internal organic pipeline within the infectious disease space, which we believe would enable us to further diversify our product portfolio and create future commercial opportunities.
Brian: We look forward to providing updates on these efforts in the future.
Speaker Change: I'll now turn the call over to Don and Rob who will provide more details on the help us happy results and our pipeline progress respectively before Kelly reviews, our financial results for the second quarter.
Speaker Change: Thank you Ryan we are thrilled with the performance and record breaking sales for <unk> in our second quarter <unk>.
Don: <unk> achieved over $70 million in net product revenue in the quarter supported by hepatitis B vaccine market growth and increases in <unk> market share.
Donn Casale: During our last earnings call, we said that the hepatitis B vaccine market began to strengthen in early Q2 as the focus of health care providers and retail pharmacies shifted back to prioritizing non-respiratory vaccines. During the quarter, several top national retail chains and many large IDM systems established hepatitis B-focused initiatives and campaigns to increase hepatitis B vaccination.
Speaker Change: During our last earnings call, we said that the hepatitis B vaccine market began to strengthen in early Q2, as a focus of healthcare providers and retail pharmacy shifted back to prioritizing non respiratory vaccine.
Don: That dynamic continue to play out throughout the quarter as customers re prioritized adoption that the herc universal recommendation to help protect their patients from hepatitis B.
Speaker Change: <unk> continued to increase its total U S market share year over year, achieving an estimated 42% market share in the second quarter compared to 39% during the same period last year.
Speaker Change: <unk> strong performance continues to be driven by two critical segment.
Don: Retail pharmacy and integrated delivery networks, our IGN.
Don: In retail <unk> second quarter estimated market share increased to approximately 59% compared to approximately 45% during the same period last year.
Brian: Brian Yes herbicide.
Don: <unk> estimated market share increased to approximately 56% compared to approximately 53% for Q2 last year.
Brian: During the quarter several top national retail chains, and many large IBM systems established hepatitis b focused initiatives and campaigns to increase hepatitis feedbacks in Asia.
Brian: We are encouraged by the focus and commitment of these customers and expect this momentum to continue into Q3 as healthcare providers continue to mobilize around the opportunity in hepatitis B vaccination.
Don: We remain confident in the long term expansion of U S. Hepatitis B vaccine market in early 2022, when the ACI to Universal recommendation went into effect, we provided five year guidance.
Speaker Change: Yeah, we expect the <unk> market opportunity to be over $800 million by 2027 with help us that would be positioned to achieve a majority market share.
Brian: We remain confident in that five year guidance and expect continued hepatitis D market expansion and help us that the market share gain through the end of the decade.
Brian: Beyond 'twenty three we expect the market to be substantial due to the continued penetration of the remaining large unvaccinated adult cohort.
Don: We look forward to providing more specific longer term guidance by the end of this year.
Don: In summary, we are reaffirming our confidence in the outlook for <unk> therapy, both of our 2024 and long term.
Brian: We expect half of that would be to strengthen this position as the clear market share leader in the expanding hepatitis b vaccine market.
Don: We are very proud of our commercial team success and are excited to help build on our momentum seen in Q2 or the remainder of 2024.
Don: I will now turn the call over to Rob to take you through our clinical pipeline.
Rob: Thank you Don I'm excited by the progress, we're making with our innovative vaccine pipeline.
Rob: Starting with our shingles vaccine program Vicente.
Vicente: As a reminder, we believe theres an opportunity to develop and improve shingles vaccine given the challenging tolerability profile of the current market leading product in.
Speaker Change: In the second quarter, we initiated a randomized active controlled dose escalation multicenter phase one two trial to evaluate the safety Tolerability and immunogenicity of <unk> compared to an active control and approximately 440 healthy adults aged 50 to 69 years.
Don: Key objectives of the trial include selecting the optimal glycoprotein E dose level and dosing schedule as well as adjuvant formulation for further clinical development.
Don: The phase one two trial will be used to support validation of a patient reported outcome measurement tool to differentiate the <unk> 2018 on tolerability and to support potential label claims.
Robert Janssen: We anticipate reporting top-line immunogenicity and safety data in the second half of 2025, including a comparison of CD4-positive T cells one month after the second of two vaccine doses. And we believe there is an opportunity to improve the duration of protection using our CPG-1018 adjuvant to generate a Th1-biased immune response. Results from the Phase 1 Extension Study are expected in the fourth quarter of 2024.
Don: Anticipate reporting topline Immunogenicity and safety data in the second half of 2025, including a comparison of CD <unk> positive T cells. One month after the second of two vaccine doses.
Don: Turning next to <unk> 18 program. This is an investigational vaccine candidate intended for active booster immunization against tetanus, diphtheria and pertussis Partido.
Speaker Change: TD vaccines have limitations, including waning effectiveness and we believe there is an opportunity to improve the duration of protection using our CPG 10, 18 adjuvant to Jennifer to generate a th one bias immune response.
Don: We're evaluating the persistence of <unk> induced pertussis immunogenicity through a long term follow up study of participants who completed a phase one trial of a booster dose of <unk> <unk> compared to an active control.
Don: The extension study will capture data for participants up to three years following initial vaccination.
Speaker Change: <unk> from the Phase one expansion study are expected in the fourth quarter of 2024.
Don: These data will provide us with a view of how the teed up to 18 immune response over time compares to the active control and will help establish our views on the potential benefits that can be achieved with this vaccine candidate.
Don: For our plagued vaccine program, which is in collaboration with and funded by the U S Department of defense.
Don: Anticipating providing a program update based on results from both our phase II clinical trial and the nonhuman Primate Challenge study in the fourth quarter of 2024.
Don: We're also focused on addressing FDA comments regarding our SPL law for Hep Lasalle B hemodialysis dosing regimen.
Don: We intend to meet with the FDA in the second half of 2024 as part of the standard regulatory process to discuss pathways to amend our <unk> with additional data to support potential approval of the four dose regimen.
Don: We're pleased with its progress across our pipeline and we look forward to executing on these upcoming milestones in the coming months.
Don: I'll now turn the call over to Kelly to review our financial results. Thank you Rob.
Kelly: Before I get started as a reminder to please refer to our press release and Form 10-Q filed earlier today for more detailed financial information.
Kelly: I'll walk through the financial highlights for another strong quarter underscored by record outflows that being net sale of $70 million at 24% year over year increase and a 47% sequential increase compared to last quarter.
Don: Putting us on track to achieve our guidance for the full year 2024.
Don: We believe this progress is a testament to the effectiveness of our overall brand plan and highlights the strength of our sales team combined with successful marketing campaigns across multiple channels, including retail.
Don: <unk> gross margin improved to 83% in Q2 224 from 76% in the prior year quarter.
Don: Margin expansion is consistent with our guidance of approximately 80% for the full year 2024, and the result of highly efficacious capital investments in our manufacturing process combined with improved scale over time.
Kelly Macdonald: Other revenue was about $4 million for the second quarter, representing revenue related to the Plague Vaccine Program in collaboration with and funded by the U.S. Department of Defense. Turning to our expenses, research and development expenses were $15 million for Q2 2024, compared to $13 million for the prior year period, with the increase reflecting important progress throughout our discovery, preclinical, and clinical pipeline. Moving to the balance sheet, we exited the second quarter of 2024 with cash equivalents and marketable securities of approximately $736 million, which was a $12 million increase over Q2.
Speaker Change: Other revenue was about $4 million for the second quarter, representing revenue related to the play vaccine program in collaboration with and funded by the U S Department of defense.
Don: Turning to our expenses research and development expenses were $15 million for Q2, 2024 compared to $13 million for the prior year period with the increase reflecting important progress throughout our discovery preclinical and clinical pipeline selling.
Don: Selling general and administrative expenses for the second quarter of 2024 or $42 million compared to approximately $37 million for the prior year period.
Don: The increase was primarily driven by sales by our sales force expansion in the second half of 2023 and other high ROI investments driving the growth of our help us that'd be franchise.
Don: Sublease income was $2 million in the second quarter of 2024, and as a reminder from last quarters call. We expect to record approximately $5 million of net sublease income for the full year 2024.
Don: These results generated net income of $11 million in the second quarter of 2024 compared to $3 million during the prior year period.
Don: Moving to the balance sheet, we exited the second quarter of 2024 with cash cash equivalents and marketable securities were approximately $736 million, which was a $12 million increase during Q2.
Don: We remain on track to achieve our cash guidance for the year and continue to believe that we have sufficient capital to prosecute our organic pipeline without the need to access the capital markets.
Don: Based on our strong execution year to date, we are also reiterating all of our full year 2024 financial guidance.
Don: For our full guidance framework, please consult our press release earlier today.
Speaker Change: In closing we are excited to report another strong quarter, consisting of record quarterly revenue for healthsouth be improved.
Don: Improved gross product product gross margins and advancing pipeline and a very robust balance sheet I'd now like to turn the call back over to Ryan for closing comments.
Ryan: Thanks Kelly.
Ryan: I wanted to take a few moments to provide additional context and reflect on the progress we are making beyond the results from this quarter on <unk>.
Ryan: Personally I'm very proud of what this company has accomplished over the last few years and how that set us up to drive the next leg of growth.
Speaker Change: We have demonstrated exceptional execution commercializing <unk> and delivered a profitable brand with a long term growth profile, which provides a strong foundation for us to continue to build on I am proud of our team's success in a market that has long been dominated by big pharma.
Ryan Spencer: Beyond HEPA Set B, we have managed to stay both disciplined and agile. We believe this provides us the tools we need to grow our business and maximize our impact to benefit all of our stakeholders.
Speaker Change: Beyond <unk>, we have managed to stay disciplined and agile.
Ryan: Allowing us to respond to opportunities and manage our risk while advancing new products into the clinic.
Ryan: Actively evaluating strategic opportunities for growth, but remain committed to applying disciplined business judgment of what any temptation to take action for the sake of the perception of progress beyond.
Ryan: Beyond our financial position, we have built a high performing team focused on strategic leadership and professionalism.
Speaker Change: We believe this provides us the tools, we need to grow our business and maximize our impact to benefit all of our stakeholders, including patients investors and employees as we aim to position <unk> as a leading infectious disease company.
Speaker Change: Thank you everyone. Operator, we would now like to open the Q&A portion of today's call.
Speaker Change: Thank you at this time, we will conduct a question and answer session as a reminder.
Speaker Change: To ask a question you will need to press star one on your telephone and wait for your name to be announced to withdraw your question. Please press star one again.
Speaker Change: Just to reiterate the ask a question you will need to press star one on your telephone and wait for you deem to be announced please standby, while we compile the Q&A roster.
Speaker Change: Our first question comes from the line of Matthew Phipps at William Blair. Matthew. Please go ahead. Your line is now open.
Speaker Change: Okay.
Matthew Phipps: Hi, Thanks for taking my questions and giving us the update aircrafts.
Speaker Change: Several of the programs.
Speaker Change: We are still anticipating that Q4 contraction.
Speaker Change: At the higher end of historical ranges between that 15% I think last year. We thought we might just you know 50% to 20% we are expecting that to come into the about 15%.
Speaker Change: Range. This year again, that's sort of how we expect Q4 relative to Q3. So hopefully that's helpful. We do still of course expect to.
Speaker Change: Q3 to be a very strong shrunk order.
Speaker Change: Hello.
unknown: Okay, great. Thanks for taking my question.
Speaker Change: Okay, great. Thanks for taking my questions.
Speaker Change: Thank you. Thank you.
Speaker Change: Our next question comes from the line of Phil Nadeau from TD Cohen.
Speaker Change: Phil Your line is now.
Phil Nadeau: Thanks for taking our questions first one commercial one pipeline commercial you reiterate your guidance for $800 million.
Phil Nadeau: Idaho market and a few years can you talk about the data points that are accumulating that continue to give you confidence.
Speaker Change: And that market growth.
Speaker Change: I think for most of US just a little hard given the noise around contraction in the market some quarters and growth others. So.
Speaker Change: What gives you confidence that that all is on track to hit the ultimate market size.
Dawn: Yes, I'll make a couple of high level points and dawn. If you have any other details to add please stephen.
Dawn: Joining me.
Dawn: You reminded us that back in 2002, we projected out the market to be $800 million by 2027.
Dawn: Based on our modeling of increasing coverage rate as a result of these VIP universal recommendation.
Stephen: And we continue to reiterate that because we are tracking towards those projections.
Speaker Change: Congrats over the last few years.
Speaker Change: Don't know if you want to elaborate at all on.
Speaker Change: As a comparison of expectation versus utilization, but its still relatively highly utilized annually.
Speaker Change: RSV is going to be.
unknown: Lower given that
Speaker Change: Lower given that.
Speaker Change: The lack of a recommendation for annual boost those are both tailwind for <unk>.
Speaker Change: Don do you want to maybe just provide a little bit of color on in particular, the retail pharmacy trends that we have seen or could see as we progress as it relates to plus one option.
Speaker Change: I think it boils down to that Phil and the fact that it provides more vaccination opportunity quite frankly for patients as they originated in pharmacy. This fall season.
Speaker Change: Into winter season.
Speaker Change: So again to <unk>.
Speaker Change: Ryan pointed a tailwind as an opportunity.
Speaker Change: Our retail partners see it as such.
Speaker Change: So for Hep b it as an opportunity because again it provides additional origination vaccination opportunities. This season, and we've factored that data as we think about this year and beyond to be clearer.
unknown: And to be clear, although RSV will be utilized less.
Speaker Change: Although RSP will be utilized less.
Speaker Change: So up in Oregon.
Speaker Change: Well someone originated for flu or Covid now they have there is an opportunity to be a different things seem to be administered correct.
unknown: Got it. Okay. Last question on the pipeline. You mentioned C4 levels are going to be assessed in the Z1018 trial. Can you give us some sense of what you hope to see? What would you consider encouraging that will prompt further investment versus what would be?
Speaker Change: Got it Okay last question on the pipeline you mentioned.
Speaker Change: Four levels, we're going to be assessed.
Speaker Change: <unk> trial can you give us some sense of what you hope to see what would you consider encouraging that.
Robert Janssen: Jared, Rob, why don't you take that? Yeah, what we're looking at, you know, we're looking at a number of different antigen levels in different combinations with adjuvants as well as different dosing regimens. And what we anticipate is identifying the best to move forward, which would be one that provides similar levels of CD4 counts that we see with Shingrix.
Donn Casale: Yeah, so a couple of things. I'll hit it at the high level. Again, Donn, if you want to add to it, please do, but we continue to have customers where we can expand utilization. So, you know, customers don't. We do believe the Heplis app will continue to capture a disproportionate share of the market expansion, which will also help overall market share.
Speaker Change: <unk> overall market share.
Speaker Change: Okay. Thank you everybody.
Speaker Change: Yeah Okay.
Speaker Change: Okay sure.
Speaker Change: Then the other piece I guess is it looks like from a gross margin perspective, you more or less hidden hitting your guidance this quarter as I think quarter to quarter. How much noise is there in gross margin now that the big efforts to improve that over time, our onboard and you're in you're reaching the.
Speaker Change: Some you are hoping to get to.
Speaker Change: So we'll continue to see some minor fluctuations quarter on quarter, and some variability quarter to quarter, just because of timing.
Speaker Change: Just manufacturing processes.
Speaker Change: Think in terms of order of magnitude as what we've seen these last couple of quarters, that's probably what we can expect to see going forward, which is like we provided the three tier point, 80% estimated gross margin for me.
Speaker Change: For the year as our guidance.
unknown: Great. And then, maybe, last one for me, just more about the phrasing of how some of your guidance reads. You're guiding for cash and equivalence at year-end to be greater than it was at year-end 23. And I notice, you know, you're not talking about cash flow. You're not talking about particular profitability numbers. It's specifically cash plus equivalence guidance. Does that imply that BD is less likely before the end of the calendar year?
Speaker Change: Great and then maybe last one for me.
Speaker Change: Just more of a the phrasing of how Youre your some.
Speaker Change: Some of your guidance reads you.
unknown: Yeah, that makes sense. All right. Thanks very much.
unknown: Thank you. I'll take the first one and then definitely layer in some details, which is, as we think about guidance, I think we certainly believe that we have plenty of scenarios that will support the upper end of the range. So, we keep the guidance in terms of a range because there are uncertainties. So, I think a couple of things that we're really excited about headed into Q3 and even Q4 have already been highlighted on this call.
unknown: So, for example, some of the retail pollsters that we've seen, we continue to see that we also have a really, really strong response to our personal promotion. And then also, of course, some of the opportunities that were highlighted around the recent RSV.
Speaker Change: Maybe I'll hand, it over to Don that any other color.
Paul: Paul just regarding Youre looking into Q3, I mean, two to Kelly's point and we've said it's already we're excited what we see especially within the retail pharmacy segment actions and behaviors that are happening in occurring by.
Speaker Change: By our partners really saving themselves up for.
Speaker Change: Robust.
Speaker Change: Back half of the year.
Speaker Change: Taking advantage of opportunities in patient origination as I mentioned before with the RSV example.
Speaker Change: Infrastructure is in place communications in place and.
Speaker Change: And so that's why we feel very good about where we're going at we reaffirmed our guidance.
Speaker Change: Our 2024.
Speaker Change: And then Paul on the play program.
Paul: There is no defined milestone structure as it relates to that program that is a.
Speaker Change: It's clearly funded program.
Paul: The upside value there would be future product sales of either <unk> or if we ended up being responsible for the whole product. So we will provide an update on the program in Q4, which would include any future expectations around advancement in funding.
Speaker Change: Got it okay. Thanks for the clarity thank you very much.
Speaker Change: Thank you. Our next question comes from the line of Roy Buchanan from JMP Securities.
unknown: Roy, your line is now open. Follow up on a lot of the guidance questions, just the longer-term guidance that you mentioned providing later this year, can you maybe talk a little, give us a preview maybe of what that's going to look like, is that 2030, 2035, 2040, any granularity and when you might give us that guidance?
Speaker Change: Yeah.
unknown: Yeah. Hi, Roy. As you heard in some of the qualitative statements we made today around a little bit of an indication of what we expect beyond 2027 with continued market growth and to continue market share, we are looking to be able to update longer term guidance to focus on providing color as to where we see the peak opportunity and then some context for the shape of the curve post-peak. So we're refining that work right now, which is where we feel confident in continued growth beyond 2027, and we'll refine that a little bit more and provide a bit more quantitative update.