UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2023 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to . Commission file number: 001-34207 Dynavax Technologies Corporation (Exact name of registrant as specified in its charter) Delaware 33-0728374 (State or o ...

Dynavax Technologies Corporation (NASDAQ:DVAX) Q4 2022 Results Conference Call February 23, 2023 4:30 PM ET Company Participants Nicole Arndt - Senior Manager, IR Ryan Spencer - CEO Donn Casale - SVP, Commercial Rob Janssen - Chief Medical Officer Kelly MacDonald - CFO Conference Call Participants Phil Nadeau - Cowen & Company Madhu Kumar - Goldman Sachs Matthew Phipps - William Blair Roy Buchanan - JMP Securities Operator Good day, ladies and gentlemen, and welcome to the Dynavax Technologies Fourth Quarte ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2022 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 001-34207 Dynavax Technologies Corporation (Exact name of registrant as specified in its charter) (State or other jurisdiction of incorpora ...

Dynavax Technologies Corporation (NASDAQ:DVAX) Q3 2022 Earnings Conference Call November 3, 2022 4:30 PM ET Company Participants Nicole Arndt - Senior Manager, IR Ryan Spencer - CEO Donn Casale - SVP, Commercial Rob Janssen - CMO Kelly MacDonald - CFO Conference Call Participants Roy Buchanan - JMP Securities Matthew Phipps - William Blair Ernesto Rodriguez-Dumont - Cowen Operator Good day ladies and gentlemen and welcome to the Dynavax Technologies' Third Quarter 2022 Financial Results. As a reminder, this ...

[PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [ITEM 1. FINANCIAL STATEMENTS (unaudited)](index=4&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS%20(unaudited)) Unaudited consolidated financial statements for Dynavax, covering balance sheets, operations, comprehensive income, equity, cash flows, and accounting notes [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) | Metric | September 30, 2022 (unaudited) (in thousands) | December 31, 2021 (in thousands) | | :----------------------------------- | :-------------------------------------------- | :------------------------------- | | **Assets** | | | | Cash and cash equivalents | $198,576 | $436,189 | | Marketable securities available-for-sale | $387,910 | $109,761 | | Total current assets | $932,944 | $972,520 | | Total assets | $999,337 | $1,039,246 | | **Liabilities and Stockholders' Equity** | | | | CEPI accrual | $107,738 | $128,848 | | Deferred revenue | $87,395 | $349,864 | | Total current liabilities | $244,080 | $556,402 | | Convertible Notes, net | $221,303 | $220,490 | | Total liabilities | $498,761 | $816,872 | | Total stockholders' equity | $500,576 | $222,374 | | Total liabilities and stockholders' equity | $999,337 | $1,039,246 | [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) | Metric | Three Months Ended Sep 30, 2022 (in thousands) | Three Months Ended Sep 30, 2021 (in thousands) | Nine Months Ended Sep 30, 2022 (in thousands) | Nine Months Ended Sep 30, 2021 (in thousands) | | :----------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Product revenue, net | $163,815 | $106,996 | $531,462 | $242,558 | | Total revenues | $167,735 | $108,270 | $538,191 | $244,372 | | Cost of sales - product | $61,334 | $60,090 | $184,665 | $99,560 | | Research and development | $12,962 | $6,186 | $33,746 | $21,111 | | Selling, general and administrative | $32,042 | $26,926 | $100,393 | $70,932 | | Income from operations | $61,397 | $16,068 | $220,387 | $53,769 | | Net income (loss) | $63,809 | $(28,430) | $225,423 | $(23,066) | | Basic Net income (loss) per share | $0.50 | $(0.24) | $1.79 | $(0.20) | | Diluted Net income (loss) per share | $0.43 | $(0.24) | $1.51 | $(0.20) | [Condensed Consolidated Statements of Comprehensive Income (Loss)](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) | Metric | Three Months Ended Sep 30, 2022 (in thousands) | Three Months Ended Sep 30, 2021 (in thousands) | Nine Months Ended Sep 30, 2022 (in thousands) | Nine Months Ended Sep 30, 2021 (in thousands) | | :--------------------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Net income (loss) | $63,809 | $(28,430) | $225,423 | $(23,066) | | Change in unrealized gain (loss) on marketable securities available-for-sale | $(395) | $(18) | $(2,296) | $11 | | Foreign currency translation adjustments | $(2,307) | $(797) | $(4,700) | $(1,812) | | Total other comprehensive (loss) | $(2,702) | $(815) | $(6,996) | $(1,801) | | Total comprehensive income (loss) | $61,107 | $(29,245) | $218,427 | $(24,867) | [Condensed Consolidated Statements of Stockholders' Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) | Metric | Balance at Dec 31, 2021 (in thousands) | Issuance of common stock upon exercise of warrants (in thousands) | Issuance of common stock upon exercise of stock options and/or release of restricted stock awards, net (in thousands) | Stock compensation expense (in thousands) | Net income (in thousands) | Balance at Sep 30, 2022 (in thousands) | | :----------------------------------- | :------------------------------------- | :------------------------------------------------ | :---------------------------------------------------------------------------------------------------- | :---------------------------------------- | :------------------------ | :------------------------------------- | | Common Shares | 122,945 | 1,879 | 2,603 | - | - | 127,581 | | Common Stock Par Amount | $123 | $2 | $2 | - | - | $127 | | Additional Paid-In Capital | $1,441,868 | $24,668 | $9,485 | $24,188 | - | $1,501,639 | | Accumulated Other Comprehensive (Loss) Income | $(2,266) | - | - | - | - | $(9,262) | | Accumulated Deficit | $(1,217,351) | - | - | - | $225,423 | $(991,928) | | Total Stockholders' Equity | $222,374 | $24,670 | $9,487 | $24,188 | $225,423 | $500,576 | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) | Metric | Nine Months Ended Sep 30, 2022 (in thousands) | Nine Months Ended Sep 30, 2021 (in thousands) | | :----------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Net cash provided by operating activities | $27,768 | $215,031 | | Net cash used in investing activities | $(283,028) | $(40,713) | | Net cash provided by financing activities | $19,372 | $40,960 | | Net (decrease) increase in cash, cash equivalents and restricted cash | $(237,643) | $214,265 | | Cash, cash equivalents and restricted cash at end of period | $198,765 | $246,575 | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Detailed accounting policies and disclosures for financial statements, covering revenue, fair value, inventory, commitments, and collaboration agreements, with ASU 2016-13 and warrant liability updates - Dynavax is a commercial stage biopharmaceutical company focused on innovative vaccines, with HEPLISAV-B® (Hepatitis B Vaccine) approved in the US and EU, and CpG 1018® adjuvant used in COVID-19 vaccines[26](index=26&type=chunk) - The company operates in one business segment: discovery, development, and commercialization of novel vaccines[29](index=29&type=chunk) - ASU 2016-13, Financial Instruments – Credit Losses, will be effective for fiscal years beginning after December 15, 2022, but is not expected to have a material impact on financial statements[51](index=51&type=chunk) Fair Value Hierarchy of Financial Assets (September 30, 2022) | Asset Category | Level 1 (in thousands) | Level 2 (in thousands) | Level 3 (in thousands) | Total (in thousands) | | :------------------------------ | :--------------------- | :--------------------- | :--------------------- | :------------------- | | Money market funds | $159,964 | - | - | $159,964 | | U.S. treasuries | - | $40,943 | - | $40,943 | | U.S. government agency securities | - | $34,027 | - | $34,027 | | Corporate debt securities | - | $312,940 | - | $312,940 | | Total assets | $159,964 | $387,910 | - | $547,874 | - All outstanding warrants as of December 31, 2021, were exercised or expired during the three months ended March 31, 2022, resulting in **$8.5 million cash proceeds** and a decrease in fair value of warrant liability by **$1.8 million** for the nine months ended September 30, 2022[59](index=59&type=chunk)[154](index=154&type=chunk) Inventories, net (in thousands) | Category | September 30, 2022 | December 31, 2021 | | :--------------- | :----------------- | :---------------- | | Raw materials | $29,170 | $26,637 | | Work-in-process | $20,902 | $14,748 | | Finished goods | $52,537 | $19,950 | | Total | $102,609 | $61,335 | - The company recorded a **$14.5 million inventory write-off** for CpG 1018 adjuvant raw materials due to a reduction in the scope of the Clover Supply Agreement[48](index=48&type=chunk)[68](index=68&type=chunk) - As of September 30, 2022, material non-cancelable purchase and other commitments for HEPLISAV-B and CpG 1018 adjuvant totaled **$61.0 million**[82](index=82&type=chunk) - Through September 30, 2022, Dynavax received **$175.1 million in Advance Payments** from CEPI for CpG 1018 adjuvant, with **$107.7 million** recorded as CEPI accrual[91](index=91&type=chunk) - The Clover Supply Agreement was amended in August 2022, reducing CpG 1018 adjuvant quantities and resulting in **$53.2 million revenue recognition** and a **$14.5 million inventory write-off**[98](index=98&type=chunk)[99](index=99&type=chunk)[100](index=100&type=chunk) - The Bio E Supply Agreement was amended in June and October 2022, establishing new payment schedules and reducing the scope of CpG 1018 adjuvant quantities[109](index=109&type=chunk)[110](index=110&type=chunk) - The Valneva Supply Agreement was amended in October 2021, canceling certain purchase orders and modifying the delivery schedule. **$55.4 million of advance payments** were recognized as product revenue in Q2 2022 upon fulfillment[122](index=122&type=chunk)[123](index=123&type=chunk)[124](index=124&type=chunk) - Dynavax entered an agreement with the DoD in September 2021 for a Phase 2 clinical trial of a recombinant plague vaccine, recognizing **$3.9 million** and **$6.6 million in other revenue** for the three and nine months ended September 30, 2022, respectively[126](index=126&type=chunk) Convertible Notes Interest Expense (in thousands) | Component | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Stated coupon interest | $1,409 | $1,409 | $4,228 | $2,145 | | Amortization of debt issuance cost | $273 | $265 | $812 | $402 | | Total interest expense | $1,682 | $1,674 | $5,040 | $2,547 | Disaggregation of Revenues (in thousands) | Revenue Type | Geographic Region | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :------------------- | :---------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | HEPLISAV-B | U.S. | $37,508 | $22,707 | $90,057 | $44,698 | | HEPLISAV-B | Non U.S. | - | - | $941 | - | | CpG 1018 adjuvant | Non U.S. | $126,307 | $84,289 | $440,464 | $197,860 | | Other revenue | U.S. | $3,877 | $1,200 | $6,566 | $1,460 | | Other revenue | Non U.S. | $43 | $74 | $163 | $354 | | **Total Revenues** | | **$167,735** | **$108,270** | **$538,191** | **$244,372** | CpG 1018 Adjuvant Product Revenue by Customer (in thousands) | Customer | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Clover | $87,483 | $52,431 | $201,061 | $58,170 | | Bio E | $27,643 | $24,968 | $145,954 | $25,908 | | Medigen | - | $6,890 | - | $24,382 | | Bio Farma | $11,181 | - | $25,436 | - | | Valneva | - | - | $68,013 | $89,400 | | **Total** | **$126,307** | **$84,289** | **$440,464** | **$197,860** | Stock-Based Compensation Expense (in thousands) | Category | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :-------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Research and development | $1,532 | $798 | $4,271 | $2,607 | | Selling, general and administrative | $6,019 | $3,930 | $17,043 | $10,519 | | Cost of sales - product | $323 | $124 | $626 | $448 | | Inventory | $739 | $524 | $2,248 | $1,549 | | **Total** | **$8,613** | **$5,376** | **$24,188** | **$15,123** | - For the nine months ended September 30, 2022, the effective tax rate was approximately **0.4%**, primarily due to the benefit of net operating losses and a full valuation allowance on deferred tax assets[160](index=160&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=30&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management's analysis of financial performance and condition, highlighting revenue growth, COVID-19 impact, operating expenses, liquidity, capital resources, and future outlook [Overview](index=30&type=section&id=Overview) - Dynavax is a commercial-stage biopharmaceutical company focused on innovative vaccines, with HEPLISAV-B® approved in the US and EU, and CpG 1018® adjuvant used in COVID-19 vaccines and a multi-program clinical pipeline[165](index=165&type=chunk) [HEPLISAV-B® Vaccine (Recombinant), Adjuvanted](index=30&type=section&id=HEPLISAV-B%C2%AE%20Vaccine%20(Recombinant),%20Adjuvanted) - HEPLISAV-B is the only two-dose hepatitis B vaccine for adults approved in the U.S. and European Union, demonstrating faster and higher protection rates than three-dose alternatives[166](index=166&type=chunk) - Commercial shipments of HEPLISAV-B commenced in Germany in May 2022, following EU Marketing Authorization approval in February 2021[167](index=167&type=chunk) HEPLISAV-B Product Revenue, Net (in thousands) | Period | Revenue | | :----------------------------------- | :-------- | | Three months ended September 30, 2022 | $37,508 | | Nine months ended September 30, 2022 | $91,000 | | Three months ended September 30, 2021 | $22,707 | | Nine months ended September 30, 2021 | $44,698 | [CpG 1018® Adjuvant Supply for COVID-19 Vaccines](index=30&type=section&id=CpG%201018%C2%AE%20Adjuvant%20Supply%20for%20COVID-19%20Vaccines) - Dynavax has global commercial supply agreements for CpG 1018 adjuvant in COVID-19 vaccine development, including with CEPI, Bio E, Clover, Bio Farma, Medigen, and Valneva[169](index=169&type=chunk)[170](index=170&type=chunk)[173](index=173&type=chunk)[175](index=175&type=chunk)[176](index=176&type=chunk)[177](index=177&type=chunk) - Amendments to the Bio E and Clover Supply Agreements in 2022 modified quantities, payment terms, and resulted in a **$14.5 million inventory write-off** for Clover[172](index=172&type=chunk)[173](index=173&type=chunk)[174](index=174&type=chunk) CpG 1018 Adjuvant Product Revenue, Net (in thousands) | Period | Revenue | | :----------------------------------- | :-------- | | Three months ended September 30, 2022 | $126,307 | | Nine months ended September 30, 2022 | $440,500 | | Three months ended September 30, 2021 | $84,289 | | Nine months ended September 30, 2021 | $197,860 | [Other (Convertible Notes, Capped Calls)](index=31&type=section&id=Other%20(Convertible%20Notes,%20Capped%20Calls)) - In May 2021, Dynavax issued **$225.5 million in 2.50% convertible senior notes** due 2026, using proceeds to repay previous debt and fund capped call transactions[181](index=181&type=chunk) - Capped call transactions totaling **$27.2 million** were entered into to offset potential dilution from Convertible Notes conversion, with an initial strike price of **$10.47** and cap price of **$15.80 per share**[182](index=182&type=chunk) [COVID-19 Update](index=32&type=section&id=COVID-19%20Update) - The COVID-19 pandemic continues to impact business operations, including HEPLISAV-B sales due to reduced adult vaccine utilization, though market share is increasing[183](index=183&type=chunk)[184](index=184&type=chunk) - Dynavax has adapted to a flexible work environment and gradually returned to in-person interactions, but future disruptions are possible[185](index=185&type=chunk) - HEPLISAV-B post-marketing study showed no increased risk of acute myocardial infarction (AMI), and the dialysis study demonstrated an **89.3% seroprotection rate**[186](index=186&type=chunk) - Collaborations leveraging CpG 1018 adjuvant for COVID-19 vaccines have led to emergency use authorization or full approval for three partners, with ongoing efforts to scale up production[189](index=189&type=chunk) [Critical Accounting Estimates](index=33&type=section&id=Critical%20Accounting%20Estimates) - No significant changes in critical accounting policies were identified during the nine months ended September 30, 2022, compared to the prior annual report[191](index=191&type=chunk) [Results of Operations - Revenues](index=33&type=section&id=Results%20of%20Operations%20-%20Revenues) Revenue Summary (in thousands, except percentages) | Revenue Type | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | % Change (YoY) | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | % Change (YoY) | | :--------------------- | :------------------------------ | :------------------------------ | :------------- | :----------------------------- | :----------------------------- | :------------- | | HEPLISAV-B | $37,508 | $22,707 | 65% | $90,998 | $44,698 | 104% | | CpG 1018 adjuvant | $126,307 | $84,289 | 50% | $440,464 | $197,860 | 123% | | Total product revenue, net | $163,815 | $106,996 | 53% | $531,462 | $242,558 | 119% | | Other revenue | $3,920 | $1,274 | 208% | $6,729 | $1,814 | 271% | | **Total revenues** | **$167,735** | **$108,270** | **55%** | **$538,191** | **$244,372** | **120%** | - HEPLISAV-B product revenue increased due to higher volume from improved market share and adult vaccine utilization[198](index=198&type=chunk) - Other revenue increased significantly due to **$3.9 million** and **$6.6 million** recognized from the DoD agreement for the three and nine months ended September 30, 2022, respectively[199](index=199&type=chunk) - CpG 1018 adjuvant product revenue increased due to higher sales volume from new supply and collaboration agreements, but future revenues are expected to decrease as initial stockpiling by customers concludes[200](index=200&type=chunk)[201](index=201&type=chunk) [Results of Operations - Cost of Sales – Product](index=34&type=section&id=Results%20of%20Operations%20-%20Cost%20of%20Sales%20%E2%80%93%20Product) Cost of Sales – Product Summary (in thousands, except percentages) | Product | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | % Change (YoY) | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | % Change (YoY) | | :-------------------- | :------------------------------ | :------------------------------ | :------------- | :----------------------------- | :----------------------------- | :------------- | | HEPLISAV-B | $11,511 | $10,544 | 9% | $27,740 | $17,913 | 55% | | CpG 1018 adjuvant | $49,823 | $49,546 | 1% | $156,925 | $81,647 | 92% | | **Total cost of sales - product** | **$61,334** | **$60,090** | **2%** | **$184,665** | **$99,560** | **85%** | - HEPLISAV-B cost of sales increased due to higher sales volume and a **$0.7 million excess capacity charge** in Q3 2022 (compared to **$3.2 million** in Q3 2021)[204](index=204&type=chunk)[205](index=205&type=chunk) - CpG 1018 adjuvant cost of sales increased due to higher sales volume and a **$14.5 million inventory write-off** related to the Clover Amendment No 1[207](index=207&type=chunk) [Results of Operations - Research and Development Expense](index=35&type=section&id=Results%20of%20Operations%20-%20Research%20and%20Development%20Expense) Research and Development Expense Summary (in thousands, except percentages) | Program/Category | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | % Change (YoY) | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | % Change (YoY) | | :----------------------------------------- | :------------------------------ | :------------------------------ | :------------- | :----------------------------- | :----------------------------- | :------------- | | HEPLISAV-B development | $959 | $1,695 | (43)% | $3,064 | $7,185 | (57)% | | CpG 1018 adjuvant development | $487 | $1,060 | (54)% | $2,182 | $4,216 | (48)% | | Tetanus, diphtheria, and acellular pertussis | $2,902 | $1,260 | 130% | $6,742 | $3,575 | 89% | | Shingles | $3,549 | $957 | 271% | $9,337 | $1,390 | 572% | | Plague | $1,834 | - | 100% | $3,025 | - | 100% | | Other | $1,187 | $94 | 1163% | $3,693 | $950 | 289% | | Facility costs | $512 | $322 | 59% | $1,432 | $1,188 | 21% | | Non-cash stock-based compensation | $1,532 | $798 | 92% | $4,271 | $2,607 | 64% | | **Total research and development** | **$12,962** | **$6,186** | **110%** | **$33,746** | **$21,111** | **60%** | - Overall R&D expenses increased due to investments in product candidates with CpG 1018 adjuvant, additional discovery efforts, and a one-time wind-down cost for the immuno-oncology program[210](index=210&type=chunk) - Decreases in HEPLISAV-B and CpG 1018 adjuvant development costs were due to the completion of the HEPLISAV-B dialysis study and prior-year production scale-up costs[212](index=212&type=chunk) - Non-cash stock-based compensation increased due to higher headcount supporting clinical vaccine programs[213](index=213&type=chunk) [Results of Operations - Selling, General and Administrative Expense](index=36&type=section&id=Results%20of%20Operations%20-%20Selling,%20General%20and%20Administrative%20Expense) Selling, General and Administrative Expense Summary (in thousands, except percentages) | Category | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | % Change (YoY) | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | % Change (YoY) | | :-------------------------------- | :------------------------------ | :------------------------------ | :------------- | :----------------------------- | :----------------------------- | :------------- | | Compensation and related personnel costs | $12,755 | $11,389 | 12% | $38,865 | $29,765 | 31% | | Outside services | $9,738 | $8,020 | 21% | $33,555 | $20,307 | 65% | | Legal costs | $438 | $487 | (10)% | $1,590 | $1,481 | 7% | | Facility costs | $3,092 | $3,100 | - | $9,340 | $8,860 | 5% | | Non-cash stock-based compensation | $6,019 | $3,930 | 53% | $17,043 | $10,519 | 62% | | **Total selling, general and administrative** | **$32,042** | **$26,926** | **19%** | **$100,393** | **$70,932** | **42%** | - Compensation and personnel costs increased due to higher headcount and increased business travel as COVID-19 restrictions eased[216](index=216&type=chunk) - Outside services increased due to expanded commercial and marketing efforts related to ACIP universal recommendation and market share expansion[216](index=216&type=chunk) - Non-cash stock-based compensation increased due to higher headcount and increased valuation of equity awards[217](index=217&type=chunk) [Results of Operations - Gain on Sale of Assets](index=36&type=section&id=Results%20of%20Operations%20-%20Gain%20on%20Sale%20of%20Assets) - In May 2022, Dynavax recognized a **$1.0 million gain** on sale of SD-101 assets from TriSalus for meeting a pre-commercialization milestone[219](index=219&type=chunk) [Results of Operations - Other Income (Expense)](index=37&type=section&id=Results%20of%20Operations%20-%20Other%20Income%20(Expense)) Other Income (Expense) Summary (in thousands, except percentages) | Category | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | % Change (YoY) | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | % Change (YoY) | | :------------------------------------ | :------------------------------ | :------------------------------ | :------------- | :----------------------------- | :----------------------------- | :------------- | | Interest income | $2,562 | $39 | 6469% | $3,588 | $134 | 2578% | | Interest expense | $(1,685) | $(1,676) | 1% | $(5,048) | $(9,497) | (47)% | | Sublease income | $2,026 | $2,022 | - | $5,660 | $5,714 | (1)% | | Loss on debt extinguishment | - | - | - | - | $(5,232) | (100)% | | Change in fair value of warrant liability | - | $(45,121) | 100% | $1,801 | $(68,576) | 103% | | Other | $(208) | $238 | (187)% | $(63) | $622 | (110)% | - Interest income increased due to higher yields and balances in marketable securities[221](index=221&type=chunk) - Interest expense decreased for the nine months ended September 30, 2022, due to the repayment of long-term debt in May 2021 and issuance of Convertible Notes at a lower effective interest rate[221](index=221&type=chunk) - The change in fair value of warrant liability was primarily due to a decrease in stock price and the expiration of warrants by February 2022[221](index=221&type=chunk) [Results of Operations - Income Taxes](index=37&type=section&id=Results%20of%20Operations%20-%20Income%20Taxes) - A provision for income taxes of **$0.3 million** and **$0.9 million** was recorded for the three and nine months ended September 30, 2022, respectively, with an effective tax rate of approximately **0.4%** for the nine-month period[222](index=222&type=chunk) [Liquidity and Capital Resources](index=37&type=section&id=Liquidity%20and%20Capital%20Resources) - As of September 30, 2022, Dynavax had **$586.5 million** in cash, cash equivalents, and marketable securities, anticipated to be sufficient to fund operations for at least the next 12 months and longer-term[223](index=223&type=chunk) - Net cash provided by operating activities was **$27.8 million** for the nine months ended September 30, 2022, a decrease from **$215.0 million** in the prior year, primarily due to changes in deferred revenue and operating assets/liabilities[227](index=227&type=chunk) - Net cash used in investing activities increased to **$283.0 million** for the nine months ended September 30, 2022, mainly due to higher net purchases of marketable securities[228](index=228&type=chunk) - Net cash provided by financing activities was **$19.4 million** for the nine months ended September 30, 2022, primarily from warrant exercises and stock options/ESPP, compared to **$41.0 million** in 2021 which included Convertible Notes proceeds and debt repayment[229](index=229&type=chunk) - The company reported net income of **$63.8 million** and **$225.4 million** for the three and nine months ended September 30, 2022, respectively, but acknowledges that sustainability of product sales revenue is uncertain[230](index=230&type=chunk) [Contractual Obligations](index=38&type=section&id=Contractual%20Obligations) - As of September 30, 2022, material non-cancelable purchase commitments for HEPLISAV-B and CpG 1018 adjuvant totaled **$61.0 million**[232](index=232&type=chunk) - The company had **$120.5 million** available under its 2020 ATM Agreement as of September 30, 2022[234](index=234&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=39&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) No material changes to market risk disclosures were reported for the nine months ended September 30, 2022, compared to the prior annual report - No material changes to market risk disclosures were reported for the nine months ended September 30, 2022[235](index=235&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=39&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Management concluded disclosure controls and procedures were effective as of September 30, 2022, with no material changes in internal controls despite remote work - Disclosure controls and procedures were deemed effective at a reasonable assurance level as of September 30, 2022[237](index=237&type=chunk) - No material changes in internal controls over financial reporting occurred during the most recent fiscal quarter, even with the adoption of a remote work model[238](index=238&type=chunk) [PART II. OTHER INFORMATION](index=40&type=section&id=PART%20II.%20OTHER%20INFORMATION) [ITEM 1. LEGAL PROCEEDINGS](index=40&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) The company is not currently aware of any material legal proceedings arising from the ordinary course of business - No material legal proceedings involving the company are currently known[241](index=241&type=chunk) [ITEM 1A. RISK FACTORS](index=40&type=section&id=ITEM%201A.%20RISK%20FACTORS) Outlines forward-looking statements and factors that could cause actual results to differ, including a summary of material risks across business, intellectual property, common stock, convertible notes, and general operations - Forward-looking statements are subject to risks and uncertainties, including the impact of COVID-19, regulatory approvals, collaborations, manufacturing, and financial performance[242](index=242&type=chunk) [RISK FACTOR SUMMARY](index=41&type=section&id=RISK%20FACTOR%20SUMMARY) - HEPLISAV-B faces significant competition and unpredictable uptake, risking sustained commercial success - Business operations are adversely affected by the COVID-19 pandemic, and collaborations for CpG 1018 adjuvant may not be successful - Financial results may vary significantly, impacting stock price - Uncertainty regarding coverage, pricing, and reimbursement for products - Ongoing FDA and EMA post-marketing obligations for HEPLISAV-B may incur significant expense and penalties for non-compliance - Market acceptance, labeling indications, and marketing claims limitations could hinder revenue generation - Competition from companies with greater financial resources and expertise poses a threat - Servicing debt requires substantial cash flow, and Convertible Notes conversion may dilute ownership - Despite recent profitability, the company anticipates potential future losses without sustained HEPLISAV-B commercialization or CpG 1018 adjuvant sales - International expansion of HEPLISAV-B or other candidates requires significant resources and carries risks - Clinical trials are expensive, time-consuming, and have uncertain outcomes - Reliance on CROs and clinical sites for trials, with failure to comply with GCP standards posing risks - Regulatory authorities may require additional clinical trials, causing delays - Reliance on oligonucleotide TLR agonists in programs poses risks if serious adverse event data emerges - Financial commitments for increased supply capacity may outpace actual demand - Reliance on third parties for manufacturing products and candidates, with limited suppliers for oligonucleotides - Intellectual property disputes and litigation could be costly and delay commercialization - Stock price is subject to volatility, and future sales of common stock could depress its price[245](index=245&type=chunk) [Risks Related to our Business and Capital Requirements](index=42&type=section&id=Risks%20Related%20to%20our%20Business%20and%20Capital%20Requirements) - Commercialization of HEPLISAV-B in the U.S. and Germany faces challenges including unpredictable uptake, competition, and the need to recruit and retain effective sales personnel[248](index=248&type=chunk)[251](index=251&type=chunk)[253](index=253&type=chunk) - The COVID-19 pandemic continues to adversely affect business operations, including HEPLISAV-B sales due to reduced adult vaccine utilization and potential disruptions to supply chains and customer interactions[261](index=261&type=chunk)[262](index=262&type=chunk)[263](index=263&type=chunk)[264](index=264&type=chunk)[267](index=267&type=chunk) - Scaling up production for HEPLISAV-B and CpG 1018 adjuvant requires significant financial commitments, which may not be recovered if demand falls short, as exemplified by a **$14.5 million inventory write-off** due to a Clover Supply Agreement amendment[270](index=270&type=chunk) - Financial results are highly volatile, with CpG 1018 adjuvant sales accounting for **81.8% of overall revenue** and two customers for **64.5%** in the nine months ended September 30, 2022, making future revenue difficult to predict[273](index=273&type=chunk)[274](index=274&type=chunk) - Reliance on a limited number of third-party suppliers for CpG 1018 adjuvant and pre-filled syringe presentation of HEPLISAV-B poses risks to manufacturing and supply chain stability[275](index=275&type=chunk)[276](index=276&type=chunk) - Collaborations for CpG 1018 adjuvant in vaccines, including COVID-19, carry risks of unsuccessful development, lack of control over partners' decisions, and potential intellectual property waivers[279](index=279&type=chunk)[281](index=281&type=chunk)[282](index=282&type=chunk) - Uncertainty regarding coverage, pricing, and reimbursement from third-party payors, especially for new products like HEPLISAV-B, could hinder profitability[284](index=284&type=chunk)[285](index=285&type=chunk) - Ongoing FDA and EMA post-marketing obligations for HEPLISAV-B, including observational studies and pregnancy registries, require significant resources and non-compliance could lead to penalties or withdrawal of approval[287](index=287&type=chunk)[289](index=289&type=chunk)[290](index=290&type=chunk) - Significant competition from established pharmaceutical and biotechnology companies with greater resources could harm business and revenue generation[293](index=293&type=chunk)[294](index=294&type=chunk)[296](index=296&type=chunk) - Despite recent profitability, the company has an accumulated deficit of **$991.9 million** as of September 30, 2022, and future losses are anticipated due to ongoing investments in commercialization and R&D[297](index=297&type=chunk)[298](index=298&type=chunk) - Substantial additional capital may be required to finance operations if product sales revenue is not sustainable, with risks of dilution or restrictive debt covenants[299](index=299&type=chunk)[301](index=301&type=chunk) - Regulatory authorities may require more clinical trials or additional data, leading to delays, increased costs, and impaired revenue generation[302](index=302&type=chunk) - International expansion of products involves significant costs, regulatory complexities, and risks related to managing distant operations and currency fluctuations[303](index=303&type=chunk)[304](index=304&type=chunk)[306](index=306&type=chunk) - Clinical trials are expensive, time-consuming, and have uncertain outcomes, with potential for delays, adverse events, or insufficient data for regulatory approval[307](index=307&type=chunk)[308](index=308&type=chunk)[312](index=312&type=chunk)[314](index=314&type=chunk)[315](index=315&type=chunk)[316](index=316&type=chunk) - Reliance on CROs and clinical sites for trials means failure to comply with GCP standards or meet deadlines could lead to increased costs, program delays, or disqualification of trial data[309](index=309&type=chunk)[310](index=310&type=chunk)[311](index=311&type=chunk) - Programs relying on oligonucleotide TLR agonists face risks if serious adverse event data emerges, potentially requiring reduced operations or reevaluation of strategic alternatives[317](index=317&type=chunk) - Compliance with extensive healthcare fraud and abuse, anticorruption, privacy, and transparency laws is critical, with violations potentially leading to significant criminal, civil, and administrative penalties[329](index=329&type=chunk)[331](index=331&type=chunk)[334](index=334&type=chunk) - Enacted or future legislation, such as the Inflation Reduction Act of 2022, could unfavorably impact pharmaceutical pricing, reimbursement, and overall business operations[339](index=339&type=chunk)[340](index=340&type=chunk)[341](index=341&type=chunk)[343](index=343&type=chunk)[345](index=345&type=chunk) - As a defense contractor with the U.S. Department of Defense, the company is subject to additional administrative burdens and compliance requirements, including ITAR, with limited experience in managing such programs[346](index=346&type=chunk) - Product liability exposure, if not adequately covered by insurance, could result in significant financial liability, diversion of management attention, and harm to the business[347](index=347&type=chunk) [Risks Related to our Intellectual Property](index=58&type=section&id=Risks%20Related%20to%20our%20Intellectual%20Property) - The company faces potential intellectual property disputes and litigation, including claims of infringement or challenges to its patents, which could be costly and delay product development or commercialization[348](index=348&type=chunk)[350](index=350&type=chunk)[351](index=351&type=chunk) - HEPLISAV-B and CpG 1018 adjuvant lack composition of matter patent protection, relying primarily on method of use patent claims and trade secret protection, which may be inadequate to prevent competitors[354](index=354&type=chunk) - Uncertainty in biopharmaceutical patent laws outside the U.S. may limit patent protection for product candidates, especially in markets where method of use patents are restricted[355](index=355&type=chunk) - Failure to obtain issued patents for applications or licensed rights - Issued patents may not provide meaningful protection or be valid/enforceable - Inability to develop additional patentable proprietary technologies - Competitors may independently develop similar technologies or design around existing patents - Pending or issued patents may be challenged by third parties in litigation or other proceedings[357](index=357&type=chunk) - Reliance on trade secret protection and confidentiality agreements for proprietary know-how carries risks of disclosure and competitive disadvantage[358](index=358&type=chunk) - Dependence on third-party intellectual property licenses subjects the company to risks of disputes, termination, or inability to maintain exclusivity, potentially harming development and commercialization efforts[359](index=359&type=chunk) [Risks Related to our Common Stock](index=60&type=section&id=Risks%20Related%20to%20our%20Common%20Stock) - The company's stock price is highly volatile, influenced by clinical trial results, regulatory approvals, collaborations, capital raising, intellectual property disputes, economic conditions, and the COVID-19 pandemic[360](index=360&type=chunk)[362](index=362&type=chunk) - Future sales of common stock, including those under the **$150 million 2020 ATM Agreement** (with **$120.5 million remaining**), or the perception of such sales, could depress the market price and impair capital raising ability[365](index=365&type=chunk)[366](index=366&type=chunk) [Risks Related to Our Outstanding Convertible Notes](index=61&type=section&id=Risks%20Related%20to%20Our%20Outstanding%20Convertible%20Notes) - Servicing the **$225.5 million Convertible Notes** requires significant cash flow, and the company may not have sufficient funds to make scheduled payments or refinance debt[368](index=368&type=chunk) - The company may lack the funds to settle Convertible Notes conversions in cash or repurchase them upon a fundamental change, potentially leading to default or limitations by future debt agreements[369](index=369&type=chunk) - The conditional conversion feature of the Convertible Notes, if triggered, could require cash payments or reclassification of debt to current liability, adversely affecting liquidity and working capital[370](index=370&type=chunk) - Conversion of Convertible Notes into common stock could dilute existing stockholders' ownership or depress the stock price, potentially encouraging short selling[371](index=371&type=chunk)[373](index=373&type=chunk) - Provisions in the Convertible Notes indenture, such as repurchase requirements upon a fundamental change, could delay or prevent beneficial takeover attempts[374](index=374&type=chunk) - The Capped Calls, while intended to offset dilution, may affect the value of Convertible Notes and common stock due to hedging activities by option counterparties[375](index=375&type=chunk)[376](index=376&type=chunk) - The company is exposed to counterparty risk with respect to the Capped Calls, as default by an option counterparty could lead to unsecured claims, adverse tax consequences, and increased stock dilution[377](index=377&type=chunk)[378](index=378&type=chunk) [General Risk Factors](index=63&type=section&id=General%20Risk%20Factors) - Loss of key personnel or difficulties in managing commercial growth and expanding operations could delay objectives and harm financial performance[379](index=379&type=chunk)[380](index=380&type=chunk)[382](index=382&type=chunk) - Business operations are vulnerable to interruptions from natural disasters, health epidemics (like COVID-19), and other catastrophic events, potentially disrupting manufacturing, distribution, and sales[383](index=383&type=chunk)[384](index=384&type=chunk)[385](index=385&type=chunk)[386](index=386&type=chunk) - Significant disruptions of information technology systems or data security breaches (e.g., phishing, ransomware) could lead to loss of intellectual property, exposure of sensitive data, financial losses, and regulatory penalties[387](index=387&type=chunk)[388](index=388&type=chunk)[391](index=391&type=chunk)[392](index=392&type=chunk)[393](index=393&type=chunk)[394](index=394&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=65&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) There were no unregistered sales of equity securities or use of proceeds to report - No unregistered sales of equity securities or use of proceeds were reported[395](index=395&type=chunk) [ITEM 3. DEFAULTS UPON SENIOR SECURITIES](index=65&type=section&id=ITEM%203.%20DEFAULTS%20UPON%20SENIOR%20SECURITIES) There were no defaults upon senior securities to report - No defaults upon senior securities were reported[396](index=396&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES](index=65&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) There were no mine safety disclosures to report - No mine safety disclosures were reported[396](index=396&type=chunk) [ITEM 5. OTHER INFORMATION](index=65&type=section&id=ITEM%205.%20OTHER%20INFORMATION) There was no other information to report - No other information was reported[397](index=397&type=chunk) [ITEM 6. EXHIBITS](index=67&type=section&id=ITEM%206.%20EXHIBITS) Lists exhibits filed with Form 10-Q, including corporate governance documents, stock certificates, warrant forms, Convertible Notes indenture, and various certifications - Exhibits include amendments to the Certificate of Incorporation and Bylaws, specimen common stock certificate, warrant forms, and the indenture for Convertible Notes[400](index=400&type=chunk) - Recent amendments to supply agreements with Biological E. Limited and Zhejiang Clover Biopharmaceuticals, Inc. are included[400](index=400&type=chunk)[401](index=401&type=chunk)[402](index=402&type=chunk)[403](index=403&type=chunk) - Certifications from the Principal Executive Officer and Principal Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 are filed[404](index=404&type=chunk) [SIGNATURES](index=69&type=section&id=SIGNATURES) The report is signed by the Chief Executive Officer, Chief Financial Officer, and Controller, Chief Accounting Officer, certifying its submission on November 03, 2022 - The report was signed by Ryan Spencer (CEO), Kelly MacDonald (CFO), and Justin Burgess (Controller, CAO) on November 03, 2022[410](index=410&type=chunk)

Dynavax Technologies Corporation (NASDAQ:DVAX) Q2 2022 Earnings Conference Call August 4, 2022 4:30 PM ET Company Participants Nicole Arndt – Senior Manager for Investor Relations Ryan Spencer – Chief Executive Officer Donn Casale – Senior Vice President of Commercial Rob Janssen – Chief Medical Officer Kelly MacDonald – Chief Financial Officer Conference Call Participants Ernesto Rodriguez-Dumont – Cowen Matthew Phipps – William Blair Edward White – H.C. Wainwright Operator Good day and welcome to the Dyna ...

[Form 10-Q Cover Page](index=1&type=section&id=Form%2010-Q%20Cover%20Page) Dynavax Technologies Corporation filed its Form 10-Q for the quarterly period ended June 30, 2022, as a large accelerated filer with 126,473,586 shares outstanding as of August 1, 2022 - Dynavax Technologies Corporation filed its Form 10-Q for the quarterly period ended June 30, 2022. The company is a large accelerated filer and had **126,473,586 shares of common stock outstanding** as of August 1, 2022[1](index=1&type=chunk)[2](index=2&type=chunk) [INDEX](index=2&type=section&id=INDEX) The index outlines the Form 10-Q structure, detailing financial and other information with corresponding page numbers - The index outlines the structure of the Form 10-Q, dividing it into Part I (Financial Information) and Part II (Other Information), detailing specific items and their corresponding page numbers[4](index=4&type=chunk) [FORWARD-LOOKING STATEMENTS](index=3&type=section&id=FORWARD-LOOKING%20STATEMENTS) This section warns that the report contains forward-looking statements whose actual results may differ materially due to various factors - This section warns readers that the report contains forward-looking statements regarding business operations, product commercialization (HEPLISAV-B, CpG 1018 adjuvant), clinical pipeline (Tdap, shingles, plague), regulatory strategy, capital needs, and future profitability. Actual results may differ materially due to various factors, including those detailed in 'Item 1A—Risk Factors'[6](index=6&type=chunk) [RISK FACTOR SUMMARY](index=4&type=section&id=RISK%20FACTOR%20SUMMARY) Key risks include intense competition, COVID-19 impacts, intellectual property protection, financial variability, reimbursement uncertainty, and post-marketing obligations - Key risks include significant competition for HEPLISAV-B, adverse effects of the COVID-19 pandemic on business and collaborations, potential failure of CpG 1018 adjuvant intellectual property protection, significant quarterly financial variability, uncertainty regarding coverage and reimbursement, ongoing post-marketing obligations for HEPLISAV-B, and the company's history of net losses despite recent profitability[9](index=9&type=chunk)[11](index=11&type=chunk) [PART I. FINANCIAL INFORMATION](index=6&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section presents the company's unaudited condensed consolidated financial statements and related notes for the reporting period [ITEM 1. FINANCIAL STATEMENTS (unaudited)](index=6&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS%20(unaudited)) This section presents the unaudited condensed consolidated financial statements, including the balance sheets, statements of operations, comprehensive income (loss), stockholders' equity, and cash flows, along with detailed notes explaining significant accounting policies, fair value measurements, and specific financial line items [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Presents the company's financial position, assets, liabilities, and equity at specific reporting dates Condensed Consolidated Balance Sheets (in thousands) | Item | June 30, 2022 (unaudited) | December 31, 2021 (Note 1) | |:-------------------------------------------|:--------------------------|:---------------------------| | **Assets** | | | | Cash and cash equivalents | $249,091 | $436,189 | | Marketable securities available-for-sale | $269,078 | $109,761 | | Accounts receivables, net | $172,270 | $116,216 | | Inventories, net | $73,979 | $61,335 | | Prepaid manufacturing | $54,477 | $159,655 | | Total current assets | $955,405 | $972,520 | | Total assets | $1,022,999 | $1,039,246 | | **Liabilities and stockholders' equity** | | | | CEPI accrual (Note 6) | $107,370 | $128,848 | | Deferred revenue | $191,998 | $349,864 | | Total current liabilities | $345,198 | $556,402 | | Convertible Notes, net | $221,030 | $220,490 | | Total liabilities | $600,200 | $816,872 | | Total stockholders' equity | $422,799 | $222,374 | | Total liabilities and stockholders' equity | $1,022,999 | $1,039,246 | [Condensed Consolidated Statements of Operations](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Details the company's revenues, expenses, and net income for the three and six months ended June 30, 2022 and 2021 Condensed Consolidated Statements of Operations (in thousands, except per share amounts) | Item | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | |:------------------------------------|:---------------------------------|:---------------------------------|:-------------------------------|:-------------------------------| | Product revenue, net | $255,320 | $52,677 | $367,647 | $135,562 | | Other revenue | $1,144 | $90 | $2,809 | $540 | | Total revenues | $256,464 | $52,767 | $370,456 | $136,102 | | Cost of sales - product | $83,369 | $14,845 | $123,331 | $39,470 | | Research and development | $9,689 | $7,167 | $20,784 | $14,925 | | Selling, general and administrative | $36,179 | $21,583 | $68,351 | $44,006 | | Income from operations | $128,227 | $9,172 | $158,990 | $37,701 | | Net income | $128,755 | $4,473 | $161,614 | $5,364 | | Net income per share (Basic) | $1.02 | $0.04 | $1.29 | $0.04 | | Net income per share (Diluted) | $0.87 | $0.02 | $1.08 | $0.04 | [Condensed Consolidated Statements of Comprehensive Income (Loss)](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) Reports net income and other comprehensive income or loss components for the three and six months ended June 30, 2022 and 2021 Condensed Consolidated Statements of Comprehensive Income (Loss) (in thousands) | Item | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | |:--------------------------------------------------------|:---------------------------------|:---------------------------------|:-------------------------------|:-------------------------------| | Net income | $128,755 | $4,473 | $161,614 | $5,364 | | Change in unrealized gain (loss) on marketable securities available-for-sale | ($629) | $38 | ($1,901) | $29 | | Foreign currency translation adjustments | ($1,768) | $375 | ($2,393) | ($1,015) | | Total other comprehensive income (loss) | ($2,397) | $413 | ($4,294) | ($986) | | Total comprehensive income | $126,358 | $4,886 | $157,320 | $4,378 | [Condensed Consolidated Statements of Stockholders' Equity](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) Summarizes changes in stockholders' equity, including common stock, additional paid-in capital, and accumulated deficit Condensed Consolidated Statements of Stockholders' Equity (in thousands) | Item | Balances at Dec 31, 2021 | Issuance of common stock upon exercise of warrants | Issuance of common stock upon exercise of stock options and/or release of restricted stock awards, net | Issuance of common stock under Employee Stock Purchase Plan | Stock compensation expense | Total other comprehensive loss | Net income | Balances at June 30, 2022 | |:-------------------------------------------|:-------------------------|:---------------------------------------------------|:-----------------------------------------------------------------------|:--------------------------------------------|:---------------------------|:-------------------------------|:-----------|:--------------------------| | Common Shares | 122,945 | 1,879 | 1,533 | 82 | - | - | - | 126,439 | | Stock Par Amount | $123 | $2 | $1 | $- | $- | $- | $- | $126 | | Additional Paid-In Capital | $1,441,868 | $24,668 | $2,149 | $710 | $15,575 | $- | $- | $1,484,970 | | Accumulated Other Comprehensive (Loss) Income | ($2,266) | $- | $- | $- | $- | ($4,294) | $- | ($6,560) | | Accumulated Deficit | ($1,217,351) | $- | $- | $- | $- | $- | $161,614 | ($1,055,737) | | Total Stockholders' Equity | $222,374 | $24,670 | $2,150 | $710 | $15,575 | ($4,294) | $161,614 | $422,799 | [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Provides a breakdown of cash inflows and outflows from operating, investing, and financing activities for the six months ended June 30, 2022 and 2021 Condensed Consolidated Statements of Cash Flows (in thousands) | Operating activities | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | |:------------------------------------------------------------|:-------------------------------|:-------------------------------| | Net income | $161,614 | $5,364 | | Net cash (used in) provided by operating activities | ($33,792) | $148,820 | | Net cash used in investing activities | ($163,981) | ($86,385) | | Net cash provided by financing activities | $11,315 | $35,638 | | Effect of exchange rate changes on cash, cash equivalents and restricted cash | ($657) | ($546) | | Net (decrease) increase in cash, cash equivalents and restricted cash | ($187,115) | $97,527 | | Cash, cash equivalents and restricted cash at beginning of period | $436,408 | $32,310 | | Cash, cash equivalents and restricted cash at end of period | $249,293 | $129,837 | [Notes to Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations of the company's significant accounting policies, fair value measurements, and specific financial line items [1. Organization and Summary of Significant Accounting Policies](index=11&type=section&id=1.%20Organization%20and%20Summary%20of%20Significant%20Accounting%20Policies) This note describes Dynavax Technologies Corporation as a commercial-stage biopharmaceutical company focused on innovative vaccines, with HEPLISAV-B as its first marketed product and CpG 1018 adjuvant used in COVID-19 vaccines. It outlines the basis of financial statement presentation, the use of estimates, and significant accounting policies for revenue recognition, inventories, convertible notes, and recent accounting pronouncements - Dynavax is a commercial-stage biopharmaceutical company with HEPLISAV-B (Hepatitis B Vaccine) approved in the U.S. and EU, and commercial shipments commenced in Germany in May 2022[31](index=31&type=chunk)[169](index=169&type=chunk) - The company manufactures and sells CpG 1018 adjuvant, used in HEPLISAV-B and in global commercial supply agreements for COVID-19 vaccines, and is advancing a clinical pipeline leveraging CpG 1018 for Tdap, shingles, and plague[31](index=31&type=chunk)[167](index=167&type=chunk) - Revenue recognition follows ASC 606, recognizing revenue when control of goods or services is transferred to the customer. Product revenue, net, includes estimates for variable consideration like returns, chargebacks, discounts, rebates, and other fees[37](index=37&type=chunk)[39](index=39&type=chunk)[40](index=40&type=chunk) - Inventories are stated at the lower of cost or estimated net realizable value on a FIFO basis, with estimates for future demand and expiration dates. Manufacturing costs for product candidates are expensed as R&D until regulatory approval[50](index=50&type=chunk)[52](index=52&type=chunk)[53](index=53&type=chunk) - The company accounts for its **2.50% convertible senior notes due 2026** as a long-term liability and capped call transactions as stockholders' equity[54](index=54&type=chunk)[55](index=55&type=chunk) [2. Fair Value Measurements](index=15&type=section&id=2.%20Fair%20Value%20Measurements) This note details the company's fair value measurements for financial assets and liabilities, categorizing them into Level 1, Level 2, and Level 3 inputs based on observability. It also provides a summary of changes in the fair value of warrant liability Fair Value Hierarchy for Financial Assets (in thousands) | Item | June 30, 2022 | Level 1 | Level 2 | Level 3 | Total | |:------------------------------------|:--------------|:----------|:----------|:--------|:----------| | Money market funds | | $211,632 | - | - | $211,632 | | U.S. treasuries | | - | $62,891 | - | $62,891 | | U.S. government agency securities | | - | $1,748 | - | $1,748 | | Corporate debt securities | | - | $227,907 | - | $227,907 | | Total assets | | $211,632 | $292,546 | - | $504,178 | | | | | | | | | December 31, 2021 | | Level 1 | Level 2 | Level 3 | Total | | Money market funds | | $429,194 | - | - | $429,194 | | U.S. treasuries | | - | $4,004 | - | $4,004 | | U.S. government agency securities | | - | $26,548 | - | $26,548 | | Corporate debt securities | | - | $79,209 | - | $79,209 | | Total assets | | $429,194 | $109,761 | - | $538,955 | | Liabilities (Dec 31, 2021) | | - | - | $18,016 | $18,016 | [3. Cash, Cash Equivalents, Restricted Cash and Marketable Securities](index=16&type=section&id=3.%20Cash,%20Cash%20Equivalents,%20Restricted%20Cash%20and%20Marketable%20Securities) This note provides a reconciliation of cash, cash equivalents, and restricted cash, and details the composition and maturities of marketable securities classified as available-for-sale. It also discusses the company's policy for assessing other-than-temporary declines in fair value Cash, Cash Equivalents and Restricted Cash Reconciliation (in thousands) | Item | June 30, 2022 | December 31, 2021 | |:------------------------------------------------------------------|:--------------|:------------------| | Cash and cash equivalents | $249,091 | $436,189 | | Restricted cash | $202 | $219 | | Total cash, cash equivalents and restricted cash | $249,293 | $436,408 | Marketable Securities Available-for-Sale Maturities (in thousands) | Maturity | June 30, 2022 Amortized Cost | June 30, 2022 Estimated Fair Value | |:---------------------------------------|:-----------------------------|:-----------------------------------| | Mature in one year or less | $270,968 | $269,078 | | Mature after one year through two years | - | - | | Total | $270,968 | $269,078 | - All investment portfolio is classified as available-for-sale and short-term. Unrealized gains and losses are included in accumulated other comprehensive loss. No realized gains or losses from sales of marketable securities for the three and six months ended June 30, 2022 and 2021[70](index=70&type=chunk)[71](index=71&type=chunk) [4. Inventories, net](index=18&type=section&id=4.%20Inventories,%20net) This note details the composition of the company's inventories, net, including raw materials, work-in-process, and finished goods, and provides information on prepaid manufacturing costs Inventories, net (in thousands) | Item | June 30, 2022 | December 31, 2021 | |:----------------|:--------------|:------------------| | Raw materials | $32,789 | $26,637 | | Work-in-process | $18,189 | $14,748 | | Finished goods | $23,001 | $19,950 | | Total | $73,979 | $61,335 | - Finished goods inventory as of June 30, 2022, included **$11.4 million of HEPLISAV-B** and the remaining balance was CpG 1018 adjuvant for collaboration partners. Prepaid manufacturing costs for CpG 1018 adjuvant were **$54.5 million** as of June 30, 2022, expected to convert to inventory within twelve months[72](index=72&type=chunk)[73](index=73&type=chunk) [5. Commitments and Contingencies](index=18&type=section&id=5.%20Commitments%20and%20Contingencies) This note outlines the company's lease commitments for facilities in Emeryville, California, and Düsseldorf, Germany, including new lease agreements and sublease income. It also details material non-cancelable purchase commitments, convertible notes, and contingent payment obligations related to asset sales - The company entered into a new lease for its Emeryville office space (Powell Street Lease) in March 2022, effective June 1, 2022, replacing a sublease that expired June 30, 2022. The Horton Street Master Lease for office and laboratory space continues until March 31, 2031, with a sublease generating income[75](index=75&type=chunk)[77](index=77&type=chunk)[78](index=78&type=chunk)[79](index=79&type=chunk) Operating Lease Liabilities (in thousands) | Item | June 30, 2022 | December 31, 2021 | |:------------------------------------------------------------------|:--------------|:------------------| | Current portion of lease liabilities | $3,039 | $2,577 | | Long-term portion of lease liabilities | $33,677 | $34,316 | | Total operating lease liabilities | $36,716 | $36,893 | - Material non-cancelable purchase and other commitments for HEPLISAV-B and CpG 1018 totaled **$115.7 million** as of June 30, 2022. The aggregate principal amount of Convertible Notes was **$225.5 million**[86](index=86&type=chunk) - The company received **$1.0 million** from TriSalus in May 2022 for meeting a pre-commercialization milestone related to the SD-101 asset sale, recognizing it as a gain on sale of assets[88](index=88&type=chunk) [6. Collaboration, Development and Supply Agreements](index=21&type=section&id=6.%20Collaboration,%20Development%20and%20Supply%20Agreements) This note details various agreements for the supply of CpG 1018 adjuvant for COVID-19 vaccines and other development programs. It covers agreements with CEPI, Clover, Bio E, Bio Farma, Medigen, Valneva, the U.S. Department of Defense, and Serum Institute of India Pvt. Ltd., outlining payment structures, revenue recognition, and key financial impacts - Under the CEPI Agreement, Dynavax received Advance Payments of approximately **$175.1 million** through June 30, 2022, for manufacturing and reserving CpG 1018 adjuvant. **$107.4 million** was recorded as CEPI accrual as of June 30, 2022[93](index=93&type=chunk)[95](index=95&type=chunk) - For the three and six months ended June 30, 2022, CpG 1018 product revenue, net, from Clover was **$91.3 million** and **$113.6 million**, respectively. Contract asset balance from Clover was **$71.3 million** as of June 30, 2022[101](index=101&type=chunk)[102](index=102&type=chunk) - CpG 1018 adjuvant net product revenue from Bio E was **$51.0 million** and **$118.3 million** for the three and six months ended June 30, 2022, respectively. Accounts receivable from Bio E was **$95.6 million** as of June 30, 2022[107](index=107&type=chunk) - In May 2022, Dynavax entered a supply agreement with Bio Farma, recognizing CpG 1018 adjuvant net product revenue of **$12.3 million** and **$14.3 million** for the three and six months ended June 30, 2022, respectively[109](index=109&type=chunk)[112](index=112&type=chunk) - The Valneva Amendment in October 2021 modified the supply agreement, leading to the recognition of **$68.0 million** in CpG 1018 adjuvant net product revenue for the three and six months ended June 30, 2022, including **$55.4 million** of advance payments[120](index=120&type=chunk)[121](index=121&type=chunk)[122](index=122&type=chunk) - Revenue from the DoD agreement for plague vaccine development was **$1.1 million** and **$2.7 million** for the three and six months ended June 30, 2022, respectively[123](index=123&type=chunk) [7. Convertible Notes](index=24&type=section&id=7.%20Convertible%20Notes) This note details the issuance of $225.5 million aggregate principal amount of 2.50% convertible senior notes due 2026, including their terms, conversion features, and accounting treatment. It also covers the associated capped call transactions - In May 2021, Dynavax issued **$225.5 million** aggregate principal amount of **2.50% convertible senior notes due 2026**. Net proceeds of **$219.8 million** were used to retire previous debt and pay for capped calls[125](index=125&type=chunk) - The Convertible Notes are convertible into cash, common stock, or a combination, at an initial conversion rate of **95.5338 shares per $1,000 principal amount** (approx. **$10.47/share**). Conversion conditions were not met as of July 1, 2022[128](index=128&type=chunk)[130](index=130&type=chunk) - As of June 30, 2022, the fair value of the Convertible Notes was **$337.3 million**, recorded as a long-term liability of **$225.5 million** less unamortized issuance costs of **$4.5 million**[133](index=133&type=chunk) Interest Expense Related to Convertible Notes (in thousands) | Item | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | |:-----------------------------------|:---------------------------------|:---------------------------------|:-------------------------------|:-------------------------------| | Stated coupon interest | $1,409 | $736 | $2,819 | $736 | | Amortization of debt issuance cost | $271 | $137 | $540 | $137 | | Total interest expense | $1,680 | $873 | $3,359 | $873 | - Capped call transactions totaling **$27.2 million** were entered into, covering **21,542,871 shares**, with an initial strike price of **$10.47** and cap price of **$15.80 per share**. The cost was recorded as a reduction to additional paid-in capital[136](index=136&type=chunk)[137](index=137&type=chunk) [8. Revenue Recognition](index=26&type=section&id=8.%20Revenue%20Recognition) This note disaggregates total revenues by product and geographic region, identifies major customers and collaboration partners, and summarizes contract balances including accounts receivable reserves, revenue reserve accruals, contract assets, and deferred revenue Disaggregation of Revenues (in thousands) | Item | Three Months Ended June 30, 2022 (U.S.) | Three Months Ended June 30, 2022 (Non U.S.) | Three Months Ended June 30, 2022 (Total) | Three Months Ended June 30, 2021 (U.S.) | Three Months Ended June 30, 2021 (Non U.S.) | Three Months Ended June 30, 2021 (Total) | |:-----------------------------------|:----------------------------------------|:--------------------------------------------|:-----------------------------------------|:----------------------------------------|:--------------------------------------------|:-----------------------------------------| | HEPLISAV-B | $31,739 | $941 | $32,680 | $13,688 | - | $13,688 | | CpG 1018 | - | $222,640 | $222,640 | - | $38,989 | $38,989 | | Total product revenue, net | $31,739 | $223,581 | $255,320 | $13,688 | $38,989 | $52,677 | | Other revenue | $1,083 | $61 | $1,144 | - | $90 | $90 | | Total revenues | $32,822 | $223,642 | $256,464 | $13,688 | $39,079 | $52,767 | | | Six Months Ended June 30, 2022 (U.S.) | Six Months Ended June 30, 2022 (Non U.S.) | Six Months Ended June 30, 2022 (Total) | Six Months Ended June 30, 2021 (U.S.) | Six Months Ended June 30, 2021 (Non U.S.) | Six Months Ended June 30, 2021 (Total) | | HEPLISAV-B | $52,549 | $941 | $53,490 | $21,991 | - | $21,991 | | CpG 1018 | - | $314,157 | $314,157 | - | $113,571 | $113,571 | | Total product revenue, net | $52,549 | $315,098 | $367,647 | $21,991 | $113,571 | $135,562 | | Other revenue | $2,689 | $120 | $2,809 | $260 | $280 | $540 | | Total revenues | $55,238 | $315,218 | $370,456 | $22,251 | $113,851 | $136,102 | HEPLISAV-B Product Revenue from Largest Customers (as % of total HEPLISAV-B net product revenue) | Customer | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | |:--------------------|:---------------------------------|:---------------------------------|:-------------------------------|:-------------------------------| | Largest Customer | 18 % | 28 % | 21 % | 28 % | | Second largest Customer | 18 % | 21 % | 18 % | 23 % | | Third largest Customer | 18 % | 16 % | 17 % | 17 % | CpG 1018 Product Revenue from Largest Collaboration Partners (as % of total CpG 1018 adjuvant net product revenue) | Partner | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | |:------------------------------------|:---------------------------------|:---------------------------------|:-------------------------------|:-------------------------------| | Largest collaboration partner | 41 % | 63 % | 38 % | 79 % | | Second largest collaboration partner | 31 % | 27 % | 36 % | 15 % | | Third largest collaboration partner | 23 % | 10 % | 22 % | 5 % | Contract Asset and Deferred Revenue Activities (in thousands) - Six Months Ended June 30, 2022 | Item | Balance at Beginning of Period | Additions | Subtractions | Revenue recognized in current period | Balance at End of Period | |:-----------------------------------|:-------------------------------|:----------|:-------------|:-------------------------------------|:-------------------------| | Contract asset | $62,525 | $12,134 | ($3,151) | - | $71,508 | | Deferred revenue | $349,864 | $12,068 | ($6,534) | ($163,400) | $191,998 | | Long-term deferred revenue | $5,385 | $6,582 | ($11,967) | - | - | [9. Net Income Per Share](index=28&type=section&id=9.%20Net%20Income%20Per%20Share) This note details the computation of basic and diluted net income per share using the two-class method, accounting for participating securities and the dilutive effects of stock-based compensation plans, warrants, and convertible notes Net Income Per Share Computations (in thousands, except per share amounts) | Item | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | |:------------------------------------------------------------------|:---------------------------------|:---------------------------------|:-------------------------------|:-------------------------------| | Net income attributable to common stockholders, basic | $128,755 | $4,140 | $161,298 | $4,954 | | Net income attributable to common stockholders, diluted | $130,015 | $2,043 | $162,332 | $4,954 | | Weighted average common stock outstanding, basic | 126,347 | 114,629 | 125,456 | 113,339 | | Weighted average common stock outstanding, diluted | 149,905 | 118,830 | 149,821 | 114,978 | Anti-Dilutive Securities Excluded from Diluted EPS (in thousands) | Item | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | |:------------------------------------------------------------------|:---------------------------------|:---------------------------------|:-------------------------------|:-------------------------------| | Stock options and stock awards | 9,647 | 6,991 | 9,067 | 8,476 | | Series B Convertible Preferred Stock (as converted to common stock) | - | 4,140 | - | 4,140 | | Warrants (as exercisable into common stock) | - | - | - | 2,474 | | Convertible Notes (as converted to common stock) | - | 11,363 | - | 5,713 | | Total | 9,647 | 22,494 | 9,067 | 20,803 | [10. Common Stock, Preferred Stock and Warrants](index=29&type=section&id=10.%20Common%20Stock,%20Preferred%20Stock%20and%20Warrants) This note provides details on the company's common stock, preferred stock, and warrants. It includes information on outstanding shares, past offerings, and the exercise or expiration of warrants - As of June 30, 2022, there were **126,439,073 shares of common stock outstanding**[151](index=151&type=chunk) - All Series B Preferred Stock had been converted into common stock as of June 30, 2022[154](index=154&type=chunk) - All **1,882,600 outstanding warrants** as of December 31, 2021, were exercised or expired during the three months ended March 31, 2022, generating **$8.5 million in cash proceeds**. No warrants were outstanding as of June 30, 2022[155](index=155&type=chunk)[215](index=215&type=chunk) [11. Equity Plans and Stock-Based Compensation](index=29&type=section&id=11.%20Equity%20Plans%20and%20Stock-Based%20Compensation) This note outlines the company's equity incentive plans, including the Amended 2018 EIP, and provides activity summaries for stock options, restricted stock units (RSUs), and performance-based restricted stock units (PSUs). It also details the weighted-average assumptions used for fair value measurements and the components of stock-based compensation expense - Stockholders approved the Amended 2018 Equity Incentive Plan in May 2022, increasing authorized shares by **15,000,000** to a maximum of **32,600,000 shares**. As of June 30, 2022, **15,465,070 shares** were reserved for issuance[156](index=156&type=chunk)[157](index=157&type=chunk) Stock-Based Compensation Expense (in thousands) | Item | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | |:------------------------------------|:---------------------------------|:---------------------------------|:-------------------------------|:-------------------------------| | Research and development | $1,463 | $937 | $2,739 | $1,809 | | Selling, general and administrative | $5,597 | $3,445 | $11,024 | $6,589 | | Cost of sales - product | $143 | $155 | $303 | $324 | | Inventory | $726 | $487 | $1,509 | $1,025 | | Total | $7,929 | $5,024 | $15,575 | $9,747 | [12. Income Taxes](index=31&type=section&id=12.%20Income%20Taxes) This note details the company's income tax provision and effective tax rate, explaining the primary differences from the federal statutory rate due to net operating losses and a full valuation allowance on deferred tax assets - For the three and six months ended June 30, 2022, the company recorded an income tax provision of approximately **$0.6 million**, with an effective tax rate of approximately **0.4%**[162](index=162&type=chunk)[217](index=217&type=chunk) - The low effective tax rate is primarily due to the benefit of net operating losses utilized and a full valuation allowance established on federal, state, and certain foreign deferred tax assets[162](index=162&type=chunk)[163](index=163&type=chunk)[217](index=217&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=32&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section provides a narrative overview of Dynavax's financial condition and results of operations, discussing product performance, collaboration agreements, the impact of COVID-19, critical accounting estimates, and liquidity. It highlights significant revenue growth driven by CpG 1018 adjuvant sales and HEPLISAV-B market share gains [Overview](index=32&type=section&id=Overview) Dynavax is a commercial-stage biopharmaceutical company focused on innovative vaccines, with HEPLISAV-B as its first marketed product and CpG 1018 adjuvant used in COVID-19 vaccines. The company is advancing a multi-program clinical pipeline and has seen significant revenue from CpG 1018 adjuvant supply agreements. The COVID-19 pandemic continues to impact business operations and vaccine utilization rates - Dynavax is a commercial-stage biopharmaceutical company with HEPLISAV-B approved in the U.S. and EU, and CpG 1018 adjuvant used in COVID-19 vaccines. Commercial shipments of HEPLISAV-B commenced in Germany in May 2022[167](index=167&type=chunk)[169](index=169&type=chunk) - HEPLISAV-B product revenue, net, was **$32.7 million** and **$53.5 million** for the three and six months ended June 30, 2022, respectively, driven by market share improvement and adult vaccine utilization[170](index=170&type=chunk)[194](index=194&type=chunk) - CpG 1018 product revenue, net, was **$222.6 million** and **$314.2 million** for the three and six months ended June 30, 2022, respectively, due to increased sales volume from supply and collaboration agreements, including **$55.4 million** from Valneva advance payments[179](index=179&type=chunk)[195](index=195&type=chunk) - The COVID-19 pandemic continues to impact business, with adult hepatitis B vaccine utilization rates remaining below pre-pandemic levels, though showing gradual recovery. The company has adapted to remote work and in-person interactions[184](index=184&type=chunk)[185](index=185&type=chunk) - HEPLISAV-B post-marketing study showed no increased risk of acute myocardial infarction (AMI). Data from the autoimmune portion of the observational study is expected in Q4 2022[186](index=186&type=chunk) [Critical Accounting Estimates](index=35&type=section&id=Critical%20Accounting%20Estimates) The company's critical accounting estimates involve significant uncertainty and can materially affect financial condition or results. No significant changes were reported in these policies during the six months ended June 30, 2022, compared to the prior annual report - Critical accounting estimates involve significant uncertainty and can materially affect financial condition or results. No significant changes were reported in these policies during the six months ended June 30, 2022[190](index=190&type=chunk) [Results of Operations](index=35&type=section&id=Results%20of%20Operations) Dynavax experienced substantial revenue growth for the three and six months ended June 30, 2022, primarily driven by increased sales of CpG 1018 adjuvant and HEPLISAV-B. Operating expenses also increased due to higher sales volume, R&D investments, and commercialization efforts. Net income saw a significant increase compared to the prior year Summary of Revenues (in thousands, except percentages) | Revenues: | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Increase (Decrease) 2021 to 2022 ($) | Increase (Decrease) 2021 to 2022 (%) | |:---------------------------------|:---------------------------------|:---------------------------------|:-------------------------------------|:-------------------------------------| | HEPLISAV-B | $32,680 | $13,688 | $18,992 | 139 % | | CpG 1018 | $222,640 | $38,989 | $183,651 | 471 % | | Total product revenue, net | $255,320 | $52,677 | $202,643 | 385 % | | Other revenue | $1,144 | $90 | $1,054 | 1,171 % | | Total revenues | $256,464 | $52,767 | $203,697 | 386 % | | | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | Increase (Decrease) 2021 to 2022 ($) | Increase (Decrease) 2021 to 2022 (%) | | HEPLISAV-B | $53,490 | $21,991 | $31,499 | 143 % | | CpG 1018 | $314,157 | $113,571 | $200,586 | 177 % | | Total product revenue, net | $367,647 | $135,562 | $232,085 | 171 % | | Other revenue | $2,809 | $540 | $2,269 | 420 % | | Total revenues | $370,456 | $136,102 | $234,354 | 172 % | Summary of Cost of Sales – Product (in thousands, except percentages) | Cost of Sales - Product | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Increase (Decrease) 2021 to 2022 ($) | Increase (Decrease) 2021 to 2022 (%) | |:--------------------------------|:---------------------------------|:---------------------------------|:-------------------------------------|:-------------------------------------| | HEPLISAV-B | $10,252 | $4,624 | $5,628 | 122 % | | CpG 1018 | $73,117 | $10,221 | $62,896 | 615 % | | Total cost of sales - product | $83,369 | $14,845 | $68,524 | 462 % | | | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | Increase (Decrease) 2021 to 2022 ($) | Increase (Decrease) 2021 to 2022 (%) | | HEPLISAV-B | $16,229 | $7,369 | $8,860 | 120 % | | CpG 1018 | $107,102 | $32,101 | $75,001 | 234 % | | Total cost of sales - product | $123,331 | $39,470 | $83,861 | 212 % | Summary of Research and Development Expense (in thousands, except percentages) | Item | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Increase (Decrease) 2021 to 2022 ($) | Increase (Decrease) 2021 to 2022 (%) | |:------------------------------------|:---------------------------------|:---------------------------------|:-------------------------------------|:-------------------------------------| | HEPLISAV-B development | $866 | $2,356 | ($1,490) | (63) % | | CpG 1018 adjuvant development | $562 | $1,768 | ($1,206) | (68) % | | Tetanus, diphtheria, and acellular pertussis | $2,275 | $1,156 | $1,119 | 97 % | | Shingles | $2,855 | $381 | $2,474 | 649 % | | Plague (1) | $439 | - | $439 | NM | | Other (2) | $677 | $99 | $578 | 584 % | | Facility costs | $552 | $470 | $82 | 17 % | | Non-cash stock-based compensation | $1,463 | $937 | $526 | 56 % | | Total research and development | $9,689 | $7,167 | $2,522 | 35 % | | | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | Increase (Decrease) 2021 to 2022 ($) | Increase (Decrease) 2021 to 2022 (%) | | HEPLISAV-B development | $2,105 | $5,490 | ($3,385) | (62) % | | CpG 1018 adjuvant development | $1,695 | $3,156 | ($1,461) | (46) % | | Tetanus, diphtheria, and acellular pertussis | $3,840 | $2,315 | $1,525 | 66 % | | Shingles | $5,788 | $433 | $5,355 | 1,237 % | | Plague (1) | $1,191 | - | $1,191 | NM | | Other (2) | $2,506 | $856 | $1,650 | 193 % | | Facility costs | $920 | $866 | $54 | 6 % | | Non-cash stock-based compensation | $2,739 | $1,809 | $930 | 51 % | | Total research and development | $20,784 | $14,925 | $5,859 | 39 % | Summary of Selling, General and Administrative Expense (in thousands, except percentages) | Item | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Increase (Decrease) 2021 to 2022 ($) | Increase (Decrease) 2021 to 2022 (%) | |:------------------------------------|:---------------------------------|:---------------------------------|:-------------------------------------|:-------------------------------------| | Compensation and related personnel costs | $12,929 | $9,172 | $3,757 | 41 % | | Outside services | $13,751 | $5,699 | $8,052 | 141 % | | Legal costs | $444 | $508 | ($64) | (13) % | | Facility costs | $3,458 | $2,759 | $699 | 25 % | | Non-cash stock-based compensation | $5,597 | $3,445 | $2,152 | 62 % | | Total selling, general and administrative | $36,179 | $21,583 | $14,596 | 68 % | | | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | Increase (Decrease) 2021 to 2022 ($) | Increase (Decrease) 2021 to 2022 (%) | | Compensation and related personnel costs | $26,110 | $18,376 | $7,734 | 42 % | | Outside services | $23,817 | $12,287 | $11,530 | 94 % | | Legal costs | $1,152 | $994 | $158 | 16 % | | Facility costs | $6,248 | $5,760 | $488 | 8 % | | Non-cash stock-based compensation | $11,024 | $6,589 | $4,435 | 67 % | | Total selling, general and administrative | $68,351 | $44,006 | $24,345 | 55 % | - In May 2022, Dynavax recognized a **$1 million gain** on sale of SD-101 assets from a pre-commercialization milestone payment by TriSalus Life Sciences[213](index=213&type=chunk) Summary of Other Income (Expense) (in thousands, except percentages) | Item | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Increase (Decrease) 2021 to 2022 ($) | Increase (Decrease) 2021 to 2022 (%) | |:------------------------------------|:---------------------------------|:---------------------------------|:-------------------------------------|:-------------------------------------| | Interest income | $765 | $48 | $717 | 1,494 % | | Interest expense | ($1,683) | ($3,109) | ($1,426) | (46) % | | Sublease income | $2,025 | $1,670 | $355 | 21 % | | Loss on debt extinguishment | - | ($5,232) | ($5,232) | NM | | Change in fair value of warrant liability | - | $2,097 | ($2,097) | NM | | Other | $40 | ($173) | ($213) | (123) % | | | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | Increase (Decrease) 2021 to 2022 ($) | Increase (Decrease) 2021 to 2022 (%) | | Interest income | $1,026 | $95 | $931 | 980 % | | Interest expense | ($3,363) | ($7,821) | ($4,458) | (57) % | | Sublease income | $3,634 | $3,692 | ($58) | (2) % | | Loss on debt extinguishment | - | ($5,232) | ($5,232) | NM | | Change in fair value of warrant liability | $1,801 | ($23,455) | $25,256 | 108 % | | Other | $145 | $384 | ($239) | (62) % | - For the three and six months ended June 30, 2022, the company recorded an income tax provision of approximately **$0.6 million**, with an effective tax rate of approximately **0.4%**. This is primarily due to the benefit of net operating losses and a full valuation allowance on deferred tax assets[217](index=217&type=chunk) [Liquidity and Capital Resources](index=39&type=section&id=Liquidity%20and%20Capital%20Resources) Dynavax's liquidity is supported by $518.2 million in cash, cash equivalents, and marketable securities as of June 30, 2022. The company anticipates these resources, along with anticipated revenues, will fund operations for at least the next 12 months. Cash flow from operations shifted from a generation in 2021 to a usage in 2022, primarily due to changes in operating assets and liabilities - As of June 30, 2022, Dynavax had **$518.2 million** in cash, cash equivalents, and marketable securities, expected to fund operations for at least the next 12 months[218](index=218&type=chunk) - During the six months ended June 30, 2022, the company used **$33.8 million** of cash from operations, compared to generating **$148.8 million** in the same period of 2021. This shift is attributed to net income and changes in operating assets and liabilities[221](index=221&type=chunk) - Net cash used in investing activities was **$164.0 million** in H1 2022, primarily due to net purchases of marketable securities. Net cash provided by financing activities was **$11.3 million**, mainly from warrant and stock option exercises[222](index=222&type=chunk)[223](index=223&type=chunk) - The company had **$120.5 million** available under its 2020 ATM Agreement as of June 30, 2022. Despite recent profitability, the company expects to incur substantial expenses and may require additional capital if product sales revenue is not sustainable[225](index=225&type=chunk)[226](index=226&type=chunk) - Material non-cancelable purchase commitments for HEPLISAV-B and CpG 1018 adjuvant totaled **$115.7 million** as of June 30, 2022[228](index=228&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=41&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) This section states that there were no material changes to the company's market risk disclosures during the six months ended June 30, 2022, compared to those reported in the Annual Report on Form 10-K for the year ended December 31, 2021 - No material changes to market risk disclosures were reported for the six months ended June 30, 2022[230](index=230&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=41&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Management, with the participation of the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of June 30, 2022. There were no material changes in internal controls over financial reporting during the most recent fiscal quarter - Disclosure controls and procedures were deemed effective as of June 30, 2022, ensuring timely and accurate reporting[232](index=232&type=chunk) - No material changes in internal controls over financial reporting occurred during the most recent fiscal quarter[233](index=233&type=chunk) [PART II. OTHER INFORMATION](index=42&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section provides additional disclosures including legal proceedings, risk factors, and exhibits [ITEM 1. LEGAL PROCEEDINGS](index=42&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) The company is not currently aware of any material legal proceedings, though it may be involved in claims arising from ordinary business operations from time to time - The company is not currently aware of any material legal proceedings[236](index=236&type=chunk) [ITEM 1A. RISK FACTORS](index=42&type=section&id=ITEM%201A.%20RISK%20FACTORS) This section details various risks that could materially affect Dynavax's business, financial condition, and operating results. These risks are categorized into those related to business and capital requirements, intellectual property, common stock, outstanding convertible notes, and general operational factors [Risks Related to our Business and Capital Requirements](index=42&type=section&id=Risks%20Related%20to%20our%20Business%20and%20Capital%20Requirements) This subsection highlights risks associated with commercializing HEPLISAV-B in competitive markets, the ongoing impact of the COVID-19 pandemic on operations and demand, challenges in managing commercial growth and supply chain, and uncertainties regarding pricing, reimbursement, and post-marketing obligations for approved products - Commercial success of HEPLISAV-B is unpredictable due to significant competition, the company's limited experience as a first-marketed product, and challenges in establishing and maintaining distribution channels and salesforce effectiveness[238](index=238&type=chunk)[239](index=239&type=chunk)[241](index=241&type=chunk) - The COVID-19 pandemic continues to adversely affect business operations, including reduced adult vaccine utilization (excluding COVID-19 vaccines) and potential disruptions to supply chains and customer interactions[249](index=249&type=chunk)[251](index=251&type=chunk)[252](index=252&type=chunk) - Scaling up production for HEPLISAV-B and CpG 1018 adjuvant involves significant financial commitments to CMOs, which may not be fully recovered if actual demand falls short of expectations[258](index=258&type=chunk) - Financial results may vary significantly due to the unpredictable nature of CpG 1018 adjuvant sales, which accounted for **85% of overall revenue** in H1 2022, with two customers making up **63% of that revenue**[260](index=260&type=chunk)[261](index=261&type=chunk) - The company relies on a limited number of suppliers for oligonucleotides and a single contract manufacturer for HEPLISAV-B's pre-filled syringe presentation, posing risks of supply disruptions and increased costs if alternative capabilities are needed[264](index=264&type=chunk)[265](index=265&type=chunk) - Collaboration agreements for CpG 1018 adjuvant, including for COVID-19 vaccines, may not be successful, and the company has limited control over collaborators' development and commercialization decisions[267](index=267&type=chunk)[268](index=268&type=chunk) - Uncertainty regarding coverage, pricing, and reimbursement from third-party payors, especially in the EU, could hinder the commercialization of HEPLISAV-B and future products[273](index=273&type=chunk)[274](index=274&type=chunk) - Ongoing FDA and EMA post-marketing obligations for HEPLISAV-B, including observational studies and a pregnancy registry, require significant resources, and non-compliance could lead to penalties or withdrawal of approval[278](index=278&type=chunk)[279](index=279&type=chunk) [Risks Related to our Intellectual Property](index=58&type=section&id=Risks%20Related%20to%20our%20Intellectual%20Property) This subsection addresses the risks associated with intellectual property, including potential infringement claims, challenges to existing patents, and the adequacy of patent and trade secret protection for products like HEPLISAV-B and CpG 1018 adjuvant. It also covers the reliance on third-party licenses and the uncertainties of the biopharmaceutical patent environment - The company faces risks of intellectual property disputes and litigation, which could be costly, time-consuming, and delay or prevent product commercialization if third parties successfully assert infringement claims or challenge Dynavax's patents[339](index=339&type=chunk)[340](index=340&type=chunk) - HEPLISAV-B and CpG 1018 adjuvant lack composition of matter patent protection, relying primarily on method of use patents and trade secrets. There is no assurance that patent applications for CpG 1018 will be granted or provide adequate protection[343](index=343&type=chunk) - The biopharmaceutical patent environment outside the U.S. is uncertain, potentially limiting patent protection for products addressing international markets. Disclosure of trade secrets could allow competitors to gain an advantage[345](index=345&type=chunk)[347](index=347&type=chunk) - Reliance on third-party licenses for intellectual property poses risks, including disputes, termination for non-compliance, or inability to obtain or maintain advantageous licenses, which could severely harm the business[348](index=348&type=chunk) [Risks Related to our Common Stock](index=60&type=section&id=Risks%20Related%20to%20our%20Common%20Stock) This subsection discusses the inherent volatility of the company's stock price, influenced by various factors including clinical trial results, regulatory approvals, market competition, and broader economic conditions. It also addresses the potential for dilution from future stock sales and the impact of outstanding equity instruments - The market price of Dynavax's common stock is highly volatile, influenced by factors such as clinical trial results, regulatory approvals, competition, intellectual property disputes, and general economic conditions, including the COVID-19 pandemic[351](index=351&type=chunk)[352](index=352&type=chunk) - Future sales of common stock, including those under the universal shelf registration statement or the 2020 ATM Agreement (**$120.5 million remaining** as of June 30, 2022), or the perception of such sales, could depress the stock price and impair the ability to raise additional capital[355](index=355&type=chunk)[356](index=356&type=chunk) [Risks Related to Our Outstanding Convertible Notes](index=61&type=section&id=Risks%20Related%20to%20Our%20Outstanding%20Convertible%20Notes) This subsection outlines risks associated with the company's $225.5 million Convertible Notes, including the significant cash required for debt servicing, potential inability to settle conversions or repurchases in cash, and the dilutive effect of conversions on common stock ownership. It also covers the impact of certain indenture provisions on potential takeovers and counterparty risk related to capped call transactions - Servicing the **$225.5 million Convertible Notes** requires significant cash flow, and the company may not have sufficient funds from operations to meet these obligations, potentially requiring asset sales or additional financing[357](index=357&type=chunk) - The company may lack the ability to generate or raise funds necessary to settle cash conversions or repurchase notes upon a fundamental change, which could lead to default under the indenture[358](index=358&type=chunk) - The conditional conversion feature of the Convertible Notes, if triggered, could adversely affect liquidity by requiring cash payments or dilute common stockholders' ownership if settled in shares[359](index=359&type=chunk)[361](index=361&type=chunk)[362](index=362&type=chunk) - Provisions in the Convertible Notes indenture, such as repurchase requirements upon a fundamental change, could make a takeover attempt more difficult or expensive[363](index=363&type=chunk) - The company is exposed to counterparty risk with respect to the capped call transactions, as a default by an option counterparty could lead to adverse tax consequences and increased dilution[367](index=367&type=chunk)[368](index=368&type=chunk) [General Risk Factors](index=63&type=section&id=General%20Risk%20Factors) This subsection addresses broader operational risks, including the loss of key personnel, challenges in managing growth, vulnerability to natural disasters and health epidemics (like COVID-19), and the potential for significant disruptions from information technology system failures or data security breaches. It also covers compliance with healthcare fraud and abuse laws and the impact of future legislation - Loss of key personnel or difficulties in managing continued growth and expanding operations could delay achieving objectives and adversely affect commercial and business efforts[369](index=369&type=chunk)[370](index=370&type=chunk) - Business operations are vulnerable to interruptions from natural disasters, health epidemics (e.g., COVID-19), and other catastrophic events, which could harm manufacturing, distribution, sales, and financial results[371](index=371&type=chunk)[373](index=373&type=chunk) - Significant disruptions of information technology systems or data security breaches (including cyberattacks, ransomware) could lead to loss of trade secrets, public exposure of sensitive data, financial losses, reputational harm, and regulatory penalties[376](index=376&type=chunk)[377](index=377&type=chunk)[378](index=378&type=chunk)[381](index=381&type=chunk) - Failure to comply with extensive healthcare fraud and abuse, anticorruption, privacy (e.g., CCPA, GDPR), and transparency laws in various jurisdictions could result in significant criminal, civil, and administrative penalties[321](index=321&type=chunk)[326](index=326&type=chunk)[327](index=327&type=chunk)[329](index=329&type=chunk) - Enacted or future legislation, including unfavorable pricing regulations or healthcare reform initiatives (e.g., ACA, Medicare payment reductions), may adversely affect operations and business by limiting coverage and reimbursement[330](index=330&type=chunk)[331](index=331&type=chunk)[334](index=334&type=chunk)[335](index=335&type=chunk) - As a defense contractor for the U.S. Department of Defense, the company is subject to new administrative burdens and control requirements, including ITAR compliance, with potential reputational or financial impact for non-compliance[336](index=336&type=chunk) - The company faces product liability exposure from clinical trials and product sales, which, if not adequately covered by insurance, could result in significant financial liability and diversion of management attention[337](index=337&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=65&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) This section states that there were no unregistered sales of equity securities or use of proceeds to report for the period - No unregistered sales of equity securities or use of proceeds to report[382](index=382&type=chunk) [ITEM 3. DEFAULTS UPON SENIOR SECURITIES](index=65&type=section&id=ITEM%203.%20DEFAULTS%20UPON%20SENIOR%20SECURITIES) This section indicates that there were no defaults upon senior securities during the reporting period - No defaults upon senior securities were reported[383](index=383&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES](index=65&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) This section states that there are no mine safety disclosures applicable to the company - No mine safety disclosures are applicable[384](index=384&type=chunk) [ITEM 5. OTHER INFORMATION](index=65&type=section&id=ITEM%205.%20OTHER%20INFORMATION) This section indicates that there is no other information to report for the period - No other information to report[385](index=385&type=chunk) [ITEM 6. EXHIBITS](index=66&type=section&id=ITEM%206.%20EXHIBITS) This section lists all exhibits filed with the Form 10-Q, including certifications, corporate documents, and financial instruments, indicating whether they are filed herewith or incorporated by reference - The report includes certifications from the Principal Executive Officer and Principal Financial Officer (Exhibits 31.1, 31.2, 32.1, 32.2) and various corporate and financial documents (e.g., Certificate of Incorporation, Bylaws, Indenture for Convertible Notes, Equity Incentive Plan) as exhibits[387](index=387&type=chunk)[388](index=388&type=chunk) [SIGNATURES](index=68&type=section&id=SIGNATURES) The report is formally signed by the Chief Executive Officer, Chief Financial Officer, and Chief Accounting Officer - The report is signed by Ryan Spencer (Chief Executive Officer), Kelly MacDonald (Chief Financial Officer), and Justin Burgess (Controller, Chief Accounting Officer) on August 4, 2022[394](index=394&type=chunk)

Financial Data and Key Metrics Changes - Total revenue for Q1 2022 was $114 million, representing a 37% increase year-over-year [7][32] - HEPLISAV-B net sales reached $21 million, up 151% from $8 million in Q1 2021 [17][32] - CpG 1018 adjuvant revenues were $92 million, a 23% increase from $75 million in the same period last year [32][12] - GAAP net income for Q1 2022 was $33 million, or $0.26 per share basic, compared to $900,000 or $0.01 per share in Q1 2021 [35][36] - Cash, cash equivalents, and investments totaled $503 million at the end of Q1 2022 [37] Business Line Data and Key Metrics Changes - HEPLISAV-B's market share increased to 26%, up from 14% year-over-year, with field targeted market share rising to 33% from 27% [17][21] - The hepatitis B market grew by approximately 27% year-over-year, while HEPLISAV-B grew by approximately 137% [20] Market Data and Key Metrics Changes - The CDC's ACIP recommended hepatitis B vaccination for all adults aged 19 to 59, significantly expanding the target market [21] - The market opportunity for HEPLISAV-B is estimated to grow to approximately $800 million by 2027 [22] Company Strategy and Development Direction - The company aims to leverage its strengths in commercial, manufacturing, and development to drive growth in HEPLISAV-B and CpG 1018 adjuvant supply [14][39] - The focus is on increasing awareness of the ACIP recommendation to drive market growth for HEPLISAV-B [9][23] - The company is advancing its clinical pipeline with new vaccine programs, including Tdap and shingles, utilizing the CpG 1018 adjuvant [13][25] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving annual revenue growth for both HEPLISAV-B and CpG 1018 adjuvant supply, anticipating a second consecutive year of profitability [14][58] - The company expects revenues of at least $550 million from the adjuvant supply business in 2022, with a strong pipeline supporting future growth [12][38] Other Important Information - The company has sufficient capital to support its core business without the need for additional funding [37] - Management highlighted the importance of the team’s commitment and execution in achieving the company’s goals [59] Q&A Session Summary Question: Trends in vaccine utilization from early in the quarter versus March - Utilization was down 23% for the entire quarter, with a significant turnaround observed in March [41][42] Question: Implementation of ACIP's recommendation - It is too early to assess the full impact, but the recommendation has created a market event for sales engagement [42][43] Question: Orders from Valneva and Clover - Orders have been placed in advance of approval, reflecting commitments from customers [45] Question: Market share gains from Q4 to Q1 - Market share was relatively flat from Q4 to Q1, but a positive trend was observed in March, indicating potential for future gains [46][48] Question: Flexibility in contracts amid changing market conditions - The company remains confident in its contracted revenue and continues to monitor the evolving COVID-19 environment [50][52] Question: Endemic market for COVID-19 vaccines - The company is cautious but optimistic about the potential for annual boosters and is waiting for more information on the evolving market [54] Question: Clinical proof of concept for pertussis - Key readouts will come from human and baboon challenge models, with data expected in late 2022 and 2023 [56]

[PART I FINANCIAL INFORMATION](index=6&type=section&id=PART%20I%20FINANCIAL%20INFORMATION) This section presents the unaudited condensed consolidated financial statements and management's discussion and analysis for the company [Item 1. Financial Statements (unaudited)](index=6&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) This section presents the unaudited condensed consolidated financial statements for Dynavax Technologies Corporation, including the balance sheets, statements of operations, comprehensive income (loss), stockholders' equity, and cash flows, along with detailed notes explaining significant accounting policies, fair value measurements, and specific financial instruments and agreements [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20as%20of%20March%2031%2C%202022%20and%20December%2031%2C%202021) This section provides a snapshot of the company's financial position, detailing assets, liabilities, and equity at specific dates | Metric | March 31, 2022 (Unaudited) (in thousands) | December 31, 2021 (Note 1) (in thousands) | | :-------------------------------- | :---------------------------------------- | :---------------------------------------- | | Total Assets | $1,008,975 | $1,039,246 | | Total Liabilities | $721,491 | $816,872 | | Total Stockholders' Equity | $287,484 | $222,374 | | Cash and Cash Equivalents | $179,421 | $436,189 | | Marketable Securities Available-for-Sale | $323,795 | $109,761 | | Deferred Revenue | $313,203 | $349,864 | [Condensed Consolidated Statements of Operations](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20for%20the%20Three%20Months%20Ended%20March%2031%2C%202022%20and%202021) This section outlines the company's financial performance, presenting revenues, expenses, and net income over specific periods | Metric | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | | :-------------------------------- | :----------------------------------------------- | :----------------------------------------------- | | Total Revenues | $113,992 | $83,335 | | Product Revenue, Net | $112,327 | $82,885 | | Net Income | $32,859 | $891 | | Basic Net Income Per Share | $0.26 | $0.01 | | Diluted Net Income Per Share | $0.22 | $0.01 | - Total revenues increased by **37%** year-over-year, driven by higher product revenue[19](index=19&type=chunk)[180](index=180&type=chunk) [Condensed Consolidated Statements of Comprehensive Income (Loss)](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)%20for%20the%20Three%20Months%20Ended%20March%2031%2C%202022%20and%202021) This section details the company's comprehensive income or loss, including net income and other comprehensive income (loss) components | Metric | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | | :-------------------------------- | :----------------------------------------------- | :----------------------------------------------- | | Net Income | $32,859 | $891 | | Total Other Comprehensive Loss | $(1,897) | $(1,399) | | Total Comprehensive Income (Loss) | $30,962 | $(508) | - Other comprehensive loss in Q1 2022 was primarily due to changes in unrealized gain (loss) on marketable securities and foreign currency translation adjustments[21](index=21&type=chunk) [Condensed Consolidated Statements of Stockholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity%20for%20the%20Three%20Months%20Ended%20March%2031%2C%202022%20and%202021) This section tracks changes in the company's equity, including net income, stock issuances, and other comprehensive income (loss) | Metric | December 31, 2021 (in thousands) | March 31, 2022 (in thousands) | | :-------------------------------- | :------------------------------- | :---------------------------- | | Total Stockholders' Equity | $222,374 | $287,484 | | Net Income | - | $32,859 | | Issuance of common stock (options/warrants/ESPP) | - | $26,502 | | Stock Compensation Expense | - | $7,646 | | Total Other Comprehensive Loss | - | $(1,897) | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20for%20the%20Three%20Months%20Ended%20March%2031%2C%202022%20and%202021) This section details the company's cash inflows and outflows from operating, investing, and financing activities | Cash Flow Activity | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | | :-------------------------------- | :----------------------------------------------- | :----------------------------------------------- | | Net cash (used in) provided by operating activities | $(50,443) | $38,032 | | Net cash used in investing activities | $(216,483) | $(22,633) | | Net cash provided by financing activities | $10,287 | $32,303 | | Net (decrease) increase in cash, cash equivalents and restricted cash | $(256,773) | $46,971 | - The significant increase in cash used in investing activities was primarily due to purchases of marketable securities[28](index=28&type=chunk)[207](index=207&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements [1. Organization and Summary of Significant Accounting Policies](index=10&type=section&id=1.%20Organization%20and%20Summary%20of%20Significant%20Accounting%20Policies) This note describes Dynavax's business, its focus on innovative vaccines, and the key accounting policies applied in its financial statements - Dynavax is a commercial-stage biopharmaceutical company focused on developing and commercializing innovative vaccines, with HEPLISAV-B® (Hepatitis B Vaccine) approved in the US and EU[31](index=31&type=chunk) - The company manufactures and sells CpG 1018® adjuvant, used in HEPLISAV-B and in global commercial supply agreements for COVID-19 vaccines[31](index=31&type=chunk) - Dynavax is advancing a multi-program clinical pipeline leveraging CpG 1018 adjuvant, including Phase 1 clinical trials in Tdap and shingles, and a Phase 2 clinical trial in plague in collaboration with the U.S. Department of Defense[31](index=31&type=chunk) [2. Fair Value Measurements](index=13&type=section&id=2.%20Fair%20Value%20Measurements) This note details the fair value hierarchy and measurements for financial assets and liabilities, including marketable securities and convertible notes | Asset Type | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Money Market Funds (Level 1) | $146,046 | $429,194 | | U.S. Treasuries (Level 2) | $25,076 | $4,004 | | U.S. Government Agency Securities (Level 2) | $16,519 | $26,548 | | Corporate Debt Securities (Level 2) | $307,189 | $79,209 | | Total Assets | $494,830 | $538,955 | | Warrant Liability (Level 3) | $0 | $18,016 | - The warrant liability decreased from **$18,016 thousand** at December 31, 2021, to **$0** at March 31, 2022, as all outstanding warrants were exercised or expired, resulting in a **$1,801 thousand** decrease in fair value recognized as income[60](index=60&type=chunk)[62](index=62&type=chunk)[143](index=143&type=chunk) - The fair value of the Convertible Notes was **$303.1 million** as of March 31, 2022, estimated using Level 2 observable inputs[64](index=64&type=chunk) [3. Cash, Cash Equivalents, Restricted Cash and Marketable Securities](index=15&type=section&id=3.%20Cash%2C%20Cash%20Equivalents%2C%20Restricted%20Cash%20and%20Marketable%20Securities) This note provides a breakdown of the company's cash, cash equivalents, restricted cash, and marketable securities holdings | Metric | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Cash and Cash Equivalents | $179,421 | $436,189 | | Restricted Cash | $214 | $219 | | Total Cash, Cash Equivalents and Restricted Cash | $179,635 | $436,408 | | Marketable Securities Available-for-Sale | $323,795 | $109,761 | - All marketable securities available-for-sale are classified as short-term, with maturities in one year or less[67](index=67&type=chunk) - No realized gains or losses from the sale of marketable securities were recorded during the three months ended March 31, 2022, or 2021[69](index=69&type=chunk) [4. Inventories, net](index=16&type=section&id=4.%20Inventories%2C%20net) This note details the composition of the company's inventories, including raw materials, work-in-process, and finished goods | Inventory Component | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Raw Materials | $27,758 | $26,637 | | Work-in-Process | $22,793 | $14,748 | | Finished Goods | $28,487 | $19,950 | | Total Inventories, Net | $79,038 | $61,335 | - Finished goods inventory includes **$13.5 million** of HEPLISAV-B and the remaining balance is CpG 1018 adjuvant[70](index=70&type=chunk) - Prepaid manufacturing costs for CpG 1018 adjuvant were **$138.3 million** as of March 31, 2022, expected to convert into inventory within the next twelve months[71](index=71&type=chunk) [5. Commitments and Contingencies](index=16&type=section&id=5.%20Commitments%20and%20Contingencies) This note outlines the company's lease agreements, purchase commitments, and other potential liabilities - The company entered into a new lease agreement for office space in Emeryville, CA, commencing June 2022, to replace an expiring sublease[74](index=74&type=chunk)[75](index=75&type=chunk) - A new commercial lease agreement for the Düsseldorf, Germany facility became effective on January 1, 2022, with an initial term of 10 years[78](index=78&type=chunk) | Lease Liability | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Current Portion of Lease Liabilities | $2,969 | $2,577 | | Long-Term Portion of Lease Liabilities | $34,253 | $34,316 | | Total Operating Lease Liabilities | $37,222 | $36,893 | - Material non-cancelable purchase and other commitments for the supply of HEPLISAV-B and CpG 1018 totaled **$158.8 million** as of March 31, 2022, for the next 12 months[83](index=83&type=chunk)[212](index=212&type=chunk) [6. Collaboration, Development and Supply Agreements](index=19&type=section&id=6.%20Collaboration%2C%20Development%20and%20Supply%20Agreements) This note details key agreements for CpG 1018 adjuvant supply, including those with CEPI, Clover, Bio E, Valneva, and the U.S. Department of Defense - The CEPI Agreement, as amended, provides up to **$176.4 million** in interest-free, unsecured, forgivable Advance Payments for the manufacture and reservation of CpG 1018 adjuvant[90](index=90&type=chunk) - Recognized CpG 1018 adjuvant net product revenue of **$22.3 million** from Clover in Q1 2022 for commercial supply for its COVID-19 vaccine candidate, SCB-2019[98](index=98&type=chunk) - Recognized CpG 1018 adjuvant net product revenue of **$67.3 million** from Biological E. Limited (Bio E) in Q1 2022 for commercial supply for its CORBEVAX™ COVID-19 vaccine[100](index=100&type=chunk) - The Valneva Amendment modified the supply agreement, cancelling certain purchase orders, with approximately **$55.4 million** of advance payments remaining as deferred revenue to be recognized upon future delivery of CpG 1018 adjuvant[107](index=107&type=chunk)[108](index=108&type=chunk) - Recognized **$1.6 million** in revenue from an agreement with the U.S. Department of Defense (DoD) for the development of a recombinant plague vaccine in Q1 2022[110](index=110&type=chunk) [7. Convertible Notes](index=22&type=section&id=7.%20Convertible%20Notes) This note describes the company's 2.50% convertible senior notes due 2026, including their principal amount, conversion terms, and associated capped call transactions - Issued **$225.5 million** aggregate principal amount of 2.50% convertible senior notes due 2026 in May 2021[113](index=113&type=chunk) - The Convertible Notes are convertible at an initial rate of **95.5338 shares per $1,000 principal amount**, equivalent to an initial conversion price of approximately **$10.47 per share**[115](index=115&type=chunk) | Interest Expense Component | Three Months Ended March 31, 2022 (in thousands) | | :-------------------------------- | :----------------------------------------------- | | Stated Coupon Interest | $1,409 | | Amortization of Debt Issuance Cost | $269 | | Total Interest Expense | $1,678 | - Capped call transactions totaling **$27.2 million** were entered into to offset potential dilution from Convertible Notes conversion, recorded as a reduction to additional paid-in capital[123](index=123&type=chunk)[124](index=124&type=chunk) [8. Revenue Recognition](index=23&type=section&id=8.%20Revenue%20Recognition) This note provides a detailed breakdown of the company's revenue by product type and customer, along with contract balances | Revenue Type | Q1 2022 (in thousands) | Q1 2021 (in thousands) | | :-------------------------------- | :----------------------- | :----------------------- | | HEPLISAV-B Product Revenue, Net | $20,810 | $8,303 | | CpG 1018 Product Revenue, Net | $91,517 | $74,582 | | Total Product Revenue, Net | $112,327 | $82,885 | | Other Revenue | $1,665 | $450 | | Total Revenues | $113,992 | $83,335 | - In Q1 2022, **80%** of overall revenue came from CpG 1018 adjuvant sales, with one CpG 1018 customer accounting for **59%** of total revenue[247](index=247&type=chunk) | Customer Type | Q1 2022 (% of total product revenue) | | :-------------------------------- | :----------------------------------- | | Largest HEPLISAV-B Customer | 25% | | Second Largest HEPLISAV-B Customer | 20% | | Third Largest HEPLISAV-B Customer | 16% | | Largest CpG 1018 Collaboration Partner | 74% | | Second Largest CpG 1018 Collaboration Partner | 24% | | Third Largest CpG 1018 Collaboration Partner | 2% | | Contract Balance | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Contract Asset (Clover) | $71,342 | $62,525 | | Deferred Revenue | $313,203 | $349,864 | [9. Net Income Per Share](index=25&type=section&id=9.%20Net%20Income%20Per%20Share) This note presents the basic and diluted net income per share calculations, including the weighted average common stock outstanding | Metric | Three Months Ended March 31, 2022 (in thousands, except per share) | Three Months Ended March 31, 2021 (in thousands, except per share) | | :-------------------------------- | :----------------------------------------------------------------- | :----------------------------------------------------------------- | | Net Income Attributable to Common Stockholders, Basic | $32,728 | $821 | | Net Income Attributable to Common Stockholders, Diluted | $32,317 | $821 | | Weighted Average Common Stock Outstanding, Basic | 124,555 | 112,035 | | Weighted Average Common Stock Outstanding, Diluted | 149,425 | 113,469 | - Securities excluded from diluted net income per share calculation due to anti-dilutive effects totaled **8,415 thousand** in Q1 2022 (stock options and awards) compared to **17,146 thousand** in Q1 2021 (including Series B Convertible Preferred Stock and Warrants)[137](index=137&type=chunk) [10. Common Stock, Preferred Stock and Warrants](index=26&type=section&id=10.%20Common%20Stock%2C%20Preferred%20Stock%20and%20Warrants) This note details the company's common stock, preferred stock, and warrant activity, including outstanding shares and conversion events - As of March 31, 2022, there were **126,296,892 shares** of common stock outstanding[138](index=138&type=chunk) - All **4,140 shares** of Series B Preferred Stock were converted into **4,140,000 shares** of common stock in August 2021, with none outstanding as of March 31, 2022[141](index=141&type=chunk) - All **1,882,600 outstanding warrants** as of December 31, 2021, were exercised or expired during Q1 2022, generating **$8.5 million** in cash proceeds[143](index=143&type=chunk) - As of March 31, 2022, **$120.5 million** remained available under the 2020 At Market Sales Agreement for potential common stock sales[140](index=140&type=chunk)[209](index=209&type=chunk) [11. Equity Plans and Stock-Based Compensation](index=27&type=section&id=11.%20Equity%20Plans%20and%20Stock-Based%20Compensation) This note outlines the company's equity compensation plans, stock-based compensation expense, and outstanding stock options and restricted stock units | Metric | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | | :-------------------------------- | :----------------------------------------------- | :----------------------------------------------- | | Total Stock-Based Compensation Expense | $7,646 | $4,723 | | Research and Development | $1,276 | $872 | | Selling, General and Administrative | $5,427 | $3,144 | | Cost of Sales - Product | $160 | $170 | | Inventory | $783 | $537 | - The increase in stock-based compensation expense was primarily due to higher headcount to support investment in clinical vaccine programs and the expansion of the field sales force[192](index=192&type=chunk)[195](index=195&type=chunk) | Stock Plan Activity | March 31, 2022 (in thousands) | | :-------------------------------- | :------------------------------ | | Shares Underlying Outstanding Options | 11,974 | | Weighted-Average Exercise Price | $11.71 | | Non-Vested Restricted Stock Units (Shares) | 3,389 | [12. Income Taxes](index=28&type=section&id=12.%20Income%20Taxes) This note explains the company's income tax provision and effective tax rate, primarily influenced by net operating losses and valuation allowances - The company recorded no income tax provision and had an effective tax rate of **0%** for the three months ended March 31, 2022, and 2021[149](index=149&type=chunk)[200](index=200&type=chunk) - This is primarily due to the benefit of net operating losses utilized and a full valuation allowance established on federal, state, and certain foreign deferred tax assets[149](index=149&type=chunk)[200](index=200&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=29&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on Dynavax's financial condition and operational results for the three months ended March 31, 2022, discussing revenue drivers, expense trends, liquidity, and the impact of the COVID-19 pandemic [Overview](index=29&type=section&id=Overview) Dynavax is a commercial-stage biopharmaceutical company focused on innovative vaccines, with its primary product HEPLISAV-B and CpG 1018 adjuvant driving revenue. The company is also advancing a clinical pipeline leveraging CpG 1018 for various indications - Dynavax is a commercial-stage biopharmaceutical company focused on developing and commercializing innovative vaccines, with HEPLISAV-B® (Hepatitis B Vaccine) approved in the US and EU[153](index=153&type=chunk) - HEPLISAV-B offers faster and higher rates of protection with two doses in one month compared to other approved hepatitis B vaccines requiring three doses over six months[154](index=154&type=chunk) - The company manufactures and sells CpG 1018 adjuvant, used in HEPLISAV-B and in global commercial supply agreements for COVID-19 vaccines[153](index=153&type=chunk) - Clinical pipeline leveraging CpG 1018 adjuvant includes Phase 1 trials in Tdap and shingles, and a DoD-funded Phase 2 trial in plague[153](index=153&type=chunk)[165](index=165&type=chunk) [COVID-19 Update](index=31&type=section&id=COVID-19%20Update) The COVID-19 pandemic continues to impact Dynavax's business, particularly HEPLISAV-B sales due to reduced adult vaccine utilization, though the product is gaining market share. The company has also engaged in multiple collaborations for COVID-19 vaccines utilizing its CpG 1018 adjuvant, with three collaborators having received emergency use authorizations - The COVID-19 pandemic has led to a significant reduction in the utilization of adult vaccines (other than COVID-19 vaccines), including HEPLISAV-B, which has impacted sales, though utilization rates are gradually recovering[170](index=170&type=chunk)[236](index=236&type=chunk) - HEPLISAV-B continues to gain market share in the U.S. hepatitis B adult vaccine market[170](index=170&type=chunk) - Dynavax has actively pursued collaborations for COVID-19 vaccines leveraging CpG 1018 adjuvant, with three collaborators having received emergency use authorizations for their vaccines[175](index=175&type=chunk) - Post-marketing studies for HEPLISAV-B have been completed, showing no increased risk of acute myocardial infarction compared to Engerix-B and a seroprotection rate of **89.3%** in a dialysis study with no safety concerns[172](index=172&type=chunk) [Critical Accounting Estimates](index=32&type=section&id=Critical%20Accounting%20Estimates) Management states that there have been no significant changes in the company's critical accounting policies during the three months ended March 31, 2022, compared to those disclosed in the previous annual report - No significant changes in critical accounting policies were identified during the three months ended March 31, 2022[176](index=176&type=chunk) [Results of Operations](index=32&type=section&id=Results%20of%20Operations) Dynavax reported a significant increase in total revenues for Q1 2022, driven by strong growth in both HEPLISAV-B and CpG 1018 adjuvant product sales, alongside increased operating expenses due to investments in R&D and commercial expansion [Revenues](index=32&type=section&id=Revenues) This section analyzes the drivers behind the company's revenue growth, including product sales from HEPLISAV-B and CpG 1018 adjuvant | Revenue Type | Q1 2022 (in thousands) | Q1 2021 (in thousands) | Change ($k) | Change (%) | | :-------------------------------- | :----------------------- | :----------------------- | :------------ | :--------- | | HEPLISAV-B | $20,810 | $8,303 | $12,507 | 151% | | CpG 1018 | $91,517 | $74,582 | $16,935 | 23% | | Total Product Revenue, Net | $112,327 | $82,885 | $29,442 | 36% | | Other Revenue | $1,665 | $450 | $1,215 | 270% | | Total Revenues | $113,992 | $83,335 | $30,657 | 37% | - HEPLISAV-B product revenue increased by **151%** year-over-year, primarily due to higher volume driven by continued improvement in market share and utilization of adult vaccines[180](index=180&type=chunk) - CpG 1018 adjuvant product revenue increased by **23%** year-over-year, due to an increase in sales volume from new supply and collaboration agreements with major partners[180](index=180&type=chunk)[181](index=181&type=chunk) - Other revenue increased by **270%** year-over-year, primarily due to **$1.6 million** revenue recognized from the agreement with the U.S. Department of Defense[180](index=180&type=chunk)[183](index=183&type=chunk) [Cost of Sales – Product](index=33&type=section&id=Cost%20of%20Sales%20%E2%80%93%20Product) This section examines the cost of products sold, attributing increases to higher sales volumes of HEPLISAV-B and CpG 1018 adjuvant | Cost of Sales Component | Q1 2022 (in thousands) | Q1 2021 (in thousands) | Change ($k) | Change (%) | | :-------------------------------- | :----------------------- | :----------------------- | :------------ | :--------- | | HEPLISAV-B | $5,977 | $2,745 | $3,232 | 118% | | CpG 1018 | $33,985 | $21,880 | $12,105 | 55% | | Total Cost of Sales - Product | $39,962 | $24,625 | $15,337 | 62% | - The increase in HEPLISAV-B cost of sales was primarily due to higher sales volume driven by improved market share and adult vaccine utilization[185](index=185&type=chunk) - The increase in CpG 1018 adjuvant cost of sales was due to increased sales volume from supply and collaboration agreements[185](index=185&type=chunk)[186](index=186&type=chunk) [Research and Development Expense](index=33&type=section&id=Research%20and%20Development%20Expense) This section analyzes the company's R&D expenditures, highlighting investments in new vaccine candidates and increased stock-based compensation | R&D Expense Component | Q1 2022 (in thousands) | Q1 2021 (in thousands) | Change ($k) | Change (%) | | :-------------------------------- | :----------------------- | :----------------------- | :------------ | :--------- | | HEPLISAV-B Development | $1,239 | $3,134 | $(1,895) | (60)% | | CpG 1018 Adjuvant Development | $1,133 | $1,388 | $(255) | (18)% | | Tetanus, Diphtheria, and Acellular Pertussis | $1,565 | $1,159 | $406 | 35% | | Shingles | $2,933 | $52 | $2,881 | 5540% | | Plague (DoD) | $752 | $0 | $752 | NM | | Other | $1,829 | $757 | $1,072 | 142% | | Facility Costs | $368 | $396 | $(28) | (7)% | | Non-Cash Stock-Based Compensation | $1,276 | $872 | $404 | 46% | | Total Research and Development | $11,095 | $7,758 | $3,337 | 43% | - Total R&D expenses increased by **$3.3 million (43%)** year-over-year, primarily due to a **$5.1 million** increase in investment in product candidates with CpG 1018 adjuvant and additional discovery efforts[188](index=188&type=chunk)[191](index=191&type=chunk) - Significant increases were seen in shingles program R&D (**5540%**) and the new plague vaccine program (DoD-funded)[188](index=188&type=chunk) - Non-cash stock-based compensation in R&D increased by **46%**, mainly due to higher headcount supporting clinical vaccine programs[188](index=188&type=chunk)[192](index=192&type=chunk) [Selling, General and Administrative Expense](index=34&type=section&id=Selling%2C%20General%20and%20Administrative%20Expense) This section details the increase in SG&A expenses, driven by higher compensation, outside services, and stock-based compensation due to sales force expansion | SG&A Component | Q1 2022 (in thousands) | Q1 2021 (in thousands) | Change ($k) | Change (%) | | :-------------------------------- | :----------------------- | :----------------------- | :------------ | :--------- | | Compensation and Related Personnel Costs | $13,181 | $9,204 | $3,977 | 43% | | Outside Services | $10,066 | $6,588 | $3,478 | 53% | | Legal Costs | $708 | $486 | $222 | 46% | | Facility Costs | $2,790 | $3,001 | $(211) | (7)% | | Non-Cash Stock-Based Compensation | $5,427 | $3,144 | $2,283 | 73% | | Total Selling, General and Administrative | $32,172 | $22,423 | $9,749 | 43% | - Compensation and related personnel costs increased by **43%** due to higher headcount, primarily from the expansion of the field sales force in July 2021, increased business travel, and recruiting expenses[194](index=194&type=chunk) - Outside services increased by **53%**, mainly due to an overall increase in sales and marketing activities[195](index=195&type=chunk) - Non-cash stock-based compensation in SG&A increased by **73%**, driven by higher headcount related to the sales force expansion[195](index=195&type=chunk) [Other Income (Expense)](index=34&type=section&id=Other%20Income%20(Expense)) This section covers non-operating income and expenses, including interest, sublease income, and changes in warrant liability fair value | Other Income (Expense) Component | Q1 2022 (in thousands) | Q1 2021 (in thousands) | Change ($k) | Change (%) | | :-------------------------------- | :----------------------- | :----------------------- | :------------ | :--------- | | Interest Income | $261 | $47 | $214 | 455% | | Interest Expense | $(1,680) | $(4,712) | $3,032 | (64)% | | Sublease Income | $1,609 | $2,022 | $(413) | (20)% | | Change in Fair Value of Warrant Liability | $1,801 | $(25,552) | $27,353 | 107% | | Other | $105 | $557 | $(452) | (81)% | | Net Income | $32,859 | $891 | $31,968 | 3588% | - Interest income increased significantly due to higher yields on marketable securities[199](index=199&type=chunk) - Interest expense decreased by **64%** due to the repayment of long-term debt and the issuance of Convertible Notes at a lower effective interest rate in May 2021[199](index=199&type=chunk) - A positive change in fair value of warrant liability of **$1.8 million** was recognized in Q1 2022, compared to a **$25.6 million** expense in Q1 2021, primarily due to the decrease in stock price and expiration of warrants[199](index=199&type=chunk) [Income Taxes](index=35&type=section&id=Income%20Taxes) This section explains the company's income tax position, reporting a 0% effective tax rate due to net operating losses and valuation allowances - The company reported no income tax provision and an effective tax rate of **0%** for Q1 2022 and Q1 2021, attributed to the utilization of net operating losses and a full valuation allowance on deferred tax assets[200](index=200&type=chunk) [Liquidity and Capital Resources](index=35&type=section&id=Liquidity%20and%20Capital%20Resources) Dynavax maintains a strong liquidity position with **$503.2 million** in cash, cash equivalents, and marketable securities as of March 31, 2022. The company anticipates these funds, along with projected revenues, will be sufficient to cover operations for at least the next 12 months and longer, despite using cash in operating activities during Q1 2022 - As of March 31, 2022, Dynavax had **$503.2 million** in cash, cash equivalents, and marketable securities[201](index=201&type=chunk) - The company anticipates that its current cash, cash equivalents, marketable securities, and anticipated revenues will be sufficient to fund operations for at least the next 12 months and in the longer term[201](index=201&type=chunk) - Net cash used in operating activities was **$50.4 million** in Q1 2022, primarily due to net income offset by non-cash items and investments in prepaid manufacturing[204](index=204&type=chunk)[206](index=206&type=chunk) - Net cash used in investing activities was **$216.5 million** in Q1 2022, mainly driven by purchases of marketable securities[207](index=207&type=chunk) - Net cash provided by financing activities was **$10.3 million** in Q1 2022, primarily from warrant and stock option exercises[208](index=208&type=chunk) - As of March 31, 2022, **$120.5 million** remained available under the 2020 At Market Sales Agreement[209](index=209&type=chunk) [Contractual Obligations](index=36&type=section&id=Contractual%20Obligations) The company's material non-cancelable purchase commitments for HEPLISAV-B and CpG 1018 adjuvant totaled **$158.8 million** for the next 12 months as of March 31, 2022 - Material non-cancelable purchase commitments for HEPLISAV-B and CpG 1018 adjuvant totaled **$158.8 million** for the next 12 months as of March 31, 2022[212](index=212&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=37&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) There were no material changes to the company's market risk disclosures during the three months ended March 31, 2022, compared to those reported in the Annual Report on Form 10-K for the year ended December 31, 2021 - No material changes to market risk disclosures were reported during Q1 2022[214](index=214&type=chunk) [Item 4. Controls and Procedures](index=37&type=section&id=Item%204.%20Controls%20and%20Procedures) This section details the evaluation of the company's disclosure controls and procedures and reports on any changes in internal controls over financial reporting [(a) Evaluation of disclosure controls and procedures](index=37&type=section&id=(a)%20Evaluation%20of%20disclosure%20controls%20and%20procedures) Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2022, ensuring timely and accurate reporting - Management, including the Principal Executive Officer and Principal Financial Officer, concluded that the company's disclosure controls and procedures were effective as of March 31, 2022, providing reasonable assurance for timely and accurate reporting[215](index=215&type=chunk)[216](index=216&type=chunk) [(b) Changes in internal controls](index=37&type=section&id=(b)%20Changes%20in%20internal%20controls) No material changes in internal controls over financial reporting were reported during the most recent fiscal quarter - There have been no changes in internal controls over financial reporting during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, these controls[217](index=217&type=chunk) [PART II OTHER INFORMATION](index=38&type=section&id=PART%20II%20OTHER%20INFORMATION) This section provides additional information beyond the financial statements, including legal proceedings, risk factors, equity sales, and exhibits [Item 1. Legal Proceedings](index=38&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently aware of any material legal proceedings involving Dynavax Technologies Corporation - The company is not currently aware of any material legal proceedings[220](index=220&type=chunk) [Item 1A. Risk Factors](index=38&type=section&id=Item%201A.%20Risk%20Factors) This section outlines various forward-looking statements and material factors that could cause actual results to differ significantly from expectations, covering risks related to business operations, capital requirements, intellectual property, common stock, and outstanding convertible notes - The report contains forward-looking statements subject to risks and uncertainties, including the impact of the COVID-19 pandemic, regulatory approvals, collaborations, manufacturing, and financial performance[221](index=221&type=chunk) - A summary of material factors that make an investment in the company's securities speculative or risky is provided[12](index=12&type=chunk) [Risks Related to our Business and Capital Requirements](index=38&type=section&id=Risks%20Related%20to%20our%20Business%20and%20Capital%20Requirements) This section details risks associated with the commercialization of HEPLISAV-B in competitive markets, the adverse effects of the COVID-19 pandemic on sales and operations, challenges in managing commercial growth, financial commitments for supply capacity, and uncertainties regarding pricing, reimbursement, and regulatory compliance - Significant competition exists for HEPLISAV-B in the U.S. and European Union, with unpredictable uptake and distribution efforts, posing a risk to achieving and sustaining commercial success[222](index=222&type=chunk) - The ongoing COVID-19 pandemic continues to adversely affect business and operations, particularly HEPLISAV-B sales due to significantly reduced utilization of adult vaccines (other than COVID-19 vaccines)[233](index=233&type=chunk)[236](index=236&type=chunk) - Financial commitments to increase supply capacity for HEPLISAV-B and CpG 1018 adjuvant might outpace actual demand, leading to unrecovered costs[244](index=244&type=chunk) - Uncertainty regarding coverage, pricing, and reimbursement from third-party payors may make it difficult to sell products on commercially reasonable terms[256](index=256&type=chunk) - Ongoing FDA and EMA post-marketing obligations for HEPLISAV-B may result in significant additional expense and potential penalties for non-compliance[259](index=259&type=chunk)[261](index=261&type=chunk)[262](index=262&type=chunk) - Despite recent profitability, the company has incurred annual net losses in most years since inception and anticipates potential significant losses, requiring substantial additional capital if product sales are not sustainable[271](index=271&type=chunk)[273](index=273&type=chunk) - Clinical trials are expensive, time-consuming, and have uncertain outcomes, with potential for delays, suspensions, or terminations due to various factors including trial design deficiencies, adverse events, or difficulties in enrollment[281](index=281&type=chunk)[286](index=286&type=chunk)[290](index=290&type=chunk) [Risks Related to our Intellectual Property](index=53&type=section&id=Risks%20Related%20to%20our%20Intellectual%20Property) This section addresses the risks of intellectual property disputes, potential infringement claims by third parties, the adequacy of patent and trade secret protection for key products like HEPLISAV-B and CpG 1018, and the company's reliance on third-party licenses - The company may face litigation or disputes over intellectual property infringement, which could be costly, time-consuming, and delay or prevent the development or commercialization of product candidates[318](index=318&type=chunk)[320](index=320&type=chunk) - HEPLISAV-B and CpG 1018 adjuvant lack composition of matter patent protection, relying primarily on method of use patent claims and trade secret protection, which may be inadequate to realize recurring commercial benefit[323](index=323&type=chunk) - Uncertainty in the biopharmaceutical patent environment outside the U.S. may limit patent protection, particularly for method of use claims[324](index=324&type=chunk) - Reliance on licenses to intellectual property from third parties exposes the company to risks such as disputes, termination provisions, and the inability to maintain exclusivity, which could severely harm the business[329](index=329&type=chunk) [Risks Related to our Common Stock](index=55&type=section&id=Risks%20Related%20to%20our%20Common%20Stock) This section highlights the inherent volatility of the company's stock price, influenced by various internal and external factors, and the potential for future sales of common stock to depress market prices - The market price of the company's common stock is subject to substantial volatility due to factors such as clinical trial results, regulatory approvals, market competition, economic conditions, and the impact of the COVID-19 pandemic[330](index=330&type=chunk)[332](index=332&type=chunk) - Future sales of a substantial number of shares of common stock in the public market, or the perception of such sales (e.g., under the 2020 ATM Agreement), could depress the market price and impair the ability to raise additional capital[335](index=335&type=chunk)[336](index=336&type=chunk) [Risks Related to Our Outstanding Convertible Notes](index=56&type=section&id=Risks%20Related%20to%20Our%20Outstanding%20Convertible%20Notes) This section outlines risks associated with the company's **$225.5 million** Convertible Notes, including the significant cash required for debt servicing, potential inability to settle conversions in cash, and the dilutive effect of conversions on common stock ownership. It also addresses counterparty risk related to capped call transactions - Servicing the **$225.5 million** Convertible Notes requires a significant amount of cash, and insufficient cash flow could lead to default or require onerous refinancing terms[337](index=337&type=chunk)[339](index=339&type=chunk) - The company may not have the ability to raise necessary funds to settle conversions of the Convertible Notes in cash or to repurchase them upon a fundamental change, potentially leading to a default[340](index=340&type=chunk) - The conditional conversion feature of the Convertible Notes could adversely affect financial condition and operating results by requiring cash payments or reclassifying debt to a current liability[341](index=341&type=chunk) - Conversion of the Convertible Notes may dilute the ownership interest of existing stockholders or otherwise depress the price of common stock[342](index=342&type=chunk) - The Capped Calls, while intended to offset dilution, expose the company to counterparty risk if the option counterparties default[345](index=345&type=chunk)[347](index=347&type=chunk) [General Risk Factors](index=58&type=section&id=General%20Risk%20Factors) This section covers broader operational risks, including the potential loss of key personnel, challenges in managing organizational growth, vulnerability to natural disasters and health epidemics (like COVID-19), and the adverse effects of disruptions to information technology systems and data security breaches - The loss of key personnel could delay or prevent achieving objectives, and continued growth to support commercialization may result in difficulties in managing operations successfully[349](index=349&type=chunk)[350](index=350&type=chunk) - Business operations are vulnerable to interruptions by natural disasters, health epidemics (such as the ongoing COVID-19 pandemic), and other catastrophic events, which could materially harm manufacturing, distribution, sales, and financial results[352](index=352&type=chunk)[354](index=354&type=chunk) - Significant disruptions of information technology systems or breaches of data security could adversely affect the business, leading to loss of intellectual property, public exposure of sensitive data, reputational damage, and regulatory penalties[356](index=356&type=chunk)[357](index=357&type=chunk)[361](index=361&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=61&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section reports that there were no unregistered sales of equity securities or use of proceeds to disclose for the period - No unregistered sales of equity securities or use of proceeds were reported[363](index=363&type=chunk) [Item 3. Defaults upon Senior Securities](index=61&type=section&id=Item%203.%20Defaults%20upon%20Senior%20Securities) This section states that there were no defaults upon senior securities to report for the period - No defaults upon senior securities were reported[364](index=364&type=chunk) [Item 4. Mine Safety Disclosures](index=61&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section indicates that there were no mine safety disclosures required for the period - No mine safety disclosures were reported[365](index=365&type=chunk) [Item 5. Other Information](index=61&type=section&id=Item%205.%20Other%20Information) This section states that there was no other information to report for the period - No other information was reported[366](index=366&type=chunk) [Item 6. Exhibits](index=62&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including certifications from executive officers and various XBRL documents - Exhibits include certifications of the Principal Executive Officer and Principal Financial Officer (Exhibits 31.1, 31.2, 32.1, 32.2) as required by the Sarbanes-Oxley Act of 2002[368](index=368&type=chunk)[371](index=371&type=chunk) - The filing includes Inline XBRL Instance Document and Taxonomy Extension Documents (Exhibits 101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE)[371](index=371&type=chunk) [SIGNATURES](index=64&type=section&id=SIGNATURES) This section contains the required signatures of the company's Principal Executive Officer, Principal Financial Officer, and Principal Accounting Officer, certifying the accuracy and completeness of the quarterly report [SIGNATURES](index=64&type=section&id=SIGNATURES) This section contains the required signatures of the company's Principal Executive Officer, Principal Financial Officer, and Principal Accounting Officer, certifying the accuracy and completeness of the quarterly report - The report was signed on May 5, 2022, by Ryan Spencer (Chief Executive Officer), Kelly MacDonald (Chief Financial Officer), and Justin Burgess (Controller, Chief Accounting Officer)[376](index=376&type=chunk)

Dynavax Technologies Corporation (NASDAQ:DVAX) Q4 2021 Earnings Conference Call February 28, 2022 4:30 PM ET Company Participants Nicole Arndt - Senior Manager, Investor Relations Ryan Spencer - Chief Executive Officer Donn Casale - Senior Vice President, Commercial Rob Janssen - Chief Medical Officer Kelly MacDonald - Chief Financial Officer Conference Call Participants Phil Nadeau - Cowen Ed White - H.C. Wainwright Matt Phipps - William Blair Operator Good day, ladies and gentlemen, and welcome to the ...