Q3 2024 Dynavax Technologies Corp Earnings Call

November 7, 2024

Unknown Speaker 00.00.00.00.

Speaker Change: Good day, ladies and gentlemen, and welcome to the Dynavox Technologies 3rd Quarter 2024 Financial Results Conference Call. As a reminder, this call is being recorded.

Speaker Change: At the end of the company's 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 Cox, Vice President, Investor Relations and Corporate Communications. You may begin.

Paul Cox: Thank you for 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.

Paul Cox: Earlier, Dynavax released financial results for the third quarter ended September 30, 2024. Copies of the press release and a supplementary slide presentation are available on Dynavax's website.

Paul Cox: 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

Paul Cox: Potential market sizes, market segmentation, effective marketing efforts, future expected market share and related growth rates, and related ACIP income and dividend impacts on each.

Paul Cox: Financial guidance and trends, including revenue, profitability, cash flow, efficiency of current capitalization, timing and results of FDA submissions, clinical trial starts, and data readouts, and potential future uses of or demand for our CPG 1018 adjuvant.

Paul Cox: 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 today's quarterly report on Form 10-Q.

Speaker Change: Our four looking statements speak as of today, and we undertake no obligation to update such statements. And with that, I will now turn the call over to Ryan.

Ryan Spencer: Thanks Paul, and thank you all for joining us this afternoon. It's nice to be here again to share the results of another very successful quarter for Dynavac. Our success continues to be driven by HEPLISAB-B, where the team once again delivered a record quarter with $79 million in net product sales.

Ryan Spencer: We're very proud of our accomplishments with Heplis FB, from its development to successful commercialization.

Ryan Spencer: While the quarterly result is impressive, we are still at the beginning of our plan for continued growth, which Donn will provide some more details on in a moment.

Ryan Spencer: Commercial success with Heplisavvy has transformed Dynavax into a profitable company.

Ryan Spencer: Supported by our confidence in the future growth of HEPLISAV-B and expectations for our current programs, we are committed to continuing this trend into the future.

Ryan Spencer: Pipeline disciplined and thoughtful capital allocation are cornerstones to our approach to generate long-term value.

Ryan Spencer: We continue to believe there is a need for an improved pertussis vaccine, however, we also understand what it takes to be commercially viable in a competitive environment.

Ryan Spencer: We will continue to evaluate all of our clinical and preclinical programs to ensure we invest in product candidates that offer meaningful value for both patients and shareholders alike.

Ryan Spencer: Moving to our Z1018 Shingles Vaccine Program, we are actively enrolling in our Phase 1-2 trial, and we expect enrollment to complete by the end of this year with top-line data in the second half of 2025. Rob will review our expectations for this study later on the call.

Ryan Spencer: As I said earlier, we are excited to have achieved a very meaningful milestone for companies in our industry, where we expect near-term recurring profitability from our base business.

Ryan Spencer: Our capital allocation strategy balances financial discipline with our ambition to leverage our expertise and capabilities to drive growth. As announced in today's press release, our Board of Directors has authorized a $200 million share repurchase plan.

Ryan Spencer: Personally, having been at Dynavax for so long and having participated in and led a number of financing transactions, it is a proud moment to be in a position where we can return capital to our shareholders while continuing to execute on our long-term vision for the company.

Ryan Spencer: We aspire to be a leader in vaccines and infectious diseases with commercial scale and scientific expertise.

Ryan Spencer: I'm proud of how we've driven and managed our growth to date. I'm inspired by the work that we have ahead and more confident than ever in the potential of our future.

Ryan Spencer: We have an exceptional, dedicated, and energized team focused on developing and commercializing products that change the public health landscape and protect millions from infectious diseases.

Now I'd like to turn the call over to Donn.

Thank you, Ryan.

Donn Casale: We are very proud of the performance and record-breaking sales for Heplisav-B in the third quarter. Heplisav-B achieved over $79 million in net product revenue supported by Hepatitis B market growth and increases in Heplisav-B market share.

Donn Casale: Keplicev continues to increase its total U.S. market share year-over-year, achieving 44% market share in the third quarter compared to 41% during the same period last year.

Donn Casale: HEPLISAB-B's growth continues to be driven by two critical segments, retail pharmacy and integrated delivery networks, or IDNs.

Donn Casale: FSSB's market share in the retail pharmacy segment increased to 55% compared to 53% for the third quarter of 2023.

Speaker Change: For IDN, Eplicebi's estimated market share increased to 56% compared to 54% during the same period last year.

Speaker Change: Over the past year, within retail pharmacy and IDN, the U.S. hepatitis B market dose volume grew 23% year-over-year in Q3, while heplisav-B dose volume grew 27%.

Speaker Change: These trends support our long-term growth expectations of the hepatitis B market and uptake of the ACIP Universal Recommendation.

Speaker Change: In the fourth quarter, we look for continued focus by retail pharmacy and IDN customers on Hepatitis B vaccination, with increases in Hepatitis B US market share.

Speaker Change: We also anticipate typical year-end seasonality with market contraction of approximately 15% due to fewer patient visits during the holiday season.

Speaker Change: Looking ahead, we are confident in the long-term revenue opportunity for Heplisav-B.

Speaker Change: We expect the Heplisav-B market opportunity in the U.S. to expand to a peak of over $900 million by 2030, with Heplisav-B achieving at least 60% total market share.

Speaker Change: This long-term guidance represents our expectation of a double-digit annual growth for product net sales for HEPLISAV out to 2030.

Speaker Change: In addition, we expect the Headless FV market opportunity to remain durable beyond 2030 due to ongoing vaccination of the eligible adult population, observed revaccination practices by healthcare providers, and continued gains in market share.

In summary, we remain confident in the outlook for HEPLISAV-B.

Speaker Change: We expect Heplisav-B to strengthen its position as the clear market share leader in the expanding hepatitis B vaccine market.

Speaker Change: We are very proud of our commercial team's success and are excited about our work to build on this momentum for the remainder of this year and into the future.

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

Rob Janssen: We previously reported that FDA issued a complete response letter for the SBLA that adds a four-dose regimen for patients on hemodialysis to the U.S. label.

Speaker Change: Dynavax recently received feedback from the FDA regarding the potential to conduct an observational retrospective cohort study to address the deficiencies noted in the complete response letter. We look forward to providing future updates on these discussions.

Speaker Change: Now, turning to our shingles vaccine program, Z1018, as a reminder, we believe there's an opportunity to develop an improved shingles vaccine given the challenging tolerability profile of the current market-leading product.

Speaker Change: In the second quarter, we initiated a randomized, active control, dose escalation, multi-center phase 1-2 trial to evaluate the safety, tolerability, and immunogenicity of Z1018 compared to Shingrix.

Speaker Change: We plan to enroll approximately 440 healthy adults age 50 to 69 years.

Speaker Change: And with recognition that CD4 positive T-cells are important in preventing reactivation of the varicella zoster virus, we seek to demonstrate CD4 positive T-cell responses that are similar to those of Shingrix.

Speaker Change: Now, important additional information we'll consider, though, will be the distribution and quality of T cell responses and T cell responses over time. Antibody responses, including vaccine response rates, will also be evaluated.

Speaker Change: In addition to immunogenicity measures, the Phase 1-2 trial will also be used to validate a patient-reported outcome measurement tool to differentiate Z1018 on tolerability and to support potential label claims.

Speaker Change: We anticipate reporting top line immunogenicity and safety data in the second half of 2025.

Speaker Change: Finally, our Plague Vaccine Program is in collaboration with and funded by the U.S. Department of Defense.

Speaker Change: Based on the results from a randomized, active-controlled Phase II clinical trial of the two-dose plague vaccine adjuvanted with CPG-1018, Dynavax has submitted a proposal to the Department of Defense regarding additional clinical and manufacturing activities.

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

Kelly Macdonald: Thank you, Rob. Before I get started, a reminder to please refer to our press release in Form 10-Q filed earlier today for more detailed financial information.

Kelly Macdonald: The third quarter financials were underscored by record Heplisav-B net sales of $79 million.

Kelly Macdonald: and positions us to deliver on a narrowed guidance range of $265 to $270 million in HEPLISAV net sales for 2024, representing over 25% year-over-year growth at the midpoint of this range.

Kelly Macdonald: This top-line growth highlights the strength of our commercial team and successful marketing campaigns across multiple channels, including retail.

Kelly Macdonald: Additionally, PEPLISAID-B growth margin improved to 84% in Q3 and 82% for the first nine months of the year, slightly outpacing our reiterated guidance of approximately 80% for the full year.

Speaker Change: Turning to our expenses, R&D expenses for the quarter were $14 million and reflect important progress throughout our pipeline, as Rob mentioned moments ago.

Speaker Change: SG&A expenses for the third quarter of 2024 were $43 million compared to approximately $38 million for the prior year period.

Speaker Change: The increase was primarily driven by incremental headcount, supporting our organization, coupled with marketing investments driving the growth of Heplis FB during the quarter.

Speaker Change: These results generated quarterly net income of $18 million, supporting our commitment to achieve profitability and positive net income for the full year 2024.

As Ryan mentioned,

Speaker Change: We believe that the strength of our current financial profile, including our balance sheet, supports the development of our pipeline assets towards proof of concept and enables us to actively pursue external opportunities to expand our portfolio with strategically aligned assets that can be rapidly developed into commercial products.

Speaker Change: As noted today, our board has approved a $200 million share repurchase plan, and we believe this use of capital will benefit our shareholders, while also preserving financial flexibility to make the investments required to deliver on our vision for the company.

Lastly, we have updated our full year 2024 financial guidance.

Speaker Change: which includes a narrower HEPLISAV-B net product revenue guidance of approximately $265 to $270 million, a reiteration of our expectations of HEPLISAV-B gross margin of approximately 80% for the year,

Speaker Change: and an overall tightening of expense guidance for the year. We now expect research and development expenses to be between $55 million to $65 million and selling general and administrative expenses to be between $170 to $180 million.

Speaker Change: Lastly, we are expecting to achieve a full year of profitability and positive net income for 2024. For our full guidance framework, please consult our press release from today.

Speaker Change: In closing, we're excited to report another strong quarter consisting of record quarterly revenue for HEPLISAV-B, improved product growth margins, an advancing pipeline, and a strong financial profile with a balanced capital allocation strategy. We are proud of this progress, and we're also excited about our growth prospects, as outlined on the call today.

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 the question and answer session. As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced.

Speaker Change: To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster.

Speaker Change: Our first question comes from Matt Phipps with William Blair. Your line is open.

Good afternoon, team. Thank you for all this extra.

Speaker Change: Kind of clarity and nuance guidance here today. I'm looking at this updated kind of 2030 view I was wondering if your 2027

Speaker Change: Previous use still is intact as far as 800 million total market by 2027 then further expanding to 20

Speaker Change: to 900 by 2030. Or if you think it's a little bit more linear, straight to 2030, just given, I guess now you see kind of an 8% CAGR between 23 and 2030 versus previously an 11% CAGR between

23 and 27 for just my first question.

Speaker Change: Hey, Matt. Thank you. I'll take that quickly. Yeah, we just see this as an extending of our guidance out to 2030 and where we see peak. And this is not a reiteration to change what we thought would happen by 2027.

Ryan Spencer: Okay, thanks, Ryan. And then it looks like the majority of growth between 27 and 2030.

Speaker Change: It's almost exclusively coming from the retail channel comparing kind of the percentage market by segment. Is that true? And if so, what do you think is IDN capping out at some point? Or what's driving your confidence in retail really driving that much more growth?

Don, you want to take that?

Yeah, sure. Hey, Matt. Yeah, as we.

Speaker Change: have communicated. We believe the retail pharmacy segment is well primed to continue to realize growth from ACIP Universal, partly due to the fact that, you know, the infrastructure that they've built coming out of the pandemic

Speaker Change: The fact that there is quite a bit of incentive for retail pharmacy to identify and recommend around all adult vaccines.

and we continue to see this shift.

Speaker Change: from, you know, the traditional hospital IDN segment, if you will, to retail, not only for hep B, but obviously, as we've seen in other vaccines as well, this shift into retail pharmacy. So we do see retail pharmacy being the predominant driver of that growth in those outer years relative to IDN.

Speaker Change: And the last question for me, just as you're thinking about this 60% market share goal.

Speaker Change: You know, you're already pretty close there and kind of your target.

Speaker Change: the target segments, and it's been kind of stable throughout 2024. So is getting to 60 more about kind of a spillover in the non-field target segments, or do you expect to be meaningfully above 60 in those field target segments? Thank you for taking my questions.

Sure Matt, I wanted to take that one too.

Sure. Yes. But Matt, you know, again,

Speaker Change: taking market share within those critical segments. And so the disproportionate growth within ID&R will continue to increase the overall total market share.

Speaker Change: We do see some spillover in some of these other segments as we continue to increase awareness around HEPLISAV-B over the years. But again, this market share gain will continue to be driven off these critical segments of retail, pharmacy, and IDM, where we do see, as I said before, disproportionate growth and continuing increases in market share.

Thank you. Please stand by for the next question.

Speaker Change: The next question comes from John Miller with Evercore. Your line is open.

John Miller: Hi guys, congrats on the quarter and thanks for taking the question.

John Miller: Maybe on gross margin dynamics, can you give me a little more color about how you expect gross margin to evolve maybe just over the next couple of quarters given you reiterated the full year guidance but it seems like you're a little bit ahead of schedule this quarter. Is there still some variability to expect in gross margin going forward into Q4?

Speaker Change: Kelly, you want to handle that one? Thanks for the question, John.

Kelly Macdonald: Sure, thanks, John. Yeah, sure. So, you know, while we we look towards the full year to represent the continued progress around gross margin, there are, you know, sort of

Kelly Macdonald: So we're not, we're not trying to highlight anything specifically that we're anticipating. We just acknowledge that there's some variability from quarter to quarter.

Bye.

Speaker Change: and I guess secondly, I heard you reiterate your interest in in BD and external opportunities, but I guess given a pretty substantial share repo authorization here, should we be taking that as more priority than external BD? And does that a sign that you've you've had trouble finding good value in the in the external opportunities that are out there right now?

Speaker Change: No, I wouldn't I wouldn't read into it that way. I think the the reality is it's a balanced capital allocation strategy and we feel like we have the opportunity to return capital at these levels while still maintaining our focus for growth through

External Business and Corporate Development.

Speaker Change: more support, we would have to obviously figure out how to finance that, but ultimately it doesn't change our focus on how we're going to drive growth.

Speaker Change: And then maybe just lastly on that on that repo for modeling purposes. Do you have an expectation for cadence on the repo and when those when that could happen? Or do you have a fully open ended?

Unknown Speaker Kelly.

Speaker Change: We have stated that we intend to execute the program by, you know, within the next 12 months, subject to market conditions, and we'll look forward to leveraging the program to execute, you know, accordingly.

All right, thanks very much.

Thank you. Please stand by for the next question.

Speaker Change: The next question comes from the line of Ernie Rodriguez with TD Cowan. Your line is now open.

Speaker Change: Congrats on the quarter two and thank you for taking our questions.

Speaker Change: So, looking forward to Q4 and Q1 and thinking about the expected seasonality, we were wondering if the lower rate of RSV vaccination that has been reported by

Speaker Change: by the RSV players in part due to the CDC updated regs. Could that be a positive impact on HEPLISA and maybe represent some upside given the potential for more capacity in the retail segment? Is that something you're thinking about?

Thanks, Ernie. Donn, why don't you address that one?

Yeah, thanks for the question.

Donn Casale: Unnecessarily upside. We considered certainly the recommendation when we thought about the guide.

Donn Casale: You know, it certainly represents, again, opportunity from the standpoint of a plus one campaign for HEPLISAV-B. It's an open arm, if you will.

Speaker Change: Thank you, that's helpful. And then on the pipeline and the Tdap vaccine program, is there any learnings that from those results that you, that perhaps are

Speaker Change: you know any read through to the to the other vaccine programs or maybe maybe even any potential vaccine indication that you are that you were contemplating um any any learning from that any data that you can use going forward

Speaker Change: No, I mean, I think, well, there's no negative read through from one program to the other. I think the learning is every program, every answer, every disease is different now.

Speaker Change: And the product that you're building and how 1018 will support it is going to be different. So, no, there's no consistent read through that. I would, we would, we would look to get out of that information. I think the important thing that you can extrapolate is.

Speaker Change: How we manage our clinical pipeline and our investments in R&D to hold ourselves accountable to try to find ways to

have

Speaker Change: meaningful readouts that will allow us to make decisions and then make the decision around that information with a focus of building products that will actually be competitive.

Speaker Change: and so we can have a high confidence in the product's overall success. So I think that's probably the bigger learning from this, Ernie, but no, I wouldn't suggest there's any read through for 1018 here. This is just how 1018 performed with these specific actions against this specific target.

Thank you. That's helpful.

Thank you.

Thank you. Please stand by for the next question.

Speaker Change: The next question comes from the line of Paul Choi with Goldman Sachs. Paul, your line is now open.

Unknown Speaker 0

Paul Choi: Hi, thank you. Good afternoon team and thank you for taking our questions. I have a pipeline question for Rob with regard to 1018. And the question is,

Paul Choi: You know, how do you think about the possibility of a single dose?

Paul Choi: candidate here that's reasonably within the non-inferiority margin versus Shingrix on immunogenicity, even if there is some somewhat more higher rate of adverse events relative to maybe the wider dosing intervals with multiple doses with two doses. Thank you very much.

Go ahead, Rob.

Rob Janssen: Yeah, a single dose, I think, is going to be challenging. I think it's going to be challenging for everybody. With respect to reactogenicity, you know, we're seeing fine reactogenicity even with our higher doses, CPG 1018. Even with that higher reactogenicity than with the lower dose of 1018, it's still better than Chingrix and still better tolerated than Chingrix.

Rob Janssen: We're certainly going to be looking, as we look at these wider interval, we certainly are going to be looking at the one dose to see if there's a potential opportunity. But in the previous study,

We compared one dose

Unknown Speaker .

Rob Janssen: The 1018 of Z1018 with one dose of Shingrix, and they were the same. It was the second dose in which things seemed to improve more for Shingrix than it did for us. It improved very well for both vaccines, but more for Shingrix. So we're going to look at one dose. I'm not sure we're going to see one dose success.

Rob Janssen: And Paul, if I understood your question, it sounded like you were asking,

Speaker Change: immunogenicity or efficacy, but had to trade off with even higher reactogenicity. Would that make sense? Because I think we've seen that in some other programs.

Not ours.

Speaker Change: And I think we would have to say, from our perspective, Shingrix is one of the most reactogenic vaccines.

Speaker Change: or is probably the most reactogenic vaccine. So I think anything that targets a profile that has more reactogenicity is not likely to be very successful.

Got it. Okay. Thank you very much.

Speaker Change: The next question comes from the line of Roy Buchanan with Citizens. Your line is now open.

Roy Buchanan: Hey, thanks for taking the questions. I had a few on the program and the plan you submitted to.

Roy Buchanan: DoD. I see that you have dose optimization in this slide. Is there anything you can say about the doses that you're going to look at higher, lower? Do you still expect greater durability and a lower number of doses? And when do you expect to hear back from the DoD on that?

Roy Buchanan: Hey Roy, thanks for the question. I think the best thing for us to do is hold off commenting on specifics regarding the trial until we actually have her back from DOD on the contract and have a good alignment on

Roy Buchanan: what the next clinical trial would look like. So we do expect to hear back from the DOT in the near term, possibly this year, maybe next year. But again, it's kind of up to them. So we're happy that we were able to continue the relationship with them and

Roy Buchanan: Submit this updated contract and we'll be able to provide you more information when they respond.

Speaker Change: Okay, perfect. And then the SPLA for the dialysis label for HEPLISAV. I guess do you have any sense of how long you might need to compile that data? And Rob, I think said, provide future updates on the discussions. So are discussions ongoing and you're awaiting additional feedback or do you think you know what you need to do at this point?

Yeah, I'll take that, Rob. You can add on, but...

Speaker Change: We, you know, we've engaged with them in the process as part of their response, and so we are waiting to provide an update to them in the near term. And then once they have that, there's no defined timeline for their response.

Speaker Change: This is not a, there's not a particular timeline or anything like that, so.

Rob Janssen: This is a little bit more flexible as far as how the dialogue would go. So Rob, do you want to provide any additional comments? Yeah, so we're proposing a real-world evidence study, and as Ryan said, we have to go through steps. And the first one is they have to decide if the database is fit for purpose.

Speaker Change: So that's really the step we're going to engage with them in the near term. I think in the long term, Roy, our understanding of the amount of time it will take to do the analysis

Speaker Change: is even though FDA's timelines are, you know, not guided by PDUFA, we're still optimistic we'll be able to get our resubmission in on time and by mid May next year.

Okay, thank you.

Speaker Change: Thank you. We have no further questions at this time. I would now like to turn the call over to Ryan Spencer, CEO, for closing remarks. You may begin.

Ryan Spencer: Thank you operator and thank you all for joining us today. We appreciate your interest in Dynavax. We're excited about our recent accomplishments and the strength of our position. We look forward to updating you on our progress focused on protecting the world against infectious diseases.

Operator, you may end the call.

For more information visit Kelly MacDonald Website www.KE Paula.com

[inaudible]

Speaker Change: Good day, ladies and gentlemen, and welcome to the Dynavox Technologies 3rd Quarter 2024 Financial Results Conference Call. As a reminder, this call is being recorded.

Paul Cox: Thank you for taking 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.

Speaker Change: Earlier, Tenebax released financial results for the third quarter ended September 30, 2024.

Speaker Change: Copies of the press release and a supplementary slide presentation are available on Dynavax's website.

Speaker Change: 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

Speaker Change: potential market sizes, market segmentation, effective marketing efforts, future expected market share and related growth rates and related ACI income and income on each.

Speaker Change: Financial guidance and trends including revenue, profitability, cash flow, efficiency of current capitalization, timing and results of FDA submissions, clinical trial starts, and data readouts, and potential future uses of or demand for our CPG 1018 adjuvant.

Speaker Change: Events involve risks, 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.

Ryan Spencer: And with that, I will now turn the call over to Ryan.

Ryan Spencer: Thanks Paul and thank you all for joining us this afternoon. It's nice to be here again to share the results of another very successful quarter for Dynavac. Our success continues to be driven by HEPLISAB-B where the team once again delivered a record quarter with 79 million dollars in net product sales.

Ryan Spencer: We're very proud of our accomplishments with FLSAP-B, from its development to successful commercialization.

Ryan Spencer: While the quarterly result is impressive, we are still at the beginning of our plan for continued growth, which Donn will provide some more details on in a moment.

Ryan Spencer: Commercial success with Heplisav-B has transformed Dynavax into a profitable company.

Ryan Spencer: Pipeline disciplined and thoughtful capital allocation are cornerstones to our approach to generate long-term value. This quarter, we read out our phase one extension study from our TDAP program, and while our phase one study showed improved immunogenicity from our vaccine candidate, the result did not demonstrate sufficient differentiation to meet our threshold to support advancement.

Ryan Spencer: We continue to believe there is a need for an improved pertussis vaccine, however, we also understand what it takes to be commercially viable in a competitive environment.

Ryan Spencer: Moving to our Z1018 Shingles Vaccine Program. We are actively enrolling in our Phase 1-2 trial and we expect enrollment to complete by the end of this year with top-line data in the second half of 2025. Rob will review our expectations for this study later on the call.

Ryan Spencer: We've evaluated many targets and hold ourselves to a very high bar when it comes to deploying capital towards external opportunities.

Ryan Spencer: We will continue to maintain discipline and patience as we execute on this part of our strategy.

Ryan Spencer: As I said earlier, we're excited to have achieved a very meaningful milestone for companies in our industry.

Ryan Spencer: where we expect near term recurring profitability from our base business.

Ryan Spencer: As announced in today's press release, our Board of Directors has authorized a $200 million share repurchase plan.

Speaker Change: personally having been at Dynavax for so long and having participated in and led a number of financing transactions.

Speaker Change: It is a proud moment to be in a position where we can return capital to our shareholders while continuing to execute on our long-term vision for the company.

Speaker Change: We aspire to be a leader in vaccines and infectious diseases with commercial scale and scientific expertise.

Speaker Change: I'm proud of how we've driven and managed our growth to date. I'm inspired by the work that we have ahead and more confident than ever in the potential of our future.

Now I'd like to turn the call over to Donn.

Thank you, Ryan.

Donn Casale: We are very proud of the performance and record-breaking sales for Heplisav-B in the third quarter. Heplisav-B achieved over $79 million in net product revenue, supported by Hepatitis B market growth and increases in Heplisav-B market share.

Donn Casale: Keplicev continues to increase its total U.S. market share year-over-year, achieving 44% market share in the third quarter compared to 41% during the same period last year.

Donn Casale: Hepatitis B's growth continues to be driven by two critical segments.

Retail Pharmacy, and Integrated Delivery Networks, or IDN.

Donn Casale: FSSB's market share in the retail pharmacy segment increased to 55% compared to 53% for the third quarter of 2023.

Donn Casale: For IDN, Eplicebi's estimated market share increased to 56% compared to 54% during the same period last year.

Donn Casale: Over the past year, within retail pharmacy and IDN, the U.S. hepatitis B market dose volume grew 23% year-over-year in Q3, while heplisav-B dose volume grew 27%.

Donn Casale: These trends support our long-term growth expectations of the hepatitis B market and uptake of the ACIP universal recommendation.

Donn Casale: In the fourth quarter, we look for continued focus by retail pharmacy and IDN customers on Hepatitis B vaccination, with increases in Hepatitis B U.S. market share.

Donn Casale: We also anticipate typical year-end seasonality with market contraction of approximately 15% due to fewer patient visits during the holiday season.

Donn Casale: We expect the Heplisav-B market opportunity in the U.S. to expand to a peak of over $900 million by 2030, with Heplisav-B achieving at least 60% total market share.

Donn Casale: This long-term guidance represents our expectations of a double-digit annual growth for product net sales for Hepatitis B out to 2030.

Donn Casale: In addition, we expect the HEPLISAV-B market opportunity to remain durable beyond 2030 due to ongoing vaccination of the eligible adult population.

In summary, we remain confident in the outlook for HEPLISAV-B.

Donn Casale: We expect Heplisav-B to strengthen its position as the clear market share leader in the expanding hepatitis B vaccine market.

Donn Casale: We are very proud of our commercial team success and are excited about our work to build on this momentum for the remainder of this year and into the future.

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

Rob Janssen: Thank you, Don. Beginning with regulatory updates for HEPLISAV-B. The FDA recently approved our SBLA to include pregnancy information in the U.S. label for HEPLISAV-B.

Rob Janssen: We previously reported that FDA issued a complete response letter for the SBLA that adds a four-dose regimen for patients on hemodialysis to the U.S. label.

Rob Janssen: Dynavax recently received feedback from the FDA regarding the potential to conduct an observational retrospective cohort study to address the deficiencies noted in the complete response letter. We look forward to providing future updates on these discussions.

Rob Janssen: Now, turning to our shingles vaccine program, Z1018, as a reminder, we believe there's an opportunity to develop an improved shingles vaccine given the challenging tolerability profile of the current market-leading product.

Rob Janssen: In the second quarter, we initiated a randomized, active-controlled, dose-escalation, multi-center Phase 1-2 trial to evaluate the safety, tolerability, and immunogenicity of Z1018 compared to Shingrix.

Rob Janssen: We plan to enroll approximately 440 healthy adults age 50 to 69 years.

Rob Janssen: And with recognition that CD4 positive T-cells are important in preventing reactivation of the varicella zoster virus, we seek to demonstrate CD4 positive T-cell responses that are similar to those of Shingrix.

Rob Janssen: Now, important additional information we'll consider, though, will be the distribution and quality of T cell responses and T cell responses over time. Antibody responses, including vaccine response rates, will also be evaluated.

Rob Janssen: In addition to immunogenicity measures, the Phase 1-2 trial will also be used to validate a patient-reported outcome measurement tool to differentiate Z1018 on tolerability and to support potential label claims.

Rob Janssen: We anticipate reporting top line immunogenicity and safety data in the second half of 2025.

Rob Janssen: Finally, our Plague Vaccine Program is in collaboration with and funded by the U.S. Department of Defense.

Rob Janssen: Based on the results from a randomized, active-controlled Phase II clinical trial of the two-dose plague vaccine adjuvanted with CPG-1018, Dynavax has submitted a proposal to the Department of Defense regarding additional clinical and manufacturing activities.

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

Kelly Macdonald: Thank you, Rob. Before I get started, a reminder to please refer to our press release in Form 10-Q filed earlier today for more detailed financial information.

Kelly Macdonald: The third quarter financials were underscored by record Heplisav-B net sales of $79 million.

Kelly Macdonald: This top-line growth highlights the strength of our commercial team and successful marketing campaigns across multiple channels, including retail.

Kelly Macdonald: Additionally, HEPLISAV-B growth margin improved to 84% in Q3 and 82% for the first nine months of the year, slightly outpacing our reiterated guidance of approximately 80% for the full year.

Speaker Change: Turning to our expenses, R&D expenses for the quarter were $14 million and reflect important progress throughout our pipeline as Rob mentioned moments ago.

Speaker Change: The increase was primarily driven by incremental headcount, supporting our organization, coupled with marketing investments driving the growth of HeplisFB during the quarter.

Speaker Change: These results generated quarterly net income of $18 million, supporting our commitment to achieve profitability and positive net income for the full year 2024.

Moving to the balance sheet.

Speaker Change: We exited the third quarter with cash equivalents and marketable securities of approximately $764 million, which was a $28 million increase during Q3.

As Ryan mentioned,

Speaker Change: In addition to these stated priorities, we are committed to returning capital to shareholders while still maintaining strict focus on executing on our organic and inorganic growth.

Lastly, we have updated our full year 2024 financial guidance.

Speaker Change: Lastly, we are expecting to achieve a full year of profitability and positive net income for 2024. For our full guidance framework, please consult our press release from today.

Speaker Change: Thank you, everyone. Operator, we would now like to open the Q&A portion of today's call.

Speaker Change: Our first question comes from Matt Phipps with William Blair. Your line is open.

Good afternoon, team. Thank you for all this extra.

Speaker Change: Kind of clarity and nuance guidance here today. Looking at this updated kind of 2030 view, I was wondering if your 2027 previous use still is intact as far as $800 million total market by 2027, then further expanding to $900 million by 2030, or if you think it's a little bit more linear, straight to 2030, just given, I guess, now you see kind of an 8% CAGR between 2023 and 2030 versus previously an 11% CAGR between.

23 and 27. That's just my first question.

Speaker Change: Hey Matt, thank you. I'll take that quickly. Yeah, we just see this as an extending of our guidance out to 2030 and where we see peak and this is not a reiteration to change what we thought would happen by 2027.

Speaker Change: Okay, thanks, Ryan. And then it looks like the majority of growth between 27 and 2030 is almost exclusively coming from the retail channel, comparing kind of the percentage market by segment. Is that true? And if so, what do you think is IDN capping out at some point? Or what's driving your confidence in retail really driving that much more growth?

Don, you want to take that?

Yeah, sure. Hey, Matt. Yeah, as we.

Speaker Change: The fact that there is quite a bit of incentive for retail pharmacy to identify and recommend around all adult vaccines.

Speaker Change: And we continue to see the shift from, you know, the traditional hospital IDN segment, if you will, to retail, not only for hep B, but obviously, as we've seen in other vaccines as well, this shift into retail pharmacy. So we do see retail pharmacy being the predominant driver of that growth in those outer years relative to IDN.

Speaker Change: And the last question for me, just as you're thinking about this 60% market share goal.

Speaker Change: You know, you're already pretty close there and kind of your target.

Speaker Change: the target segments and it's been kind of stable throughout 2024. So is getting to 60 more about kind of a spillover in the non-field target segments or do you expect to be you know meaningfully above 60 in those field target segments? Thank you for taking my questions.

Sure, Matt. Don, I wanted to take that one, too.

Sure. Yes. So Matt, you know, again,

Speaker Change: taking market share within those critical segments. And so the disproportionate growth within ID&R retail will continue to increase the overall total market share.

Speaker Change: We do see some spillover in some of these other segments as we continue to increase awareness around HEPLIS-IV over the years. But again, this market share gain will continue to be driven off these critical segments of retail, pharmacy, and IDM, where we do see, as I said before, disproportionate growth and continuing increases in market share.

Speaker Change: The next question comes from John Miller with Evercore. Your line is open.

John Miller: Hi guys, congrats on the quarter end and thanks for taking the question.

Speaker Change: Kelly, you want to handle that one? Thanks for the question, John.

Kelly Macdonald: Sure, thanks, John. Yeah, sure. So, you know, while we we look towards the full year to represent the continued progress around gross margin, there are, you know, sort of

Kelly Macdonald: fluctuations quarter over quarter, as you've seen over the last couple of years, just in terms of counting and timing of recognizing cost of goods sold relative to the activities, particularly in our Germany facility.

Kelly Macdonald: So we're not, we're not trying to highlight anything specifically that we're anticipating. We just acknowledge that there's some variability from quarter to quarter.

All right, great, and I guess secondly

Speaker Change: I heard you reiterate your interest in BD and external opportunities, but I guess given a pretty substantial share repo authorization here, should we be taking that as more a priority than external BD? And is that a sign that you've had trouble finding good value in the external opportunities that are out there right now?

Speaker Change: No, I wouldn't, I wouldn't read into it that way. I think the, the reality is it's a balanced capital allocation strategy and we feel like we have the opportunity to return capital at these levels while still maintaining our focus for growth through.

Speaker Change: More support. Well, we would have to obviously figure out how to how to finance that, but ultimately it doesn't change our focus on how we're going to drive growth.

Kelly.

Speaker Change: We have stated that we intend to execute the program by, you know, within the next 12 months subject to market conditions, and we'll look forward to leveraging the program to execute, you know, accordingly.

All right. Thanks very much.

Thank you. Please stand by for the next question.

Speaker Change: The next question comes from the line of Ernie Rodriguez with TD Cowan. Your line is now open.

Ernie Rodriguez: Hi, and congrats on the quarter two, and thank you for taking our questions.

Ernie Rodriguez: So, looking forward to Q4 and Q1 and thinking about the expected seasonality, we were wondering if the lower rate of RSV vaccination that has been reported by

Ernie Rodriguez: by the RSV players in part due to the CDC updated RECs. Could that be a positive impact on HEPLISA and maybe represent some upside given the potential for more capacity in the retail segment? Is that something you're thinking about?

Thanks Ernie. Donn, why don't you address that one?

Donn Casale: Yeah, thanks for the question. Not necessarily upside. We considered certainly the recommendation when we thought about the guide.

Speaker Change: into the pharmacy for other vaccines. That is the retail pharmacy strategy. All the retailers always want to find a way to have a plus one vaccine. So from that standpoint, there's opportunity, but we calculate that into kind of our thinking into the fourth quarter, as well as starting into the beginning of 2025.

Thank you. That's helpful. And then.

Speaker Change: On the pipeline and the Tdap vaccine program, is there any learnings that from those results that you, that perhaps are

Speaker Change: you know any read through to the to the other vaccine programs or maybe even any potential vaccine indication that you are that you were contemplating um any any learning from that any data that you can use going forward

Speaker Change: No, I mean, I think, well, there's no negative read through from one program to the other. I think the learning is every program, every answer, every disease is different now.

Speaker Change: and the product that you're building and how 1018 will support it is going to be different. So no, there's no consistent read through that I would, we would look to get out of that information. I think the important thing that you can extrapolate is

Speaker Change: How we manage our clinical pipeline and our investments in R&D to hold ourselves accountable to try to find ways to

Speaker Change: have meaningful readouts that will allow us to make decisions and then make the decision around that information with a focus of building products that will actually be competitive and and so we can have a high confidence in the product's overall success. So I think that's probably the bigger learning from this Ernie, but

Speaker Change: No, I wouldn't suggest there's any read through for 1018 here. This is just how 1018 performed with these specific actions against this specific target.

Thank you. That's helpful.

Thank you.

Speaker Change: The next question comes from the line of Paul Choi with Goldman Sachs. Paul, your line is now open.

Unknown Speaker 0

Paul Choi: Hi, thank you. Good afternoon, team, and thank you for taking our questions. I have a pipeline question for Rob with regard to 1018, and the question is,

Paul Choi: You know, how do you think about the possibility of a single dose?

Paul Choi: candidate here that's reasonably within the non-inferiority margin versus Shingrix on immunogenicity, even if there is somewhat more higher rate of adverse events relative to maybe the wider dosing intervals with multiple doses, with two doses. Thank you very much.

Go ahead, Rob.

Rob Janssen: Yeah, a single dose I think is going to be challenging. I think it's going to be challenging for everybody. With respect to reactogenicity, you know, we're seeing fine reactogenicity even with our higher doses, CPG 1018. Even with that higher reactogenicity than with the lower dose of 1018, it's still better than Chingrix and still better tolerated than Chingrix.

Rob Janssen: We're certainly going to be looking as we look at these wider interval, we certainly are going to be looking at the one dose to see if there's a potential opportunity. But in the previous study,

We compared one dose

Speaker Change: And Paul, if I understood your question, it sounded like you were asking,

Speaker Change: Immunogenicity or efficacy, but had to trade off with even higher reactogenicity. Would that make sense? Because I think we've seen that some other programs, not ours, and I think we would have to say from our perspective shingles was one of the most reactogenic vaccines

Speaker Change: or is probably the most reactogenic vaccine. So I think anything that targets a profile that has more reactogenicity is not likely to be very successful.

Got it. Okay. Thank you very much.

Speaker Change: The next question comes from the line of Roy Buchanan with Citizens. Your line is now open.

Roy Buchanan: Thanks for taking the questions. I had a few on the program and the plan you submitted to.

Speaker Change: Hey Roy, thanks for the question. I think the best thing for us to do is hold off commenting on specifics regarding the trial until we actually have her back from DOD on the contract and have the alignment on

What, what the next clinical trial would look like. So.

Speaker Change: We do expect to hear back from the DOT in the near term, possibly this year or next year, but again, it's kind of up to them. So we're happy that we were able to continue the relationship with them and submit this updated contract and we'll be able to provide you more information when they respond.

Okay, perfect. And then the

Speaker Change: The SPLA for the dialysis label for HEPLISAV, I guess, do you have any sense of how long you might need to compile that data? And Rob, I think, said, provide future updates on the discussions. So, are discussions ongoing? You're waiting additional feedback? Or do you think you know what you need to do at this point?

Yeah, I'll take that, Rob. You can add on, but...

Speaker Change: We, you know, we've engaged with them in the process as part of their response and so we're

Speaker Change: We are waiting to provide an update to them in the near term and then once they have that

There's no defined timeline for their response.

Speaker Change: This is not a Paducah timeline or anything like that. So, this is a little bit more...

Speaker Change: So that's really the step we're going to engage with them in the near term. I think in the long term, Roy, our understanding of the amount of time it will take to do the analysis

Speaker Change: is even though FDA's timelines are, you know, not guided by PDUFA, we're still optimistic we'll be able to get our resubmission in on time in mid by mid May next year.

Okay, thank you.

Speaker Change: Thank you. We have no further questions at this time. I would now like to turn the call over to Ryan Spencer, CEO, for closing remarks. You may begin.

Ryan Spencer: Thank you, operator, and thank you all for joining us today. We appreciate your interest in Dynavax. We're excited about our recent accomplishments and the strength of our position. We look forward to updating you on our progress focused on protecting the world against infectious diseases.

Q3 2024 Dynavax Technologies Corp Earnings Call

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