DVAX - NASDAQ

Good day, ladies and gentlemen, and welcome to the Dynavax Technologies Second Quarter 2025 Financial Results Conference Call. As a reminder, this call is being recorded. [Operator Instructions] I would now like to turn the call over to Paul Cox, Vice President, Investor Relations and Corporate Communications. You may begin.

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. Earlier today, Dynavax released financial results for the second quarter ended June 30, 2025. Copies of the press release and a supplementary slide presentation are available on Dynavax's 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 sizes, market segmentation, effective marketing efforts, future expected market share and related growth rates and related ACIP recommendation impact on each financial guidance and trends, including revenue, profitability, cash flow and sufficiency 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. These statements involve 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. Our forward-looking statements speak as of today, and we undertake no obligation to update such statements. 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 Investors section of our corporate website at dynavax.com. And with that, I will now turn the call over to Ryan.

Thanks, Paul. Thank you all for joining us this afternoon. We continued our momentum in the second quarter of 2025 by delivering our highest ever revenue quarter for HEPLISAV-B. We recorded $92 million in Q2 net product revenue, representing an increase of 31% year-over-year. We also continued to grow our market-leading position in the U.S. adult hepatitis B vaccine market with 45% estimated market share in Q2 compared to 42% for the prior year quarter, demonstrating our ability to continue growing share in this expanding market, putting us on track to achieve our long-term goal of at least 60% total market share in the U.S. by 2030. Based on our strong performance for the first half of the year, we are updating our full year 2025 HEPLISAV-B net product revenue guidance to $315 million to $325 million, bringing up the prior low end of the range of $305 million. Beyond HEPLISAV-B, our vaccine pipeline remains on track with key clinical milestones achieved or expected this year across multiple programs. We look forward to reporting initial top line immunogenicity and safety results from our Phase I/II trial for our novel shingles program in the coming weeks. We are excited to have an opportunity to advance a potential best-in-class profile for this program with the goal of disrupting the multibillion-dollar shingles vaccine market. We're also excited to continue advancing our earlier-stage development pipeline, which leverages our vaccine adjuvant technology, CpG 1018. As we announced last quarter, we are developing 2 new programs in pandemic influenza and Lyme disease. We believe our pandemic influenza adjuvant program is an attractive opportunity to leverage our expertise and capabilities as a supplier of CpG 1018, given the global shortage of proven vaccine adjuvants for potential pandemic responses. This program is on track to report the safety and immunogenicity Phase I/II data next year, which would support our business development efforts with global flu manufacturers, governments and nongovernment organizations focused on global pandemic preparedness and response efforts. We continue to focus on building an optimal product portfolio and development pipeline with a disciplined capital allocation approach, first and foremost, supporting our lead asset, HEPLISAV-B; second, advancing our internal pipeline programs, which are evolving and maturing; while third, also continuing to assess attractive opportunities that would complement our existing portfolio. We believe this performance year-to-date continues to set us up for a banner year for Dynavax. I look forward to providing you with updates on our progress along the way. Now I'd like to turn the call over to Donn.

Thanks, Ryan. In the second quarter, we observed continued strong momentum in the expansion of the U.S. adult hepatitis B vaccine market, driven by increasing awareness, higher vaccination rates and growing demand across key segments. HEPLISAV-B continued to gain share, reinforcing its competitive position and clinical differentiation. Together, these factors contributed to a record quarter for net product sales, reflecting both the strength of the market and the effectiveness of our commercial execution. The ACIP universal recommendation has fundamentally transformed the adult hepatitis B vaccine market, establishing one of the largest addressable vaccination opportunities in the United States. As adoption of the updated guidelines takes hold, hepatitis B vaccination rates continue to rise across key segments. In Q2, total HEPLISAV-B dose volume grew by approximately 13% year- over-year, demonstrating sustained momentum and expanded provider uptake. HEPLISAV-B's estimated quarter end market share in the U.S. rose to 45% in Q2, up from 42% in the same period last year. This growth was driven by broad-based gains, including consistent annual market share increases across major retail customers. We expect to see similar year-over-year market share gains throughout the remainder of 2025, in line with our long-term expectations. Our positive outlook is supported by strong market growth in retail and other key customer segments where HEPLISAV-B holds a leading position. We have updated our approach to communicating market performance by organizing the U.S. adult hepatitis B vaccine market into 4 primary segments: IDN, retail, dialysis, and other. This new segmentation simplifies and consolidates customer groups to more accurately reflect market dynamics. In addition to our quarter end market share metric, we are now reporting trailing 12-month market share data across these 4 market segments to enhance visibility into performance. This metric accounts for seasonality and variability across segments and offers a clear picture of HEPLISAV-B's position in the market. For Q2, HEPLISAV-B had a 44% total market share on a trailing 12-month basis, with retail and IDN segments reaching 57% and 53%, respectively. Please refer to our updated corporate presentation for additional details, including historical trends and key insights. The hepatitis B market is rapidly shifting to retail. In the second quarter, retail continued to perform strongly with annual dose utilization increasing by approximately 35%. Given this momentum, we are updating our long-term market outlook, and we now anticipate that the retail segment will account for at least 50% of the total hepatitis B doses by 2030. As this shift continues, retailers are placing greater emphasis on hepatitis B vaccination. Top chains are implementing operational levers to better identify eligible patients and are partnering with us to help educate retail leadership and pharmacists on the value of HEPLISAV-B. Additionally, we are increasing investments in collaborative marketing initiatives designed to drive in-store patient identification and consumer activation for hepatitis B vaccinations during the fall season. To further support HEPLISAV-B's growth in the retail segment, we're encouraged by recent Medicare policy changes that now allow coverage of monovalent hepatitis B vaccines such as HEPLISAV-B in the retail setting. Previously, TWINRIX was the only hepatitis B-containing vaccine reimbursed and utilized for Medicare patients in retail. This is a meaningful policy shift as approximately 25% of all hepatitis B doses administered in retail are to patients over 65 years old. This update enhances HEPLISAV-B's growth potential and strengthens its competitive positioning within the Medicare population in the retail channel. We are actively collaborating with our retail partners to help support them with these changes and look forward to updating you on our progress throughout the remainder of the year. HEPLISAV-B continues to demonstrate strong and sustained adoption, reinforcing its value and competitive position in the adult hepatitis B vaccine market. Our progress continues to track with our long-term outlook for HEPLISAV-B market opportunity, which we expect to peak at over $900 million in the U.S. by 2030 with HEPLISAV-B capturing at least 60% of the market. This long- term guidance reflects our expectation of double-digit annual growth in product net sales through 2030. We expect the HEPLISAV- 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. We are excited about the future for HEPLISAV-B. The execution by our commercial team has been outstanding, and we believe the momentum we have built in the first half of 2025 sets a strong foundation for continued success this year and beyond. I will now turn the call over to Rob to take you through our clinical pipeline.

Thank you, Donn. For our vaccine development pipeline, our internal programs focus on well-established antigens and biology with clear regulatory pathways where CpG 1018 adjuvant can provide a meaningful improvement. Additionally, we provide CpG 1018 to support external collaborations in a variety of programs. We believe this maximizes the opportunity for CpG 1018 to be utilized in novel vaccine development initiatives. Our clinical pipeline continues to advance, led by our novel shingles vaccine program currently in Phase I/II development. As Ryan mentioned, we now expect to report top line results this month. The top line results will be based on 1-month data following the last vaccine dose in the study. This is an antigen dose-ranging study to select the dose level to further optimize the formulation and regimen for our vaccine. We expect to report top line immunogenicity results, including vaccine response rates compared to Shingrix, along with safety and tolerability. As these data support advancement, we plan to select the optimal dose, formulation and regimen to advance into Part 2 of the study in adults 70 years of age and older. This portion of the trial will have a higher number of subjects to more fully support assessment of the vaccine response rate compared to Shingrix. We believe the Part 2 data, along with the longer-term follow-up from Part 1, both of which are expected next year, will be a comprehensive data package to provide confidence in determining whether to advance our novel shingles vaccine candidate into a pivotal efficacy trial. Now for the pandemic influenza adjuvant program, as Ryan mentioned, we initiated this first-in-human clinical trial and also completed enrollment in the second quarter of 2025. This is a randomized active controlled Phase I/II study to evaluate the safety and immunogenicity of an investigational H5N1 avian pandemic influenza vaccine that's adjuvanted with CpG 1018 and alum. We believe this study could enable us to generate clinical proof of concept in an efficient and low-cost manner. We recently completed dosing in the study with the intention to select the optimal formulations of CpG 1018 for Part 2 of the Phase I/II trial. Now regarding our plague vaccine program, it's in collaboration with and fully funded by the U.S. Department of Defense. Given that the program is focused on preventing the spread of pneumonic plague in a biological attack, our goal in the upcoming Phase II study is to maximize a rapid antibody response through dose ranging of the CpG 1018 adjuvant and optimizing the dosing regimen. We plan to initiate this Phase II clinical trial in the second half of this year. I'll now turn the call over to Kelly to review our financial results.

Thank you, Rob. Before I get started, a reminder to please refer to our press release and Form 10-Q filed earlier today for more detailed financial information and for a full reconciliation of GAAP to non-GAAP results in accompanying disclosure. We are very pleased with the momentum of HEPLISAV-B quarterly net sales of approximately $92 million, up 31% year-over-year and approximately $95 million in total revenues, up 29% year-over-year. Of note and unique to this quarter, HEPLISAV-B net product revenue in the second quarter includes $1.6 million in ex U.S. revenue and approximately $5 million in gross to net favorability associated with improvement in returns rates, neither of which are expected to recur in the second half of the year. Additionally, HEPLISAV-B gross margin was 85% for the second quarter of 2025, an increase compared to 83% in the second quarter of 2024. We continue to expect HEPLISAV-B gross margin of approximately 80% for the full year 2025. Turning to expenses and starting with R&D. As we continue to progress our clinical stage pipeline through key milestones this year, R&D expenses were $17 million in the second quarter, up slightly compared to $15 million in the second quarter of last year. We expect to provide further clarity on full year R&D expenses in connection with the results of our shingles data readout expected later this month. Q2 SG&A expenses were $50 million, up from $42 million in the second quarter of last year, with this increase primarily related to an incremental $13 million in expenses related to our successful proxy contest campaign, partially offset by a reduction in personnel- related costs. Looking ahead for the full year, we continue to expect SG&A expenses to be consistent with prior year, excluding the aforementioned proxy contest-related costs reported in the first half of this year. This prudent management of our SG&A line reflects our ongoing commitment to financial discipline as the organization matures. Moving to the bottom line. We had GAAP net income of $19 million for the second quarter of 2025 compared to GAAP net income of $11 million for the second quarter of 2024. Additionally, non-GAAP adjusted EBITDA improved to $37 million for the second quarter compared to $20 million in the second quarter of last year. Transitioning to the balance sheet. We ended the second quarter with cash, cash equivalents, and marketable securities of $614 million compared to $714 million at the end of 2024. The decrease in our cash position was primarily driven by the successful and highly efficient execution of our previously announced $200 million share repurchase program, which we completed during the second quarter. We retired over 16 million shares using a combination of execution tactics to maximize the value of the program during a period of significant market volatility. Following the completion of our share repurchase program and our successful debt refinancing completed in March 2025, we believe that we have the rightsized capital structure to support our strategy to protect and deliver long-term value for shareholders. We continue to be highly prudent stewards of capital on behalf of all of our shareholders and evaluate the highest and best use of capital allocation in connection with our strategy. Turning now to our financial guidance for the full year 2025. We expect HEPLISAV-B net product revenue to be in the range of $315 million to $325 million, raising the low end of the range to reflect our strong performance in the first half of the year. We also continue to expect adjusted EBITDA to be at least $75 million for the year. In closing, we're very excited about the strong performance throughout the first half of 2025, consisting of a record quarter for HEPLISAV-B, our advancing pipeline with key milestones and new programs this year and our strong financial profile. We are proud of this progress, and we are also excited about our growth prospects as outlined on the call today. Thank you, everyone, for your time. Operator, we would now like to open the Q&A portion of today's call.

[Operator Instructions] Our first question comes from the line of Matthew Phipps with William Blair.

Thanks for a lot of additional granularity around some of the market dynamics and market share here and glad to see that market share tick-up in the quarter. With the shingles readout obviously coming pretty soon, I know you also talked previously about hoping to see CD4 T cells, I think, you said within 75% of Shingrix as what you think could be -- result in comparable efficacy. Just wanted to kind of check on that number. And then also, is that the 1-month time point or is that a 6- or 12-month time point where you want to be within that range of Shingrix?

Matt, thanks for that question. Rob, why don't you take that?

Sure. So at 1 month, what we're going to be looking at is VRR for the -- as a composite endpoint, both CD4 and antibody vaccine response rate. Our concern, as we've talked to more experts around CD4s, we have small numbers of subjects, and because of that, we're concerned about the variability across the assays and across subjects. So we're focusing more on VRR at the initial time point. Over time, we will be looking at VRR also at 6 and 12 months. But at that point, we'll be looking more at CD4 and antibody levels over time and see how they change over time in comparison to Shingrix. So the 75%, we certainly will be looking at it but we also will be looking at other factors as well with VRR sort of leading the charge. Because, Matt, sorry, we really -- the first thing we want to see is sort of a robust immune response, both an antibody response and CD4 response.

Yes, okay. And looking at the side effects, I think you all have talked before about trying to make sure that's standardized and using a patient-reported outcomes tool. Is that -- do we get that full type of data in this first update?

We're certainly looking at that with respect to tolerability. We do -- we will have some of those data, although we have an ongoing study to validate all that, which will not be ready in the next month.

Yes. Matt, just to reiterate, the primary focus of this trial, just to remind everyone, was to demonstrate immunogenicity of our Dynavax-developed gE protein. And we are confident in the tolerability profile of our adjuvant during this original study, the

Our next question comes from the line of Phil Nadeau with TD Cowen.

Congratulations on the progress. A couple of commercial questions from us. First, in terms of HEPLISAV's performance in the quarter, it was obviously very strong. Were there any onetime issues during the quarter, anything like inventory build or big lumpy orders that happened during the quarter? That's the first question. And then second, on the market share segments. It looks like the other segment is almost 1/3 of the market and that's where your share is the lowest. Could you talk a little bit more about that segment of the market? What comprises it? And do you have any plans to be more aggressive at marketing into it?

Phil, it's Donn. Regarding any onetime issues or stock-ins in the quarter, no. It was just a widespread adoption, particularly by retail in particular, for the quarter that gave us the strong output for the second quarter results. With regards to other, it's a combination of a bunch of smaller segments, so military corrections, small clinics. And so it's kind of the long tail of customers and so the reach there is usually challenging. But again, as we said, I think on previous calls, when we think about the strategy, the patients that originate in a lot of those small clinics, which is a part of the other, they also originate in pharmacy and retail pharmacy. So our strategy is to capture the patient where they originate within the retail pharmacy segment. And we're seeing that happen and we're seeing the continued shift, obviously, of the patients to retail, which aligns with our strategy and where we're most successful. So we anticipate continued increases in overall market share due to that fact of increase in retail utilization and market mix and our share in that segment.

Our next question comes from the line of Jon Miller with Evercore.

Congrats on the progress. I'd love to start with the shift to retail that you talked a little bit about today. What's driving that shift to retail? And it looks like a lot of that's coming away from IDNs, which I know was another focus area for you in the past. So given that shift in the way the market is operating, not surprised necessarily, but I'm interested to see that your long-term guidance has remained exactly the same. Is there anything that's changing in the way that you're operating in this market that gives you confidence in the ability to keep that long-term guidance exactly the same even as the market is sort of shifting around?

So Jon, I'll take that. With regards to the shift, hep B is following what we've seen with other vaccines. We see it in, obviously, zoster, pneumococcal and flu. You see the continued shift post-pandemic, in particular, retailers being more proactive on patient outreach around adult vaccines, and hep B is following that trend. And so we continue to see that. We're seeing it throughout the quarters. We're right on trend, quite frankly, with the shift here in this quarter. As we project out into 2030, that retail will be at least 50%, if not more. So again, it goes back to the fact that it's following other adult vaccines, the infrastructure, the capabilities of retail and convenience for the consumer and the patient are all the things that are supporting that. And it really fits in line right with our long-term guidance. So we think about having 60% of the market, it's really underpinned by the fact that retail is going to be a big part of that market where we have a tremendous, as I said before, infrastructure, relationships and momentum with the key customers within the retail segment.

Great. And then 1 more, maybe if I may. I noticed up here that the share repo is now complete. How -- looking back on that, how are you happy with the performance of that program? And do you have any current plans to reinitiate that, given where the valuation is currently?

Thanks, Jon. Yes, I think we're -- first of all, we're really proud of the way that we've been able to efficiently and very effectively execute that program. As you know, we use a combination of different tactics, and we're able to very opportunistically take advantage of a lot of volatility in the market, sort of completely unaffiliated with our performance. So we're really happy with the way that we executed on that program. As a reminder, that program was a discrete decision from a capital allocation perspective, and it was in connection with a number of events that occurred sort of after our Q3 earnings last year, including the decision to discontinue our clinical -- Tdap, which were one of our clinical programs as well as the continued progress of HEPLISAV, which gave us confidence in being able to identify the exact amount of excess capital that would be appropriate to allocate to a share buyback program. Like we always say, and I'll reiterate again here, it's our -- first and foremost, it's our priority to drive value in maximizing HEPLISAV, which we believe is the best way to drive long-term value for all of our shareholders. And then also, we do look opportunistically at other tools to drive value, including potentially share buyback when appropriate.

Our next question comes from the line of Roy Buchanan with Citizens.

I just had a quick one. I assume you saw the CorMedix deal from Melinta today. Clearly, you guys have the capital to do that deal. Is there a strategic reason something like that isn't particularly a fit for Dynavax? And have there been any changes in BD intensity or focus areas with your moving the H5N1 and Lyme programs forward?

Roy, I'm sorry, we're not familiar with the deal. Obviously, we've been a little focused on our events for today so I can't comment on whether or not. But if you want to give me a quick summary of more specifically what your question is on the type of deal, I can see if we can provide our thoughts.

Yes. So CorMedix bought Melinta and Melinta has a portfolio of hospital antibiotics and some other programs. Yes, so I guess, can it be accretive?

Yes, we're familiar with the Melinta portfolio and we have looked at a variety of different in-line products and portfolios. The reality is when we think about different opportunities, we're trying to leverage our areas of strength. So for example, inpatient hospital sales for a relatively portfolio of small individual brands is not something that has been at the top of our list. We really are looking forward to leveraging our vaccine development capability and our institutional sales capability. That is not quite the same as inpatient capability. So from that perspective, that is not a specific area that we targeted. And then -- and can you just remind me of the second part to your question, please?

Yes. Just if there's been any change in your focus or intensity around BD efforts having moved the H5N1 and the Lyme programs forward?

No. I mean, I wouldn't suggest that those 2 programs changed our desire to find synergistic and opportunistic and accretive opportunities. Those are relatively early-stage programs. As a reminder, H5N1 is a fairly discrete clinical investment. We're excited to be able to generate the data that will support many years of BD activities as an adjuvant supplier, but it is a fairly discrete singular investment in clinical development. And the Lyme disease program, again, a very interesting and exciting opportunity to leverage the power of our adjuvant for a known approach to protecting against Lyme disease. But again, that's an early-stage preclinical work in nonhuman primates and IND- enabling studies. So relatively small capital requirements at the moment, so they don't have an impact on our focus on BD and corporate development.

Our next question comes from the line of Paul Choi with Goldman Sachs.

Can you hear me?

Yes. Hey, Paul.

I want to ask first just on the plague program. Just sort of what -- I guess, given the sort of moving pieces in the vaccine support from the government, just what the DoD commitment is here and just how much of your future development plans are contingent on that? And then second, on Lyme disease. I know you guys are going to kick it off IND-enabling studies with clinical development in 2027, so a little bit off. But just in terms of enrolling that with patients, just how much of a seasonal element is that? And how would that potentially affect enrollment time lines there?

Okay. So DoD, I mean, I think we -- I think the point around the DoD commitment compared to our commitment, we are 100% aligned to the DoD on this program. We will not be advancing the plague program independent of full support from the Department of Defense. As it relates to -- which I assume is underpinning some of this question is the continued shift we see with the USG. We have -- continue to have strong relationships with the DoD as it relates to this program with funding for this program already being awarded. And it's funded through the first half of 2027 based on the award already granted. Obviously, we would update that to the extent we learn anything else along the way. But as of now, this continues to be business as usual with no indication of any issue from the DoD's perspective as it relates to funding the program. As it relates to Lyme disease and enrollment, we have to get into really the trial design. We're going to have a way to go before we do our efficacy study, which, of course, we'll have to be thoughtful about seasonality for an efficacy study, especially given some of the challenges of the currently developed Lyme products in development. So I do expect we'll be thoughtful about seasonality and durability, given the fact that, that is a key element of our product profile is to be able to have durability through multiple seasons. So that will be definitely a part of the clinical development plan. But it will be a little bit further off, given that our next few studies will be more focused on safety and immunogenicity.

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.

Thank you, operator, and thank you all for joining us today. We appreciate your interest in Dynavax. We are 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.