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 like to turn the call over to Nicole Arndt, Senior 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 Ostrach, Chief Financial Officer; Rob Janssen, Chief Medical Officer; Donn Casale, Vice President, Commercial..

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 adjuvant have the potential to boost the immune response to increase protection and provide longer lasting immune immunity, maybe adjuvant and 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 theater. 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 3-dose products are well known, with only approximately 22% to 54% of patients completing the 3-dose regimen over the required six months schedule.

HEPLISAV-B dose one month schedule, with the corresponding improvements 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 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 Hep B vaccine of approximately 35% in the fourth quarter compared to the same period last year..

Thank you, Ryan. Our financial results are included in the press release we issued this afternoon and detailed number 10-K we are filing with the SEC today. So, I will just touch on a few highlights. Total revenues for the fourth quarter of 2020 were $19.6 million, including $13.1 million of net product revenue.

Net product revenue for HEPLISAV-B during the fourth quarter was $11.5 million, up from $10.6 million for the fourth quarter of 2019. Full-year HEPLISAV-B net product revenue increased from 34.6 million in 2019 to 36 million for 2020.

The highest annual HEPLISAV-B revenue achieved since launch, despite the ongoing reduction in vaccine utilization due to the pandemic and the COVID-19 vaccines rollout. Looking to the first quarter of this year, we expect continued progress in key national accounts and continued growth in sealed targeted market share.

However, we currently expect overall vaccine utilization to decline significantly in the first quarter of 2021 from the fourth quarter of 2020 to around 50% of pre-pandemic levels, which will result in a decrease in HEPLISAV-B revenues in the first quarter of 2021 compared to the fourth quarter of 2020.

Thanks, Michael. Despite the significant disruption of the past year, we continue to make good progress with both HEPLISAV-B B and CpG 1018, and are looking forward to multiple important milestones in 2021, including potential ACIP decision on a universal recommendation for adult Hepatitis B vaccination increasing the addressable market in the U.S.

and multiple COVID-19 vaccine data readout for our CpG 1018 collaborators. 2020 was a successful year for Dynavax, and we look forward to updating you in 2021, as we continue building Dynavax into a leading commercial stage vaccine company. We think all of our investors and team members for their commitment to this goal.

Operator, we would now like to open the Q&A portion of today's call..

. Our first question comes from the line of Matt Phipps ..

Hi, Ryan. Thanks for taking my question and congrats on a good quarter and obviously a pretty important year for you guys. Just a couple of clarification on some of the CpG 1018 revenues. First, Michael I think you said 40% of the supply is planned to be delivered in the first half with the remaining amount in Q4.

Just wanted to confirm that is I guess, the Valneva collaboration or does that also include the set agreement? And then if you could just provide, I guess, more details on how that revenue recognition works with the CEPI grantees under CEPI grant.

Is it still when you delivered the material, the CpG 1018 final material to the CEPI grantees that you would recognize it?.

Yes. On the latter. So, the projection with respect to the split was specifically with respect to Valneva. We expect 40% of the planned deliveries will occur in the first half. And then the remainder in the fourth quarter.

With respect to CEPI arrangement, that is a loan for us to produce the material and have it available for their clients, and when we enter into supply agreements with those clients and then sell to them. We will repay CEPI for that comparable portion of the material that we sell to their clients. And that is when we would recognize the revenue.

So, it is similar to when we generally recognize revenue for CpG 1018, which is upon delivery of product..

Great. Thanks, Michael. And then if I can also ask about kind of the discussion yesterday, I'm sure there is limited things you can say, given it is ongoing. But the committee members seem to be pretty positive in my opinion, on universal recommendation and not really limiting it to any age group. I think if the positive vote comes through in October.

How much would you have to scale current manufacturing? How much investment would you need, is that probably wait until it comes through, or would you start some of that earlier, if the discussion looks positive as well?.

Well, exactly. We are going to have a couple of looks at it, right. It is going to progress through June and October, so we will see how it is progressing. I think it is important to understand that, we have been preparing for a success for this product from a manufacturing perspective.

So, we have made continued improvement and investment in to be able to meet any demand that we think we could generate. So, those investments have already kind of ongoing in that.

So I don't think that there is a major need to invest in manufacturing other than just continue to stockpile material, and we will have enough advanced notice because what is you will see with the ACIP recommendation, will be the recommendation and then an update in the MMWR, which take a little bit of time as well, couple months.

I think plenty of time for us to react both commercially and from a manufacturing perspective..

Okay. And then if I got one more in Europe. Obviously, Europe on the approval and then I know you're submitting and manufacturing supplements.

So, launch in Germany at the end of this year, just as you think about it now, when you start in Germany, obviously that is a common procedure, but how quickly would you advance to maybe another country or will it be the cadence of out into additional countries? How many do you think you can do in legitimately try to target by yourselves?.

I mean, cadence of that kind of depends on which countries we want to go to. They each have their own process for access, initial access and pricing, things like that. So the overall pricing strategies between private and public will matter. So, I don't think we can comment at this moment on the cadence or the specific countries beyond Germany.

But as we move through 2021, we will be refining that overall European strategy..

Great. Thank you..

Your next question comes from line of Ed White ..

Good afternoon guys. Thanks for taking my questions.

So, when you were talking about the recovery of the market share - excuse me, market penetration and increased market share by year end, the question I have for you is just, how are you thinking about that why are you confident that the second half will be stronger than the first half, which seems like it would be before the ACIP guidelines or recommendations.

And when you are thinking of market penetration, how are you getting the market penetration, who is coming from and why do you continue to believe that you are going to gather more shares? Thanks..

Thanks Ed. While, I think the first part of that question and I will ask Donn, he would be fair to answer the second part. But as it relates to the market returning the we did even we did get to see some insights and how fast the market can rebound as evidenced by last year's Q3, moving up to about 75%.

Our expectation of the market returning is not tied to ACIP is really tied to processing the vaccine will offer COVID-19. Q1 saw a resurgence of cases after the holiday period combined with the rollout of the vaccine program. And we do think that the majority, the vast majority of Americans will be vaccinated in the first half of this year.

And both for Hep B vaccines as well as other adult vaccines, there is going to be significant pent up demand because of the fact that it has become clear that there is a number of people who are prioritizing COVID vaccination over other adult vaccines.

So, the return in the second half of the year is really more tied to when we believe the mass vaccination campaign will complete.

Donn, do you want to comment on penetration?.

Yes, and I get that, when we look back a quarter and we look at our market share, it was at 23%, we grew from Q3 to Q4, three points. Again, in this disruption of the pandemic, we anticipate, again, our ability to be successful with customers every month. So, the challenge is not being able to engage customers.

It is really causes disruption around the administration with the COVID vaccine. So, we continue to engage with customers, we are very confident our ability to continue to win new business in the market can be a little smaller here in the first half of the year.

But we do anticipate to drive market share, which will lead to certainly revenue in the second half of this year..

Okay, thanks. And maybe if you can just discuss the Hemodialysis market opportunity. And we know you're going to get the full safety data by year end 2021.

And just curious as to what that really means to potential sales in 2022 and beyond and in how you're going to go about targeting that market opportunity?.

I mean, the beauty of the job, as long as it is highly concentrated amongst a few national providers, and then obviously, dialysis services provided by large integrated health systems. And so the two national chains make up about 80% of the overall dialysis market as we have it kind of laid out in our, our slide deck, we provide a segmentation there.

And so as far as how we resource that opportunity, it is pretty easy as for the two national accounts to make national decisions for all of their centers.

And this is this is evidence a little bit by what we had happened here in Q4 with one of the national providers making a major purchase for their employees essentially, at least that is how we have engaged them.

The data that we that you referred referenced in the study will be used to support interactions with the FDA to get that data into the label which will strengthen our ability to capture that market.

So, because at that point, we will be able to proactively engage with all our customers from a commercial perspective at the moment, but we are not doing that. Right now, our conversations with them are only focused on employees..

Okay. Thanks.

And perhaps just last question from me, can you give us just an update on the universal flu vaccine and what we expect to see going forward?.

Yes. The development of that program was fairly impacted by COVID-19 in 2020. And so, it is continuing to progress. I believe that the clinical trial for that, the initial clinical trial would be targeted for next year..

Okay. Thank you..

Certain..

Thanks Ed..

Your next question comes from the line of (Ph)..

Hi, team. Thank you for taking my call, and congratulations on the progress on CpG.

In terms of recommendations from for these recommendations to be fix sure and what role do you guys play in the process? And similarly in terms of supply contracts with Valneva, was that mostly in Q2, in order for the supply agreements - do you have any clarity on that? Thank you..

So, let's start with the ACIP. Thanks for the questions. If you go back and look at the presentation, you can see they sort of laid off the next steps.

The way this works is they present an initial concept like they did yesterday, and as part of that presentation, they basically solicited questions from ACIP, which they will then go back and do more analysis to be able to support the ACIP questions and concerns. So that is, what is going to happen next.

Our involvement here on given this as a universal recommendation is limited. I mean, we obviously engage as we can. But this is a working group, a division of our Hepatitis and ACIP working group agenda items. So, our involvement is actually a little bit limited in this. But, we will be supportive.

You can tell though as part of their assessment, they are considering, the role that 2-dose vaccine plays. And so, we will continue to engage with the work group to present our safety data, when it is available in Q2.

So, the work we have had the benefit of the safety data and as part of their overall analysis around the universal recommendation, and then the appropriate recommendations around the two versus 3-dose products. And then moving to Valneva. Valneva we really just need to continue to deliver the doses.

I think the only point that we just sort of trying to make with all of these collaborations is, we have to have time to deliver the doses, and we know Valneva has a data readout coming here in April.

So, while we believe that the UK Government remains committed to the contract and the fact that, they are inactivated approach, adjuvant inactivated approach is building off there is other inactivated technologies out there that have demonstrated an ability to drive protection.

We believe that there is relatively little risk on that data readout, but there is still a data readout that has to come for that program and they just have to continue to move their program forward. It is really all it has to happen for us to continue to recognize the revenue..

Alright. Thank you. That is very helpful..

There are no further questions at this time. I would now like to turn the floor back over to Ryan Spencer CEO for closing or additional comments..

Thank you, operator. Well, we believe adjutanted vaccines will plan an critical role to ensure the effective vaccination for all populations against COVID-19. Having vaccines going to be effective in offsetting this is really one of the first steps, we want to make sure there is adequate supply of these vaccines.

We believe the evolving COVID-19 pandemic will require additional solutions and manufacturing capacity beyond 2022. We also believe CpG 1018 is well-positioned to drive significant growth and value for Dynavax and its shareholders.

And while the fight against COVID-19 is currently a key priority, we also continue to drive our business through the growth of sales of HEPLISAV-B which we believe will become standard of care for adult Hepatitis B vaccine in the U.S. with a potential annual market opportunity in growing to over $600 million.

With a combined strengthen of opportunities in HEPLISAV-B and CpG 1018 we believe 2021 will be a transformational year for Dynavax. Thank you again for spending your time with us today. And we look forward to speaking with you soon. Operator, you man end the call..

Ladies and gentlemen, thank you for joining us today. This concludes today's conference call. You may now disconnect..