Q4 2024 Dynavax Technologies Corp Earnings Call
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Good day, ladies and gentlemen, and welcome to the Dynavax Technologies fourth quarter and full year 2024 financial results conference call.
Speaker Change: As a reminder, this call is being recorded. 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.
Speaker Change: 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.
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 ACIP recommendation impact on each.
Speaker Change: Financial guidance and trends including revenue, profitability, cash flow, insufficiency 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 adjuvants.
Speaker Change: Our earnings press release and this call will include discussion of certain non-GAAP information. You can find our earnings press release, including relevant non-GAAP reconciliations, on the investor section of our corporate website at dynavax.com.
Speaker Change: Thanks, Paul. And thank you all for joining us this afternoon.
Speaker Change: In 2024, we delivered across our strategic priorities, including achieving record fourth-quarter and annual HEPLISAV-B product revenues, advancing our pipeline programs, achieving profitability, and returning capital to shareholders through our share repurchase plan.
Speaker Change: This performance sets us up for even greater success in 2025, which we expect to be a banner year for Dynabats.
Speaker Change: For HEPLISAV-B, we expect to drive continued top-line growth, with net product sales between $305 million to $325 million, fueled by the expanding adult hepatitis B vaccine market in the U.S., along with expected market share gains by HEPLISAV-B.
Speaker Change: We also expect 2025 to be a transformational year for our development pipeline.
Speaker Change: with multiple programs advancing to important milestones and new programs emerging throughout the year. Our shingles program is our most advanced clinical program and we see a significant opportunity for a differentiated and best-in-class shingles vaccine.
Speaker Change: and both the U.S. and ex-U.S. markets, which is currently a multibillion-dollar annual market dominated by a single product.
Speaker Change: We know the profile required for a competitive vaccine to be successful and disruptive in this market will require similar efficacy to the standards of care and significantly improved tolerability compared to the existing product.
Speaker Change: We are executing on a development plan to establish this product profile for our Z1018 program.
Speaker Change: For our ongoing Phase 1-2 study, we expect to report our top-line readout in the third quarter, which will be based on one-month data following the last vaccine dose in the study.
Speaker Change: We expect this study to establish proof of concept of this program, and to select the dose and regimen taken to our Phase 2 Extension Study in patients over 70 years old, along with further studies.
Speaker Change: We expect these data will support our dialogue with regulators and potential strategic partners ahead of a Global Phase III launch.
Speaker Change: We also expect to begin our next clinical trial for our plague vaccine program, which is partnered with the U.S. Department of Defense. Rob will speak more about our clinical pipeline in a few minutes.
Speaker Change: We are proud of the company we are building around our core assets of HEPLISAV-B and CBG-1018, which have together helped protect millions of people around the world while establishing Bionavax as a leading vaccine company.
Speaker Change: Driven by continued top line revenue growth and operational discipline, our strong financial position has enabled us to also return capital to shareholders as part of our balanced capital allocation strategy.
Speaker Change: We will also continue to pursue external opportunities to generate sustainable long-term value for our shareholders. This will be an exciting and important year ahead for Dynavax, and I look forward to providing you with updates on our progress along the way. I'd like to turn the call over to Donn.
Donn Casale: Thank you, Ryan. At Dynavex, we are proud to be the leader in the U.S. hepatitis B adult vaccine market.
Donn Casale: Since its launch in 2018, Tableau Sat B has disrupted the market due to what we believe is a differentiated and best-in-class profile.
Donn Casale: This rapid advancement in a few short years demonstrates our ability to compete effectively against established legacy products.
Donn Casale: The ACIP Universal Recommendation has transformed the adult hepatitis B vaccine market, creating one of the largest addressable patient populations for vaccines in the U.S.
Donn Casale: The market continues to adopt these expanded guidelines, with overall hepatitis B vaccine dose growth increasing by nearly 10% year-over-year in 2024.
Speaker Change: Tesla said these strong performance in this expanding market has resulted in record net revenues of $71 million for the fourth quarter and $268 million for the full year 2024.
These results reflect significant growth compared to prior year.
Speaker Change: The growth of HPSSB is supported by two key segments, retail pharmacy and integrated delivery networks or IDN.
Speaker Change: Although market share was essentially flat year-over-year in these segments, together they drove an impressive 25% annual growth in HEPLISAV-B doses.
Speaker Change: We are encouraged by the ongoing adoption of HEPLIS-FB and look forward to continuing our momentum in 2025 and beyond.
Speaker Change: As we look to the future, we are excited by market developments that are improving access to and increasing the focus on hepatitis B vaccination in the U.S.
Speaker Change: These developments are reflected in our 2025 guidance and further strengthen our outlook on the long-term market opportunity and market share for HEPLISAV-B.
Speaker Change: First, starting in January of this year, Medicare patients gained access to hepatitis B vaccines at retail pharmacies through roster billing under Medicare Part B, which mirrors the approach for influenza and pneumococcal vaccines.
Speaker Change: Until now, Twinrix was the only hepatitis B containing vaccine reimbursed for Medicare patients in the retail setting, giving it majority market share among that population.
Speaker Change: Second, beginning in 2025, adult hepatitis B vaccination will be included in the Health Care Effectiveness Data and Information Set, or HEDIS, measure.
Speaker Change: HEDIS is the largest and most widely used set of quality performance indicators in U.S. healthcare, and IDNs typically align their operations to perform well on these measures.
Speaker Change: The inclusion of hepatitis D vaccination as a HEDIS measure signals its growing priority, placing it alongside other high-volume adult vaccines.
Speaker Change: We believe this change is likely to enhance focus and utilization in IDNs and large clinics, while also increasing market share, as the measure focuses on series completion, which we believe aligns well with Headless Abuse Two-Dose Regimen.
Speaker Change: These positive market dynamics, combined with our strong commercial execution and performance in retail and IDN segments, give us confidence in the long-term revenue opportunity for HEPLISAV-B.
Speaker Change: We are encouraged by the growth of the Headless FB market opportunity, which expanded by approximately $90 million to $650 million in 2024.
Speaker Change: This progress tracks with a long-term outlook for Heplisav-B market opportunity in the U.S., which we expect to peak to over $900 million by 2030, with Heplisav-B capturing at least 60% market share.
Speaker Change: This long-term guidance reflects our expectation of double-digit annual growth and product net sales through 2030.
Speaker Change: We expect the Hepatitis B market opportunity to remain durable beyond 2030, driven by ongoing vaccination of the eligible adult population, observed revaccination practices by health care providers, and continued market share gains.
In summary, we remain confident in the outlet for HEPLISAV-B.
Speaker Change: We expect Headless MB to further solidify its position as a clear market leader in the expanding hepatitis B vaccine market. We are incredibly proud of our commercial team's success and excited about the momentum we're building today and into the future.
Speaker Change: I will now turn the call over to Rob to take you through our clinical pipeline.
Thank you, Donn.
Rob Janssen: I'll begin with our shingles vaccine program, Z1018. As Ryan mentioned, we previously reported results from our Phase 1 clinical trial designed to evaluate our investigational shingles vaccine, Z1018, compared to Shingrix in 150 participants.
Rob Janssen: One month following the second vaccine dose, antibody and CD4 positive T cell vaccine response rates were similar in the high CPG1018 adjuvant dose groups to Shingrix.
Rob Janssen: In the high-dose C1018 groups, the antibody vaccine rate was 96 to 100 percent compared with 100 percent for Shingrix.
Rob Janssen: CD4 positive T cell vaccine response rates were 88 to 92% in the Z1018 groups compared to 96% in the Shingrix group.
Rob Janssen: The quality of CD4 positive T-cells was also similar between the Z1018 and Shingrix groups.
Rob Janssen: The proportion of subjects with GE-specific activated CD4 positive T cells that express 3 or 4 activation markers was 79 to 82% in the Z1018 groups and 82% in the Shingrix group.
Rob Janssen: C1018 showed favorable tolerability compared to Shingrix without observed safety concerns.
Rob Janssen: The rate of solicited moderate and severe local post-injection reactions was 8% for Z1018 and 37% for Shingrix. While moderate and severe systemic post-injection reactions were 26% for Z1018 and 43% for Shingrix.
Rob Janssen: The ongoing Phase 1-2 trial is designed to select the antigen dose and regimen to take into future studies and we're evaluating 441 adults aged 50 to 69 years.
Rob Janssen: With the understanding that there's no accepted correlative protection for shingles vaccines, CD4 positive T cells are thought to be an important but not only factor in preventing reactivation of the varicella exhaustor virus.
Rob Janssen: Demonstrating a similar distribution and quality of T-cell responses, durable T-cell responses, and similar antibody responses will also be important.
Rob Janssen: If observed, this constellation of findings would suggest to us a high probability of demonstrating comparable efficacy in a Phase III trial.
Rob Janssen: Following the one-month data, we expect to select a dose regimen to advance into a phase 2 extension study evaluating adults 70 years of age and older while we await the six-month follow-up data from the 50 to 69 year old groups.
Rob Janssen: Regarding the plague vaccine program, Dynavax and the Department of Defense recently executed a new agreement for approximately 30 million dollars through the first half of 2027 to support additional clinical and manufacturing activities.
Rob Janssen: We plan to initiate a Phase II clinical trial in the third quarter of 2025.
Rob Janssen: Given that the program is focused on preventing the spread of pneumonic plague in a biological attack, our goal in the Phase 2 study is to maximize a rapid antibody response through dose ranging of the CPG1018 adjuvant and optimizing the dosing regimen.
Rob Janssen: Now turning to our program to develop a four-dose HEPLISAV-B vaccine regimen for adults on hemodialysis.
Rob Janssen: We previously reported that the FDA issued a complete response letter for our SPLA that's on file. We continue to work with FDA to incorporate data from an observational retrospective cohort study in the SPLA filing with a goal of resubmitting this year.
We look forward to providing future updates on this program.
Rob Janssen: 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 and Form 10-K filed earlier today for more detailed financial information.
Kelly: Financial highlights for the fourth quarter and full year include Heplisav-B net sales of $71 million for the fourth quarter, up 39% year-over-year, and a record $268 million for the full year, up 26% year-over-year, reflecting the impressive growth in the total addressable market opportunity.
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Kelly: Additionally, HEPLISAV-B gross margin was 82% for the full year 2024, an increase compared to 76% in 2023, and achieving our guidance of approximately 80% for 2024,
Kelly: And looking forward, we expect HEPLIS-M v. Gross Margin to continue at around 80% in 2025.
Turning to expenses.
Kelly: R&D expenses were $19 million in the fourth quarter, up 32% year-over-year, and $62 million for the full year 2024, up 12% year-over-year.
Kelly: Looking forward for R&D expenses. As we continue to progress our clinical stage pipeline through key milestones in 2025, we expect R&D expenses to increase by high teens percent compared to 2024.
Kelly: SG&A expenses were $42 million for the fourth quarter, which is flat year-over-year. And they were $170 million for the full year 2024, up 11% year-over-year.
Kelly: Looking forward for SG&A expenses, we expect these expenses to be roughly flat in 2025 as we believe this represents the appropriate resourcing to drive the overall growth of our current business and maximize the Heplisav-B opportunity.
Kelly: Moving to the bottom line, we achieved our previously stated guidance for full year profitability with net income of $27 million, including net income in the fourth quarter of $7 million.
Kelly: Lastly, on the P&L, we are introducing a non-GAAP measure of adjusted EBITDA, excluding non-cash stock-based compensation, that we intend to report on for 2025.
Kelly: Non-GAAP-adjusted EBITDA excluding stock-based compensation was $13 million for the fourth quarter, an increase of over 200% year-over-year, and $52 million for the full year 2024, up over 300% compared to prior year.
Kelly: Please see our press release issued earlier today for a reconciliation of gaps to non-gap results and accompanying disclosure.
Kelly: Transitioning to the balance sheet, we exited the year with cash equivalents and marketable securities of $714 million, compared to $742 million at the end of 2023.
Kelly: The decrease in our cash position includes the deployment of $100 million towards our first accelerated share repurchase program, which was finalized earlier this month.
Kelly: As a reminder, in November 2024, we announced the authorization of up to $200 million in share buybacks, which approximated just under 15% of our market cap and approximately 37% of our net cash at the time of announcement.
Kelly: We expect to complete the remaining $100 million of authorized share repurchases by the end of 2025.
Kelly: We achieved all of our financial guidance goals, including Heplisav-B net sales and full year profitability, further strengthening our financial position and enabling us to drive long-term growth while returning capital to shareholders as part of our balanced capital allocation strategy.
Turning to our financial guidance for full year 2025.
Kelly: We expect Heplisav-B net product revenue to be in the range of $305 to $325 million, which represents 17% year-over-year growth at the midpoint.
Kelly: We also expect adjusted EBITDA, excluding stock base and compensation, to be at least $75 million, demonstrating our ability to grow adjusted EBITDA at more than two times the rate of product revenue, further strengthening our ability to deliver on our strategic priorities in 2025.
Kelly: In closing, we're excited to report another strong year, consisting of record revenue for Headless FV, improved product growth margin, an advancing pipeline with key milestones this year, and a strong financial profile with a balanced capital allocation strategy.
Kelly: We're very proud of this progress. We're also excited about our growth prospects as outlined on the call today.
Kelly: Thank you everyone. Operator, we would now like to open the Q&A portion of today's call.
Speaker Change: Ladies and gentlemen, if you have a question or comment at this time, please press star 1 1 on your telephone keypad. If your question has been answered or you wish to remove yourself from the queue, simply press star 1 1 again.
Kelly: Again, if you have a question or comment at this time, please press star 11 on your telephone keypad.
Please stand by while we compile the Q&A roster.
Speaker Change: Our first question or comment comes from the line of Matt Phipps from William Blair. Mr. Phipps, your line is now open.
Matt Phipps: I hope you can hear me. Thanks for taking my question.
Speaker Change: Curious as you, you know, go into 2025 and just kind of looking at the year over year.
Speaker Change: barriers that you need to overcome? Is it just, you know, that you've gotten the fast adopters and now you have to try to find these kind of other accounts? Or is there something else to help kind of drive continued market share gains between now and 2030?
Donn Casale: Hey Matt, thanks for the question. Don, why don't you take that one? One thing I want to highlight is we recognize that our
Speaker Change: The market is broken up into two key segments, between IBM and retail, so probably a little bit of commentary on both would be helpful.
Donn Casale: Yeah, Matt, how you doing? It's a great question. When we think about market share, you know, I alluded to it on the
Donn Casale: On the call, there's two major market events that are going to help support continued growth in market share. Access in the Medicare patient population and retail is critical to be able to continue the gains in retail that is incredibly important.
Donn Casale: Then also having the HEDIS measure, which again is going to focus on series completion, which obviously has got to favor HEPLISAV in its two-dose completion.
Donn Casale: So those are two events that will continue to support market share gains.
Donn Casale: And then it's a continuation to continue to working with customers and various outlets to drive the market share. So we're very confident and continue to grow the share in both those critical segments. And again, those are the two segments that will have disproportionate growth.
Donn Casale: in the marketplace as we maintain high share and growth share. So we'll obviously take up the overall total market share in line with what we are guiding to by 2030.
Speaker Change: Thanks Donn. And on the shingles program, maybe you mentioned this a little bit, but just
Speaker Change: Kind of going over again what you think is the non-inferiority level that you need to show. I think you've said before like 75%.
or greater of Schoenberg's and is that on just
Speaker Change: CD4 response rate or again looking at that kind of three or four positive activation signal T cells.
Rob Janssen: Yeah, so I'll let Rob handle the details here, Matt, but I think that what's important to note is...
Rob Janssen: I just want to make sure it's clear that the trial is not powered or designed for statistical analysis of these various immunogenicity markers. And as you noted in Rob's prior comments, generically, there's a number of markers and a constellation of data that we're going to have to evaluate, not a simple...
objective measure of CD4 T-cell frequencies alone.
Rob Janssen: You know, some of the prior information we've given around the level of expectation for city force.
Speaker Change: Yeah, the 75% really is about 75% of the median quantity for T cell quantity as well as full change.
Speaker Change: Full change helps to some extent correct for any differences at baseline.
So we're really looking at that and that.
Speaker Change: in itself gives us a good sense of the probability of success.
Speaker Change: Unknown Speaker going forward. But as Ryan said, we also think what's important is the quality of T cell responses. And we've seen this before with 1018, our COVID partners saw it.
Speaker Change: And, you know, we saw it in our phase one study where equality of
Speaker Change: CD4 T-cells with three or four activation markers is very similar to Shingrix, and we think that's going to be important, too.
Speaker Change: Okay. Thanks, Rob. And one last question. Thanks, Rob, again. When we look at the safety, both from your previous phase one, the Shingrix label, and also the CureVo phase two, I was wondering if there's any differences in kind of collection methods or definitions for some of these. Just wondering what we should be comparing to looking across some of those data sets.
Speaker Change: You know, we don't we don't really have access to their data collection instruments. However,
Speaker Change: FDA does, and FDA does insist on these e-diaries that subjects fill out during trials. They're pretty standard.
Speaker Change: They're not always standard in that the same events aren't always included in every trial, but across the main ones like fever, injection site pain, swelling for local like fatigue and fever.
Speaker Change: Those things, those things are uniformly collected in pretty much in the same way. So, so, but understand also in these early studies, there's certainly not power to be looking at this.
Unknown Speaker Data.
Great. Thanks for taking my questions.
Speaker Change: Thank you. Our next question or comment comes from the line of Roy Buchanan from Citizens. Mr. Buchanan, your line is open.
Roy Buchanan: Hey, thanks for taking the questions. I guess a couple on Shingrix and just following up on the
Roy Buchanan: durability, the data coming in 3Q. How much are you going to be able to tell from the one month post-second dose?
Roy Buchanan: results in terms of durability and do you have any I guess longer follow-up data from the phase one that you reported in 2023 that gives you confidence in the durability?
Roy, I'll comment and Rob will clean it up.
Roy Buchanan: We don't have long-term data from the phase from the prior initial phase one that would be
Roy Buchanan: from that initial readout. But importantly, as we advance the program, you heard in my comments, that we will be moving forward from there into a extension study in the 70 year old population, 70 plus year old population. And that study to read out along with a six month date will provide us another sense of the strength of the product profile.
Speaker Change: Yeah, so I think in terms of durability, we've certainly seen durability data for 1018 from HEPLISAV as well as from our partners with COVID vaccines that use 1018.
Speaker Change: and Alan. As Ryan said, we only looked at one month data, but, you know,
Speaker Change: The mantra in vaccines is the higher the better, the higher it peaks, the longer.
Speaker Change: for both antibodies and CD4 T-cells, but that's not always true. And there can be differential antibody or CD4DK.
Speaker Change: decayed particularly in the first six months. So I think we'll be able to pick pick up any changes or similarities during that period of time.
Speaker Change: Okay, perfect. Thank you. And then on the extension study in the older adults, just what's the logic of that? I know they did a trial in that population for Shingrix and...
Speaker Change: Maybe that's the reason, but if you're looking to differentiate, is this a regulatory request? Can you just elaborate a little bit? Thanks.
It's one of these things, one. Oh, sorry, Ryan.
Speaker Change: Yeah, so it's really two things. One is to be certain immunogenicity in that older age group looks similar to the younger age group. And this is, you know, the highest risk for shingles increases with increasing age.
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Speaker Change: It's that, but then also it's get collecting safety data on this age group because you can't go into a phase 3 study with no safety data on this age group when they're going to be a critical population enrolled in a phase 3 study.
Unknown Speaker.
Speaker Change: Okay, great. And then the last one for me, maybe just on the buybacks, you guys did an accelerated first bid of the $200 million. I know you're guiding to the rest by the end of the year, but what's your appetite for maybe announcing more buybacks? If you get to mid-year and you've completed the extra $100 million on the $200 million,
Speaker Change: How are you guys thinking about additional buybacks potentially earlier than the end of 2025? Thanks.
Speaker Change: Thanks, Roy. Thanks for the for the question. I mean, we we definitely agree that buybacks are a great tool to return capital to shareholders when
Very importantly for us are
Primary objective is to drive long-term value for all shareholders.
Speaker Change: First and foremost, looking for opportunities to maximize HEPLISAV. Also, we have the opportunity to drive real progress in our clinical stage pipeline, including shingles through the end of the year.
Speaker Change: continue to look for opportunities to leverage our fully integrated organization that has significant capability to bring to bear for potentially other assets that could fit nicely in with our skill sets.
Speaker Change: To the extent that we get through the remainder of the authorized program.
Speaker Change: which we have committed to and we're very serious about. You know, we absolutely will consider whether or not it makes sense to add additional buybacks. As you mentioned, we are actively still ongoing with the current program. So at this point in time, it doesn't make sense to.
Speaker Change: to extend to expand the program, but certainly it's something on the list of of opportunities for us as we learn more and get to towards the second half of the year.
Okay, thank you.
Thank you. Thanks Ryan.
Speaker Change: Our next question or comment comes from the line of Jonathan Miller from Evercore ISI. Mr. Miller, your line is open.
Jonathan Miller: Hi guys, thanks for taking my question and congrats on all the happy progress.
Speaker Change: I guess building on that on that last question obviously there's been an investor pressure to return more capital
Speaker Change: but looking at your capital allocation strategy slide, it seems like you'd rather be doing development, both internal and external.
Speaker Change: But how confident are you at this point that there are good deals to do in your target areas from a BD perspective? And then sort of relatedly, what's giving you confidence that you'll be able to achieve those BD goals in a reasonable time frame, given how long you've been looking at this point?
Speaker Change: Yeah, I'll take that one. So, obviously, we continue to evaluate the landscape, which I think is important to recognize. It's an ever-changing landscape. It's not static, it doesn't stand still. So we've been very active in looking at ideas. We've set a very high bar for this. We recognize the company has a certain risk profile. We recognize we have certain capabilities and we want to leverage those.
Speaker Change: You know high-value transactions for us that fit Dynanax is pretty high
But what level of
Speaker Change: What safety differentiation do you view as commercially relevant and maybe to a stronger extent what level of differentiation would drive the sort of market share gains that you're hoping to see for like an HBV dominant market share?
Speaker Change: Well, we're going to, as we progress and have more robust and reliable data, we'll have to test the...
Product Profiles.
Speaker Change: with traditional market research to make sure we are operating with the right assumptions. I think the kinds of differences we saw in our prior phase one are meaningful. And I think an important point here is
Speaker Change: Commercial execution is critical whether it's HEP-V or shingles it's not the product profile is a tool but your commercial prowess and the ability to engage your customers are equally as important.
Speaker Change: So we believe an improved safety profile is critical for us to be able to have something that allows us to
Speaker Change: address customers in a way that leverages our strength with our customer engagement.
Speaker Change: The specific levels, I'm not able to comment on right now, but I would say that the levels we saw in our prior phase one, we would suggest are significant and were part of the reason we were confident in continuing to advance the program.
Make sense.
Speaker Change: On FB then, maybe just finally, you've identified a couple of opportunity areas to grow market share in 25, which is obviously great to hear. But as we start thinking about that long tail that you're talking about,
talking about post 2030 2030 and beyond.
Speaker Change: How durable is your market share going to be next to high weight commercial competitors that have portfolios of products and can do bundling and discounting and long-term contracting? How durable are your current market share opportunities as we look to that tail?
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Donn Casale: Hey Jonathan, it's Donn. I think it's very durable. It goes beyond a contract. It goes around partnership. So we've established ourselves.
Speaker Change: extensively within retail, for example, with partnerships and engagements over the last several years.
Speaker Change: We're working with these partners with a shared goal. They're looking to expand their utilization with HEPI vaccines, specifically HEPLISAV-B.
Speaker Change: And we've been there from from day one. And so we enable them to have success. And so that's going to continue, obviously, moving forward. So we feel very good about that. And then to the long tail around where there's a lot of customers that we don't call on.
Speaker Change: Those patients engage and go out to retail as well. So we feel like we're going to capture patients to the retail channel that are originating in the full practitioner small clinics.
Speaker Change: that originate in the US. So that strategy within retail, that's why we believe this segment will be the segment that grows substantially over the next several years, and we're well positioned to maintain and grow share as well as market size within retail with our partners. Yeah, I think an important add on here just to have the full picture is
Speaker Change: This will be a durable product that's been laid out for all the reasons, but it will require us to maintain an effort in the marketplace.
Speaker Change: So this is not a situation, and that should not be viewed as a situation where we establish market share, and we don't have to cultivate that market continuously. So we, I think Kelly was clear about expectations around flattening of SG&A, and so we do believe we're right-sized.
Speaker Change: But you should expect that we have to maintain a commercial effort to maintain the strength of this brand.
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Great. Thank you very much.
Speaker Change: Thank you. Our next question or comment comes from the line of Phil Nadeau from T.D. Cowan. Mr. Nadeau, your line is open.
Phil Nadeau: Good afternoon. Thanks for taking our questions and congrats on the progress. A couple of commercial then one back on the Shingles program. So on the commercial, in terms of seasonality in the HEPLISAV business, can you discuss what you're seeing now?
Speaker Change: this winter in 2025. It does seem like seasonality was there in Q4, but maybe a bit less. What does the beginning of 2025 look like?
Speaker Change: Hey, Phil, thanks for the question. Yeah, yeah, in Q4, we saw the, I would say, traditional seasonality as it relates to the holiday season, the two weeks where there's less healthcare utilization. So that was typical. And that's what we saw in Q4.
Speaker Change: specifically around Q1. Q1 is also a stronger start relative to Q1 last year and we're very excited about the start thus far within retail in particular. We noticed that the customers are focusing on
Speaker Change: non respiratory vaccines much faster and sooner this year than last year. And so we're seeing a lot of momentum and we're very excited about what we've seen thus far and it really supports our guide in the range that we put out there today with what we're seeing here in Q1.
Speaker Change: Got it. So last year there was another sequential decrease from Q4 to Q1. It sounds like you're suggesting...
Speaker Change: You know, I think it'll be as different than last year. I think it won't be as profound as you saw last year from Q4 to Q1, given the fast start. So we'll have to wait to see how obviously the quarter plays out. But again, like I said before,
Early read is that Q1 is progressing very strong.
Speaker Change: Got it. In terms of the Medicare reimbursement, can you go into a bit more detail, I guess exactly what's changed and what impact do you think that could have on HEPA staff share in that channel?
Speaker Change: Yeah, so basically hepatitis B vaccines were under Part B in Medicare.
Speaker Change: and so, you know, pharmacists could not reimburse under Part B. Only Part D is in Davis.
Speaker Change: And so what has happened is hepatitis B has been recognized similar to flu and pneumococcal vaccines under Part B under Rostra billing. And so that allows pharmacists and pharmacies to reimburse.
Speaker Change: the vaccine at the retail setting. And so it basically opens up the Medicare patient population for a hep B vaccine, whereas before it was only Twinrix, which was a Part D vaccine.
Speaker Change: And so it's important because, you know, within the retail pharmacy setting, the 60 plus cohorts, about a third of the market,
Speaker Change: And obviously, Medicare is a big piece of that. So essentially, it's allowed Heplisav-B to be on equal footing from an access perspective. So we absolutely believe it will, as I said before, support not only market share gains, but also market growth for Heplisav-B here in 25 and beyond.
Great.
Speaker Change: That's really helpful. And then last on the on the shingles program, it's sort of a follow on to Matt's question.
Speaker Change: You mentioned the CD4 positive T cells and the antibody responses are important, but then also the durability of the responses. It seems like there's at least four or five different elements of the responses you're going to be looking at.
Speaker Change: Can you give us some sense of, kind of, is there a hierarchy of which of those is more important? Like, how are you going to aggregate all the data, integrate it, and decide to make a go, no-go decision?
Speaker Change: Yeah, so I'll give you the high-level answer. We haven't been shy about the fact that we believe CD4s are critically important, so that hasn't changed. I think the reality is it's an element of the overall constellation of information that has to be considered when assessing immunogenicity. There is no correlate.
Speaker Change: So this is one of the challenges of vaccine development. You're in a position where you have to set the immunogenicity to approximate efficacy. And CD4s, we believe, are critically important. However, all the elements of the immune response have to be considered.
Rob Janssen: Rob, anything to add? No, I think you said it pretty well, Ryan. I think, you know, CD4 seemed to be critical. People who lack CD4s are the people at highest risk for shingles.
Rob Janssen: When they get it, it's the most severe disease. But antibodies also seem to play a role. Quality of T-cells matters and antibodies matter too. So we will be looking at all of them, but CD4 response itself.
Rob Janssen: will probably be, let's say, a little more important than everything else.
Got it. Thanks for taking our questions.
Speaker Change: Thank you, Phil. Thanks, Phil. Thank you. Our next question or comment comes from the line of Paul Troy from Goldman Sachs. Mr. Troy, your line is open.
Robert Janssen, Paul Cox, Ryan Spencer, Unknown Executive, Kelly MacDonald
Speaker Change: And secondly, just on on OPEX, I know you mentioned the high teens growth in 2025. Just wondering how to think about that from a timing perspective. That's things we ran up towards the second half of the year, or is it kind of right happening right now? Thank you so much.
Speaker Change: Let me take that first part of the question. So the flu season, the extended flu season of the second peak if we have it, that's going to be a little bit outside of flu vaccination protocol.
Speaker Change: So, you know, we're pretty late in the flu season here.
Speaker Change: The comments Donn were making about the fast start, you know, we're going to get relatively limited time, we're still in the middle of the quarter.
Speaker Change: on Q1 was really, really highlighting the retail pharmacies focus on non-restoratory vaccine initiatives.
and we're seeing retail pharmacy make the pivot internally.
Speaker Change: to non respiratory a little bit earlier than we saw last year. That's really the commentary is.
Speaker Change: And so, oh yes, we recognize the food season is a bit extended.
Kelly, do you want to handle the OpEx?
Speaker Change: I expect R&D expenses to increase by a high teens percentage, as you noted. Yeah, I mean, to be honest, this is really driven by, this is activity-based, and there are two things going on in the clinics this year, sort of full scheme ahead. One, the DOD.
Speaker Change: split play program. That phase two contract kicked off late last year. So we'll have a full year, we'll expect a full year of expenses there. Again, just a reminder from prior disclosures that contract is $30 million and will go through the first half of 2027.
Speaker Change: And then secondly, we expect through the first three quarters to have expenses to support our ongoing efforts for Phase I and II shingles study.
Speaker Change: Thank you. Our next question or comment comes from the line of Ed White from H.C. Wainwright.
Mr. White, your line is open.
Ed White: Thank you for taking my questions. So just going back to shingles, assuming the one-month and six-month data are positive,
Speaker Change: Let's just focus on on the phase 3 global study. Can you just give us your expectations for that study as far as size goes and maybe timing for that study?
Speaker Change: Thanks, Ed. We still have some work to do on that with the regulators. Obviously, we need to see this data, meet with the regulators, and develop the overall plan. There's a couple different options we're considering on how to run that study, and we want to evaluate.
you know.
Speaker Change: All the data that we receive from our current phase one, two, as well as our BD and partnering efforts.
to optimize that plan so.
It's a little premature for us to provide.
Speaker Change: Too many details on that on that study. I think if for a point of reference you there is the Shingrix development plan that you can reference as far as what it takes to drive a placebo-controlled shingle study but we we don't have we're not prepared to comment specifically on that trial design or timeline.
Speaker Change: Okay, thanks, Ryan. And just on the plague program, you know, as we all know, there's no approved vaccine in the US.
Speaker Change: I wanted to get your thoughts on how are you thinking about the size of the potential market here and stockpiling for the U.S. and perhaps also, you know, globally?
Ryan Spencer: Yeah, the reality is it depends, Ed, on how the threat is assessed by the government. There's very specific processes for the government to assess threats for biological.
that seem to be a concern for the entire population.
Ryan Spencer: It's frankly too premature for us to understand how that would be seen.
Ryan Spencer: The overall global climate has an impact on that. So for now, the goal is to do the work, create a optimized product profile, and then we'll have to see how the opportunity kind of unfolds as we progress further.
Okay, thank you.
Thank you.
Speaker Change: Thank you. Our next question or comment is a follow-up from Mr. Roy Buchanan from Citizens. Your line is open, sir.
Speaker Change: Thanks for taking the fall. I had actually got most of it, but I guess what's your, it's a bit in the future, but your willingness to pay for the phase threes for shingles, assuming that they're likely to be large to some extent. Thanks.
http://TheBusinessProfessor.com
Speaker Change: Thanks, Roy. That's actually very helpful just to make sure it's very clear. We have a very clear stated strategy for business development for this program, focusing on XUS markets. XUS markets for shingles, we believe, will be quite significant and a large value driver for the program, which provides a great opportunity for us to leverage it from a BD perspective.
Speaker Change: to reduce the overall financial risk of advancing into phase three. We also think it's a very valuable point to validate our interpretation of the data and the opportunity.
Speaker Change: So, we plan to leverage the Phase 1-2 data, the 1-month, 6-month, and 70-year-old data as part of an ongoing BD strategy to support
Speaker Change: You know, I think right now our willingness is high, especially if we have the right immunogenicity profile because we believe there's room to compete and Dynavax is well positioned.
Speaker Change: to compete and capture a very significant portion of the market share. Ultimately, the best scenario would be for us to have an external ex-USBD partner, both to commercialize as well as absorb the cost and risk of the phase three trial.
Okay, thank you.
Speaker Change: Thank you. I'm sure no additional questions in the queue at this time. I'd like to turn the conference back over to Mr. Ryan Spencer for any closing remarks.
Ryan Spencer: Thank you, Operator. Thank you all for joining us today. We appreciate your interest in Dynadax. We're excited about our recent accomplishments, 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.
Ryan Spencer: Ladies and gentlemen, thank you for joining us today. This concludes the conference call. You may now disconnect.
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