DYNAVAX TECHNOLOGIES CORP Q1 FY2024 earnings call

Management Statement and Operational Highlights

• HEPLISAV-B Performance: The first quarter of 2024 saw continued year-over-year growth in HEPLISAV-B net product revenue despite a soft U.S. hepatitis B vaccine market in Q1 due to an extended cough, cold, and flu season. HEPLISAV-B was market share-leading in the U.S. adult hepatitis B vaccine market in 2023 and is expected to have record sales in 2024. The retail pharmacy and IDN segments are projected to drive significant growth, representing over 60% of the adult hepatitis B market in the U.S. by 2027.
• Pipeline Milestones: Upcoming milestones include the initiation of the Phase I/II trial for shingles vaccine candidate Z-1018, long-term follow-up data for the Tdap-1018 Phase I trial, and data readouts from the plague program. The PDUFA action date on May 13 for HEPLISAV-B supplemental BLA for hemodialysis patients is a key event.
• Financials: Dynavax ended Q1 2024 with cash, cash equivalents, and marketable securities totaling $724 million, sufficient to fund the pipeline and base business without additional capital. Gross margin is expected to be approximately 80% for 2024. R&D expenses were $14 million in Q1 2024, and SG&A expenses were $44 million in Q1 2024, with expectations for R&D and SG&A expenses in 2024.

Segment Performance

• HEPLISAV-B: In the first quarter of 2024, HEPLISAV-B achieved net product revenue of $48 million, a 10% year-over-year growth. Cost of product sales for HEPLISAV-B decreased to $11 million in Q1 2024 from $15 million in Q1 2023. Gross margin was approximately 77% in Q1 2024, significantly higher than the 66% in Q1 2023. HEPLISAV-B held an estimated 41% market share in the U.S. hepatitis B vaccine market in Q1 2024, up from 37% in Q1 2023. The retail pharmacy and IDN segments are key drivers, with HEPLISAV-B's market share in these segments rising to ~55% in Q1 2024 from ~49% in Q1 2023. Revenue guidance for HEPLISAV-B in 2024 is $265 million to $280 million.
• Other Revenue: Other revenue was approximately $3 million in both Q1 2024 and 2023, related to the plague vaccine program in collaboration with the U.S. Department of Defense.

Guidance

• HEPLISAV-B: Net product revenue for HEPLISAV-B is expected to be in the range of $265 million to $280 million for 2024, including approximately $3 million in ex U.S. sales. Gross margin is expected to be approximately 80% for 2024.
• Pipeline: Anticipate top line immunogenicity and safety data for the shingles vaccine candidate Z-1018 in the second half of 2025. Top line results for the Tdap-1018 Phase I extension study are expected in Q4 2024, and top line data from the plague program Phase II trial and nonhuman primate challenge study are anticipated in Q4 2024.

Risks

• Forward-looking statements involve risks and uncertainties, including potential market dynamics, regulatory outcomes, and clinical trial results. These risks are summarized in the press release and detailed in the SEC filings' Risk Factors section.

Question and Answer

Q: Retail market share dip from Q4 to Q1. Any lumpy factors or contract changes?

A: Donn Casale states that market share variations are due to purchasing patterns of larger customers, but the company expects to gain market share in retail and IDN.

Q: Shingles program trial design, number of arms, placebo-controlled status?

A: Robert Janssen mentions there will be 11 arms (10 Z-1018 arms and 1 Shingrix arm) with 40 subjects per arm. The FDA has indicated a placebo-controlled efficacy study would be acceptable for review.

Q: Seasonality of HEPLISAV-B and Tdap Phase II design change?

A: Ryan Spencer notes Q2 and Q3 are expected to be the largest quarters for the adult hepatitis B vaccine. Donn Casale explains the Tdap Phase II trial delay is due to regulatory feedback on pertussis strain, focusing on PR negative strain and using insights from the Phase I extension study.

Q: Impact of HEPLISAV-B hemodialysis BLA PDUFA on revenue?

A: Ryan Spencer says it's too early to quantify revenue impact, but the PDUFA allows commercial engagement.

Q: RSV vaccine window for other vaccinations, hemodialysis penetration?

A: Ryan Spencer states there's no specific window for RSV vaccine, and Donn Casale mentions operational hurdles for retailers. Ryan Spencer notes HEPLISAV-B is used in hemodialysis but no specific penetration data until BLA approval.

Q: Tdap extension trial details?

A: Robert Janssen says the extension trial will follow up to 50 young adults comparing Tdap-1018 to Boostrix, with 2-3 years of follow-up.