Dynavax Technologies Corporation

Good day, ladies and gentlemen, and welcome to the Dynavax Technologies' fourth quarter 2020 conference call. As a reminder, this conference call is being recorded. At the end of the company's prepared remarks, we will open the call for questions and provide specific instructions at that point. I would now extend the call over to Nicole Arndt, Senior Vet Manager, Investor Relations. You may begin.

Thank you, operator. Good afternoon. Welcome to the DynaVax fourth quarter and full year 2020 financial results and corporate update conference call. Joining me on the call today are Ryan Spencer, Chief Executive Officer, Michael Ostrock, Chief Financial Officer, Rob Jansen, Chief Medical Officer, and Don Casal, Senior Vice President Commercial. Before we begin, I advise you that we will be making forward-looking statements today including statements regarding HEPLIS-SB's commercial profile, revenue expectations, potential peak revenue, European launch, and the completion of post-marketing studies, and regarding vaccine development potential for CPG1018 and revenue expectations. These statements are subject to a number of risks and uncertainties that could cause actual results to differ materially. These risks are summarized in today's press release and are detailed in the risk factors section of our current 10Q and 10K periodic reports filed with the SEC, which we encourage you all to review. I will now turn the call over to Ryan Spencer, CEO of Dynavax.

Thank you, Nicole, and thank you all for joining us today. I'm excited to share both our 2020 results as well as our outlook for 2021. The current global pandemic has highlighted the need for continued development of new or improved vaccines to prevent the spread of infectious diseases. Vaccine adjuvants have the potential to boost the immune response to increase protection and provide longer lasting immunity, making adjuvants an important contributor to the success of these vaccines. In addition, increased awareness of the importance of protection against deadly diseases will expand the long-term recurring revenue stream that vaccines provide. Our first commercialized product, HEPLISAV-B, is an adult hepatitis B vaccine, which is adjuvanted with CPG-1018 and was shown in three pivotal trials to provide higher levels of protection with fewer doses compared to the current market leader. Hepatitis B is a highly infectious and potentially deadly virus with increasing infection rates. Over 250 million people worldwide are infected. Thankfully, it can be prevented with effective vaccination. Challenges with compliance with the legacy three-dose products are well known, with only approximately 22 to 54% of patients completing the three-dose regimen over the required six-month schedule. HEPLISAV-B's two-dose, one-month schedule with the corresponding improvement in compliance and higher levels of protection, give us confidence HEPLISAV-B will eventually become the standard of care for adult hepatitis B vaccination in the U.S. HEPLISAV-B enjoyed a strong fourth quarter, with net product revenue of $11.5 million, which was up approximately 8.5% year over year, despite a reduction in the overall utilization of HEPB vaccine of approximately 35%, in the fourth quarter compared to the same period last year. Market share in accounts targeted by the field sales team increased to 26% in the first quarter of 2020, up from 20% in the fourth quarter of 2019, demonstrating Heplis AbbVie's continued ability to take market share despite significant customer disruptions due to the COVID-19 pandemic. Additionally, we made continued progress in national accounts. with a national dialysis chain making a significant purchase of HEPLISAV-B to be used for its employees, resulting in approximately $3 million in revenue in the quarter. While we expect this customer to contribute meaningful recurring revenue over time, the stock in order will likely cover their utilization for the first few quarters as they implement HEPLISAV-B vaccination for their employees. Our ability to continue to increase our market share and advance national accounts provides us confidence in the value of HEPLISAV-B and its ability to become the market leader. Looking ahead to the first quarter, we are seeing continued pressure on adult vaccine utilization as our nation starts to significantly ramp up COVID-19 vaccine administration. Current CDC guidance recommends COVID-19 vaccines be administered alone with a minimum interval of 14 days before or after administration of another vaccine. Market data in January and early February show reduced non-COVID vaccine utilization compared to fourth quarter of 2020. As a result, we expect HEPALSAT-B revenues in the first quarter to decrease from the fourth quarter. Based on customer feedback and the expected timing of COVID-19 vaccination rollout, we believe the utilization of adult vaccines will be impacted throughout the first half of 2021. will rapidly return in the second half of the year as the backlog of patients requiring non-COVID vaccines is addressed. Despite the pandemic, we expect to capture additional market share in field targeted accounts and make significant progress in our national accounts. Furthermore, we believe a combination of our efforts in driving market share and converting national accounts, as well as increased awareness of the importance of using the best available vaccines will lead to significant revenue growth compared to 2020, with a large majority of HEPLIS FB revenue in 2021 coming in the second half of the year. Another important highlight of continued progress for HEPLIS FB came this past Friday when the European Commission granted marketing authorization for HEPLIS FB in Europe. We anticipate launching HEPLIS FB in Germany in the fourth quarter of this year. Furthering our positive outlook for hepatitis B, yesterday, the CDC Advisory Committee on Immunization Practices, or the ACIP, discussed the concept of an enhanced recommendation for adult hepatitis B vaccination. Specifically, the ACIP discussed recommending hepatitis B vaccination for all previously unvaccinated adults. This universal recommendation would greatly expand the number of adults in the U.S. who should be vaccinated against hepatitis B. The hepatitis B working group is targeting an ACIP vote as soon as October 2021 on this major policy initiative. We believe a universal recommendation would be a catalyst to support the growth of the adult hepatitis B market by significantly increasing the number of people recommended to be vaccinated and enabling easier identification of those in need of vaccination. Hepatitis B provides an important foundation for our company. Additionally, our CPG-1018 adjuvant supply business is growing rapidly as a result of the COVID-19 pandemic, providing an additional source of revenue growth. Underscoring CPG-1018's versatility, our collaborations span multiple technology platforms across varied indications, including COVID-19, tetanus, diphtheria, and acellular pertussis, or Tdap, and universal influenza. These CPG1018 collaborations provide a pipeline of opportunities for DynaVax, either as a vaccine developer or as a supplier of adjuvant. And both scenarios progressed from strategy to reality in 2020. In the vaccine development category, DynaVax is now evaluating CPG1018 in a phase one clinical trial of a potentially improved Tdap vaccine candidate. This clinical stage program developed out of a collaboration with Serum Institute of India. Data from this trial are anticipated in the fourth quarter of this year. We have also made progress with our adjuvant supply business for COVID-19 vaccines, which is now generating significant revenue. Before I provide an update on our specific COVID-19 partnerships, I would like to briefly review the COVID-19 vaccine landscape and how we expect CPG1018 to fit in. The global demand for initial COVID-19 vaccines is massive, and with the uncertainty regarding duration of protection and the emergence of new mutations, it is likely that booster vaccinations will be necessary and may need to contain antigens from multiple strains. Adjuvanted and activated and adjuvanted protein subunit vaccine platforms provide a number of advantages to address the global demand. These vaccines are stored at traditional refrigeration temperatures, unlike mRNA vaccines, making them more accessible for the global population. These platforms have historically been used for multivalent vaccines while maintaining an acceptable safety and tolerability profile. Inactivated and subunit vaccines can be used for repeat dosing, unlike some viral vector platforms. And finally, with adjuvants like CPG-1018, we believe these platforms have the potential to deliver high levels of protection on par with mRNA vaccines. Our collaboration strategy has resulted in multiple opportunities for emergency use authorization in 2021 for CPG1018 adjuvanted COVID-19 vaccines. CPG1018 has demonstrated the ability to increase antibodies while preserving a best-in-class tolerability profile. Our partnerships are moving forward to the next stage of development and preparation for commercial supply. In the third quarter of last year, we executed our first commercial supply agreement for a COVID-19 vaccine candidate and began production of CPG1018 at scale for pandemic supply. Under this agreement, Dynavax is providing CPG1018 for Valneva's COVID-19 vaccine candidate, being developed under an agreement with the UK government. Dynavax is scheduled to supply Valneva CPG1018 adjuvant for 100 million vaccine doses in 2021. which represents a revenue opportunity of up to $230 million. While this contract is contingent on continued successful development, it is potentially worth over $400 million for DynaVax through 2024. We recently executed another major agreement to support commercial supply in 2021 with the Coalition for Epidemic Preparedness Initiative, or CEPI. CEPI is providing significant support for the global response to the COVID-19 pandemic through many collaborations and partnerships around the world. CEPI is providing DynaVax manufacturing funding of up to $99 million to support stockpiling of CPG-1018 for future sales to CEPI grantees. Depending on the mix of CEPI grantees and the allocation to high and low income countries, the material produced under this agreement has the potential to generate approximately $125 to $200 million in CPG1018 revenue for DynaVax in 2021. Our most advanced partner is Clover Biopharmaceuticals, who is initiating a global phase 2, 3 efficacy trial with their protein subunit vaccine candidate, adjuvanted with CPG1018. This trial is expected to have an interim analysis for vaccine efficacy in the middle of 2021. This efficacy study is being funded by CEPI, and as a CEPI grantee, Clover will have access to adjuvant produced under the CEPI funding arrangement. In November, Biological E, another CEPI grantee, initiated a Phase 1-2 clinical trial of its COVID-19 subunit vaccine candidate, adjuvanted with CPG1018, with results expected in March of this year. Biological E is one of the leading vaccine companies in India. and partners with global healthcare agencies, including the WHO, UNICEF, and Pan American Health Organization in their efforts to make life-saving vaccines accessible globally. And finally, Medigen, who is based in Taiwan, is currently evaluating CPG1018 adjuvanted protein subunit vaccine candidate in 3,700 subjects in a phase two clinical trial. Data from this trial is expected in July of this year. Based on the limited initial availability of COVID-19 vaccines compared to the world's population, we expect the period of initial vaccination will continue at least through 2022, driving the need for additional vaccine options, particularly adjuvanted vaccines. And with emerging variants creating potential challenges for current vaccines, the need for adjuvanted COVID vaccines may continue far beyond 2022. Through the continued advancement of our multiple collaborations, CPG-1018 could be utilized in up to 500 million to 1.5 billion doses of vaccine annually in 2022 and beyond, with additional capacity expansion available, depending on the global demand, making CPG-1018 a valuable additional revenue-generating asset. With that, let me wrap up with a couple final comments. 2020 was a very successful year for Dynamax, despite the pandemic. as we executed on the transformation that we initiated in 2019. We made tremendous progress on a number of fronts that we believe have laid a foundation for significant growth in 2021 and beyond. The strength of the fourth quarter revenue for HEPA-Sav-B, combined with the rapidly increasing revenue from CPG-1018, reinforced our confidence in the Dynavax vaccine business model and the long-term investment opportunity it represents. I'll now turn the call over to Michael to discuss our financial results in more detail.