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Operator
Good day, ladies and gentlemen, and welcome to the DynaVax Technologies first quarter 2022 financial results. 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 time. I would now like to turn the call over to Nicole Arndt, Senior Manager, Investor Relations. You may begin.
Nicole Arndt
Thank you. Good afternoon, and welcome to the DynaVax first quarter 2022 financial results and corporate update conference call. In addition to our press release issued today, a supplementary slide presentation that accompanies today's call is available in the event section of our website. 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 potential market size and market share. impact of ACIP recommendations, financial guidance and trends, expected regulatory filings or approvals of our collaborators, clinical readouts, and potential future uses of CPG-1018 adjuvant. These statements involve risks and emergencies, and our actual results may differ materially. These results, these risks are summarized in today's press release. and detailed in the risk factors section of our SEC filings, including today's quarterly report on Form 10-Q. Our forward-looking statements speak as of today, and we undertake no obligation to update these statements. Joining me on the call today are Brian Spencer, Chief Executive Officer, Don Casal, Senior Vice President of Commercial, Rob Jansen, Chief Medical Officer, and our Chief Financial Officer, Kelly McDonald. I will now turn the call over to Ryan.
Brian Spencer
Thank you, Nicole, and thank you all for joining us today. We are very excited to have this opportunity to review the progress we've made in our business during the first quarter. I will provide some corporate highlights and a brief review of our COVID-19 adjunct supply business before I turn it over to Don, Rob, and Kelly to provide a bit more insight into their respective areas. Following a year of record revenue in 2021, we are off to a great start in 2022. Our team has demonstrated strong execution in driving growth of Hepatitis B and executing on our adjuvant supply business for COVID-19 vaccines, driving total revenue of $114 million in the first quarter, which was up 37% from the same period last year. For Hepatitis B, we are seeing positive momentum driven by market growth as we emerge from the pandemic, along with our continued successful engagement across our customer segment. Through our efforts, we have achieved $21 million in product sales in the first quarter, providing us continued confidence in our expectation for annual revenue growth. Additionally, we continue to focus increasing effort on driving awareness of the expanded ACIP recommendation, which we believe will result in significant market growth over the coming years. In addition to HEPA-SAP-B, our global portfolio of CPG-1018 adjuvant supply agreements for COVID-19 vaccines, generated $92 million as the largest driver of revenue in the first quarter. We're very proud of our efforts to support the development of multiple COVID-19 vaccines. Our COVID-19 supply partners have received multiple emergency use authorizations, and additional regulatory applications are under review, with decisions anticipated in the second and third quarter of this year spanning multiple countries and regions. Additionally, our partners continue to expand their clinical data to support broad utilization of their vaccines. This includes additional clinical trials to support heterologous boosting, elderly and pediatric indications, and research to evaluate new variant-based vaccines. Based on the impressive phase three data sets across our COVID-19 partnership portfolio, we believe the combination of high efficacy and immunogenicity with favorable safety and tolerability provides a very competitive profile as COVID-19 vaccine landscape evolves to a recurring booster market. We expect revenues of at least $550 million from our adjuvant supply business in 2022, and our supply partners' continued progress provides opportunity for future revenues as the endemic COVID-19 vaccine market develops. We are also leveraging CPG1018's profile in our clinical pipeline to develop new and improved vaccines. We have advanced two programs into the clinic, Tdap and Shingles, both of which are on track to generate additional clinical data this year that we anticipate will highlight our high-value pipeline designed to produce best-in-class products targeting large markets. Our performance this quarter puts us on track to achieve annual revenue growth in 2022 for both Heplis FV and CPG 1018 adjuvant supply, which is expected to enable a second consecutive year of profitability. This strong financial performance has resulted in sufficient capital for us to bring HEPA-CEP-B to profitability, develop our existing pipeline, and to continue to advance CPG-1018. We are committed to taking advantage of all the strengths we have, including our commercial, manufacturing, and development expertise, our advancing clinical pipeline, our strong balance sheet, and our team's commitment to deliver value for public health and our shareholders. I'll now turn the call over to Dawn to provide more details on HEPA-CEP-B performance.
Nicole
Thank you, Ryan. I'm extremely excited to share the exceptional first quarter results for HEPALSATB. HEPALSATB is the first and only FDA-approved adult hepatitis B vaccine that allows series completion with only two doses in one month. Series completion is essential for high levels of protection. Unfortunately, most adults never complete a three-dose hepatitis B vaccine series. Efficient series completion is more critical now than ever in the era of universal adult hepatitis B vaccination. Two-dose HEPLISA-B can make series completion easier and protect more patients faster. For Q1, HEPLISA-B's net product revenue grew to $21 million, an increase of 151% from $8 million in Q1 of 2021, driving this increase for gains in market share Hemplicev's total market share increased to 26%, up from 14% during the same period last year, while Field's targeted market share increased to 33%, up from 27% during the same period last year. We are extremely proud of our commercial team's execution and ability to drive significant revenue growth and market share gains over the past year, despite the turbulent and challenging market conditions brought on by COVID. While Omicron had significant impact on healthcare delivery and hepatitis B market utilization from January to mid-February of this year, we saw a significant shift in turnaround in March. We are very encouraged by this trend and expect to see continued progress with customers working their way back to normal throughout the remainder of 2022. Over the past 12 months, hepatitis B grew faster than the overall hepatitis B market. By doses, the hepatitis B market grew by approximately 27% from Q1 of last year, while HEPLISAV grew by approximately 137%. HEPLISAV B is in an excellent position to realize additional revenue gains as the hepatitis B market continues its return to pre-pandemic levels. Furthering our long-term positive outlook for HEPLISAV B, The CDC Advisory Committee on Immunization Practices, or ACIP, has now published its recommendation that all adults 19 to 59 years of age should receive hepatitis B vaccination. This recommendation significantly expands the number of adults in the U.S. who should be vaccinated against hepatitis B compared to the prior risk-based recommendation. With the ACIP universal recommendation, Hepatitis B vaccines now become one of the most widely recommended adult vaccines. We believe the ACIP recommendation will be a significant catalyst for growth, and we estimate the market opportunity could grow to approximately $800 million by 2027, with Hepatitis B well positioned to secure a majority market share over time. Many of our customers are updating vaccine protocols and internal operations to reflect the change in the universal adult hepatitis B recommendation. The two-dose and one-month profile of Hepatitis B has become an even more important consideration for customers now that they are faced with vaccinating a significant portion of their adult population. We are increasing sales and marketing initiatives to support the long-term process of building awareness among healthcare providers and patients to increase vaccination coverage rates. Importantly, we are reinforcing why the two-dose and one-month profile of Hepatitis B is now the best option for customers to effectively operationalize a universal adult hepatitis B vaccination program. With a proven clinical profile and our team's strong commercial execution, we expect further market share gains and revenue growth in 2022. We remain confident in our ability to generate momentum, and look forward to continuing to drive long-term growth for HEPLOSAB-V. I will now turn the call over to Rob to take you through our clinical pipeline.
Ryan
Thank you, Don. Our adjuvant CPG1018 has demonstrated exceptional characteristics of inducing a strong immune response combined with a very favorable tolerability profile. This has been established through a wide range of clinical trials and now through extensive real-world commercial use. We're very excited to advance our clinical pipeline leveraging CPG1018 to develop improved and new vaccines and indications with unmet medical needs. During 2022, our studies will generate early clinical data that we anticipate will begin to support meaningful differentiation from the existing vaccines. Last year, we initiated a phase one clinical trial evaluating an improved tetanus diphtheria and pertussis, or TDAP vaccine, that uses our CPG1018 adjuvant. Interim adult data from this ongoing study demonstrated the vaccine candidate was well-tolerated without safety concerns. Additionally, immunogenicity results were consistent with our expectations and support continued advancement of the vaccine candidate. Adolescent data from the same trial are expected in the second half of 2022. We anticipate presenting the full data at a scientific conference sometime later this year. Additionally, we're conducting a non-human primate pertussis challenge study, and this is assessing the impact on prevention of both disease symptoms and nasal colonization of the pertussis bacteria. Data from this study are expected in early 2023. Now, second is our shingles vaccine program. We believe that CPG1018 has the potential to elicit strong CD4 T cell responses, and these are key in controlling reactivation of the zoster virus, while also providing improved tolerability compared to the current marketed product. In late January, we dosed the first patient in a phase one study designed to evaluate safety, tolerability, and immunogenicity. Data from this trial are expected to be available by the end of 2022. Now, finally, in the second half of 2022, we anticipate initiating a phase two clinical trial for a plague vaccine that utilizes our CPG1018 adjuvant. This clinical trial is being conducted in collaboration with and funded by the US Department of Defense. We believe the proven profile of CPG1018 enables us to develop vaccine candidates that have significant opportunities with lower development risks. I'll now pass the call over to Kelly to review our first quarter financial results and our 2022 financial guidance.
Don
Thank you, Rob. It's wonderful to be in a position to report another quarter of strong financial performance. I'll walk through the key financial highlights and then review our full year 2022 guidance and provide a few closing thoughts. Please note that all financial comparisons are versus the prior year period, unless otherwise noted. And also, please refer additionally to our press release and 10G for detailed financial information. Starting with revenue, we delivered total revenue of $114 million for the first quarter of 2022, up 37% year over year. Pebbles FD generated net sales of $21 million, up 151%, which, as others have mentioned, is a positive trajectory that we are very pleased with. Additionally, we achieved $92 million in DPG-1018 adjuvant revenues, up 23% from $75 million in the same period last year, driven by continued strong execution on our global portfolio of commercial supply agreements. Now, turning to expenses. Our research and development expenses for the first quarter of 2022 were $11 million, reflecting continued advancement of our ongoing pipeline programs in TDAP and shingles, and our fully funded phase two contract with the DOD for adjuvanted slave vaccines. Looking ahead, we continue to be very pleased with the progress we're making in our clinical pipeline and look forward to multiple potential data catalysts by the end of the year. Selling general and administrative expenses for the first quarter of 2022 increased at $32 million compared to $22 million for the first quarter of last year, primarily driven by increased personnel related expenses, including stock based compensation, coupled with focused marketing investments to drive growth in HEPA-SAP-B and support our global operations. Moving on to profitability. For the first quarter of 2022, we generated GAAP net income of $33 million, or $0.26 per share basic and $0.22 per share diluted, compared to GAAP net income of $900,000, or $0.01 per share basic and diluted, for the first quarter of 2021. I'd like to take a moment to point out two unique items impacting our profitability. First, we utilize approximately $33 million in net operating losses to reduce our 2022 Q1 taxable income. And second, our GAAP net income includes an approximately $2 million gain, reflecting the final non-cash fair value adjustment for our previously outstanding warrant liability. Looking ahead, we do not expect to record any further quarterly non-cash share value adjustments as all warrants have either been exercised or expired as of the end of Q1 2022. Now, for a few quick remarks on cash. We ended the first quarter with a very robust balance sheet, including cash, cash equivalents, and investments of $503 million. And we continue to believe that we have sufficient capital to support our core business without the need to raise additional funds which is especially important in this challenging market background. Lastly, I'm very pleased to reaffirm our previous 2022 all-year financial guidance, which includes DPG 1018 adjuvant revenue of at least $550 million with approximately 50% gross margin for the year, SG&A expenses in the range of $120 to $140 million, RMD expenses in the range of $55 to $70 million, and interest expense of approximately $7 million. Delivering shareholder value is at the heart of successfully executing on our strategic priorities. We demonstrated strong execution on our core business objectives during the first quarter and believe that continued execution on these priorities will drive value creation over time. Thank you, everyone, for your attention today. Operator, we would now like to open the Q&A portion of today's call.
Operator
Certainly. As a reminder, to ask a question, you will need to press star one on your telephone. To withdraw your question, please press the pound key. And our first question comes from Phil Nadeau of Cohen & Company. Your line is open.
Phil Nadeau
Hi, this is Ernie Rodriguez for Phil. Congratulations on a strong quarter, and thank you for taking my question. First, for HEP Lab, in regards to the trends that you mentioned, in vaccine utilization from early in the quarter versus March and on. Do you have any numbers on that? I know you mentioned 60% vaccine utilization in the last quarter. How is it now compared to that?
Brian Spencer
Hi, Ernie. This is Ryan. Total utilization in Q1. Don, do you have that number offhand?
Nicole
Yeah. So utilization was down for the entire quarter down 23%. Just to give a little additional color within the quarter, January, as I mentioned, the first few weeks of January into early February, utilization was similar to what we saw in Q4, went down quite a bit more because of Omicron. And then we saw the reversal, if you will, in the latter part of February into March, which overall brought us to the overall utilization of down about 23%.
Phil Nadeau
All right. Thank you. That's helpful. And then one more question on that. Do you have any visibility into how effectively is the ACIP's recommendation being implemented? Are you able to see, for example, is there more use in healthy patient population versus the at-risk population? And also, if you can share any updates on the progress from your marketing efforts to push the implementation.
Nicole
Yeah, so I mean, it's a bit early. It was just published during the quarter in February. So, you know, as it relates to additional patients getting vaccinated, it's probably too early to tell. Well, what I can say, though, is that it's created a market event for our sales team with customers as now this recommendation has provided us an opportunity to engage customers differently in the fact that customers now have to stop, think and change. And so that's been a real catalyst for us to get in front of the appropriate customers to tell the story around HEPOSAB, the two-dose HEPOSAB. The aspect of operations and efficiency becomes a real reality to our customers. And so we see some of the immediate effects around being able to accelerate market share, first and foremost, with the recommendation. With regards to additional marketing efforts, we will continue to target both the healthcare providers And as I mentioned before, we will start to embark on some market direct-to-consumer advertising in a handful of markets throughout the U.S. and test that with patients requesting a HEPL-SAV at the pharmacy.
Phil Nadeau
Okay. Thank you. That's very helpful. If I may, one quick one on the CPG business. Does the $550 million in committee orders, does that include – Does that include any orders from Valneva's anticipation of an approval in Europe or Clover's anticipation of an approval?
Brian Spencer
Yeah, Ernie, I think we've covered this a little bit in the back in prior discussions, but remember, Our customers have to order from us in advance of producing for their eventual formulation, filling, and supply. And so without getting into the specifics by customer, yes, in general, our customers have – these orders have been placed in advance of approval. And so there's commitments in advance of approval across – and that's been the case across all of our customers over 21 and 22.
Phil Nadeau
Great. Thank you for taking my question.
Operator
Sure.
Brian Spencer
Thank you.
Operator
Our next question comes from Matt Fitz of William Blair. Your line is open.
Matt Fitz
Good afternoon. Thanks for taking my questions, and congrats on a nice quarter again. I guess on HEPA-SAV, great year-over-year gains on market share, but looking back at Q4, there wasn't a ton of movement across the different segments that you all break out in the slide. So is there anything that maybe impacted that from Q4 to Q1 and just you know, should we think about similar year-over-year gains going for the rest of the year or any, you know, anything you take going forward? And I assume, again, we should expect kind of the DOD impact in the summer. Don, why don't you go ahead and take that?
Nicole
Yeah, sure. Hey, Matt, thanks for the question. I'm glad you actually asked that question. I think it's an important question. And so you're right, from Q4 to Q1, relatively flat market share gains, both for total and for field targeted. However, when you look within the quarter, and I think that's the key here, looking within the quarter, as I mentioned before, the first six weeks really in this quarter, as we all know from Omnicron, had a significant impact on healthcare operations, as well as our ability just to engage customers with all the sick outs due to Omnicron. So when you look within quarter, certainly there was a negative impact on market share But then this turnaround, if you will, in the latter part of February into the month of March really allowed us to have the market share that we had for the quarter, both for total and field targeted. And really the trend in March is a very positive trend. We see that trend continuing here into the second quarter as well, which gives us a lot of confidence as we think about the rest of the year and being able to make the statement that we anticipate quarter over quarter market share change. for the rest of the year, given the trend we've seen of the last six to eight weeks coming out of really Omicron. So that was really the impact and it was real. We really felt in the first six weeks of the quarter.
Brian Spencer
And then Matt, the final question around seasonality, we do expect it to continue to be seasonality to some degree within the market around summer surge for DOD. And then I think just frankly, just to keep everyone's mind, we also do realize there's some Q4 seasonality in this business as well.
Matt Fitz
You know, I really was glad to see reiterating the society guidance. I know you guys have talked about the strength of the contract and put a lot of language in the last 10K about that, but clearly we're seeing headlines of either countries trying to get out of agreements or other companies talking about regulations slowing down production or even potentially stopping production of their vaccines. So just, you know, maybe you can elaborate a little bit on if there is any flexibility or if you are having any conversations with clients on flexibility.
Brian Spencer
No, I mean, I think the best way to think about that, I mean, we're not, we pay attention to the headlines too, I think, but it's been like this since the beginning that there's, they're all different for every company. I think you have to really look into our collaborators and, We continue to see our collaborators, again, expand their clinical data, file for regulatory approvals, work hard to generate regulatory approvals that have discrete opportunities across the different regions. And so I think you really have to look at it partner by partner, company by company as the whole COVID environment continues to evolve. And then I also want to draw some attention to the fact while there is some complexity to stockpiles, as you mentioned, and certain regional challenges. There also continues to be more evidence to support an ongoing recurring booster market with a question around maybe population and age and frequency and variant-based vaccines. But given the fact that the adjuvant is a consistent component, even to variant-based vaccines, makes us feel like there's continued opportunity depending on how the endemic market evolves. At the stage where, like you said, we reiterate our guidance based on the contracted revenue that we have in place.
Matt Fitz
Thanks, Ryan. One last question. I might have to compare exactly what you said in the transcript, but it did sound like you're a little more excited on the endemic annual market for COVID-19. How are you thinking about potentially trying to bring something to the U.S.? And what are you kind of waiting to see as far as shaking out? I know there's a ton of moving pieces with all of this.
Brian Spencer
Yeah, I mean, I think you're right. Every quarter, we all have more information on how the space is evolving. I mean, you've seen some commentary from the FDA recently on how they're thinking about potential need for annual boosters. As it relates to us for the U.S., I guess we do have a number of collaborators who have products that could be useful here, but I think before we're willing to step into that in a particular specific way, I'd like to understand a little bit more around how the space is going to evolve. And the other thing we haven't seen yet is the long-term impact across different vaccine platforms for severe disease in the face of waning immunity against severe disease. I think that's where differential products could emerge, and that would have a big influence on how we would view the U.S. opportunity.
Matt Fitz
Okay, good. Thanks, man.
Operator
Our next question comes from Madhu Kumar of Goldman Sachs. Your line is open.
Kumar
Hey everyone, thanks for taking my question. This is Rob on for Madhu. I guess I was just wondering on pertussis, what do you believe constitutes clinical proof of concept and when would you expect to reach that point?
Brian Spencer
Rob, would you like to take this one?
Ryan
Yeah, thanks Rob. The Pertussis program, you know, has several steps in it. The first is we now have antibody data compared with Boostrix. But the key readout, as you're implying, is not antibody data. The key readouts are going to be from human and baboon challenge models. And we'll be looking for the effect of the vaccines on disease symptoms, on nasal colonization, and shifting a Th2 response to a Th1 and Th17 response. And I think our best expectation of this is to see data from the baboons potentially late this year, and the human challenge model will be in 2023.
Kumar
Thank you.
Operator
We have no further questions at this time. I would now like to turn the call back to Ryan Spencer, CEO, for closing remarks. You may begin.
Brian Spencer
Thank you, operator. We are very pleased with the successful execution thus far against our plan. With a strong first quarter under our belt, as I mentioned earlier, we continue to anticipate another profitable year driven by increasing revenue from our CPG Agile Supply business and from increasing HEPA W sales. We believe the combination of a strong financial profile, revenue-generating assets, and an emerging pipeline of product candidates based on a proven Agile technology provides a solid foundation for our future. Lastly, and in closing, I would like to highlight the incredible DynaVax team and their commitment and effort towards our mission. Our achievements and the opportunities that we believe lie ahead are made possible by the hard work and dedication of this team. We look forward to updating you all on our progress throughout the year. Thank you for joining us today. We appreciate your time and interest in DynaVax. Operator, you may end the call.
Operator
Ladies and gentlemen, thank you for joining us today. This concludes today's conference call. You may now disconnect.
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