Dynavax(DVAX) - 2025 Q2 - Quarterly Report

PART I FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) The unaudited condensed consolidated financial statements for the six months ended June 30, 2025, show a significant increase in total revenues compared to the same period in 2024, primarily driven by HEPLISAV-B sales, despite a net loss of $77.4 million largely due to a one-time $82.1 million loss on debt extinguishment Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash, cash equivalents, and marketable securities | $613,729 | $713,834 | | Accounts receivables, net | $70,699 | $45,281 | | Inventories | $75,687 | $70,054 | | Total Assets | $918,449 | $986,256 | | Liabilities & Equity | | | | Total current liabilities | $118,230 | $78,634 | | Convertible Notes, net | $260,772 | $223,854 | | Total Liabilities | $424,287 | $389,457 | | Total Stockholders' Equity | $494,162 | $596,799 | - Total assets decreased primarily due to a reduction in cash and marketable securities, partly used for share repurchases and debt refinancing. Total liabilities increased due to the issuance of new 2030 Convertible Notes, partially offset by the exchange of 2026 Notes[15] Condensed Consolidated Statements of Operations Statement of Operations Summary (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $95,442 | $73,795 | $163,606 | $124,584 | | Income (Loss) from Operations | $14,429 | $5,198 | $(9,201) | $(12,573) | | Loss on debt extinguishment | $0 | $0 | $(82,095) | $0 | | Net Income (Loss) | $18,721 | $11,386 | $(77,378) | $2,665 | | Diluted EPS | $0.14 | $0.08 | $(0.63) | $0.02 | - Total revenues grew 29% YoY in Q2 2025 and 31% YoY for the six months ended June 30, 2025, driven by strong HEPLISAV-B sales. The significant net loss for the first six months of 2025 was primarily caused by a one-time, non-cash loss of $82.1 million on debt extinguishment related to the March 2025 refinancing transaction[17][72] Condensed Consolidated Statements of Cash Flows Cash Flow Summary for Six Months Ended June 30 (in thousands) | Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $3,792 | $(5,966) | | Net cash provided by (used in) investing activities | $101,702 | $(25,936) | | Net cash used in financing activities | $(103,800) | $(5,618) | | Net increase (decrease) in cash | $3,252 | $(37,785) | - For the first six months of 2025, cash from operations turned positive. Investing activities provided cash due to net proceeds from marketable securities. Financing activities used significant cash for share repurchases ($100.6 million) and debt extinguishment payments ($80.9 million), partially offset by proceeds from new debt issuance and unwound capped calls[25] Notes to Financial Statements Key notes to the financial statements detail the company's collaborative agreements, a significant debt refinancing transaction, revenue recognition policies, and the completion of its share repurchase program - An allowance for doubtful accounts of approximately $11.0 million was recorded relating to the contract asset for Clover, based on an evaluation of credit risk after GAVI terminated its purchase agreement with Clover[60][137] - In March 2025, the company completed a refinancing transaction, issuing $225.0 million of 2.00% Convertible Senior Notes due 2030 to exchange and repurchase a portion of its 2.50% Convertible Senior Notes due 2026, resulting in a recognized loss on debt extinguishment of $82.1 million[68][72][151] - The company completed its $200.0 million share repurchase program, repurchasing a total of 16.6 million shares during the six months ended June 30, 2025, including shares under an Accelerated Share Repurchase (ASR) agreement and through open market transactions[105][107][156] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes the 33% year-over-year revenue growth for the first six months of 2025 to increased HEPLISAV-B sales volume and higher net pricing, while operating expenses rose due to R&D investments and proxy contest costs, leading to a net loss of $77.4 million driven by a debt extinguishment loss Overview and Pipeline Update - The company's strategy focuses on maximizing HEPLISAV-B utilization, expanding its vaccine pipeline using the CpG 1018 adjuvant, and leveraging CpG 1018 supply through collaborations[127] - Key pipeline programs leveraging the CpG 1018 adjuvant are advancing: - Shingles (Z-1018): Top-line immunogenicity and safety data from a Phase 1/2 trial comparing Z-1018 to Shingrix are expected in August 2025 - Plague: A new $30 million agreement with the DoD will support a Phase 2 trial expected to start in H2 2025 - Pandemic Influenza (H5N1): A Phase 1/2 study is ongoing, with data expected to inform formulation selection for Part 2 of the trial - Lyme Disease: The vaccine candidate has progressed to IND-enabling studies, with clinical development planned to start in 2027 - HEPLISAV-B (Hemodialysis): Engaging with the FDA to finalize the protocol for an observational study to support an sBLA filing for a four-dose regimen[143][144][149] Results of Operations Revenue Comparison (in thousands) | Revenue Source | YTD 2025 | YTD 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | HEPLISAV-B | $156,831 | $118,032 | $38,799 | 33% | | Other revenue | $6,775 | $6,552 | $223 | 3% | | Total Revenues | $163,606 | $124,584 | $39,022 | 31% | - The $38.8 million increase in HEPLISAV-B revenue for the first six months of 2025 was driven by higher sales volume ($17.2 million), increases in net sales price ($14.0 million), and favorable adjustments to the product returns reserve estimate ($6.8 million)[163] Operating Expense Comparison - YTD (in thousands) | Expense Category | YTD 2025 | YTD 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Cost of Sales - Product | $27,804 | $22,952 | $4,852 | 21% | | Research & Development | $35,996 | $28,478 | $7,518 | 26% | | Selling, General & Administrative | $98,037 | $85,727 | $12,310 | 14% | | Bad Debt Expense | $10,970 | $0 | $10,970 | N/A | - R&D expenses increased by $7.5 million YTD, primarily due to the shingles Phase 1/2 trial and advancing the pandemic influenza and Lyme disease programs. SG&A expenses increased by $12.3 million YTD, mainly driven by $12.5 million in professional fees related to a proxy contest[171][174] Liquidity and Capital Resources - As of June 30, 2025, the company had $613.7 million in cash, cash equivalents, and marketable securities. Management believes these funds, along with anticipated HEPLISAV-B revenues, are sufficient to fund operations for at least the next 12 months[181] - The company completed its $200.0 million share repurchase program as of June 30, 2025[184] - Following the refinancing, the total principal balance of outstanding convertible notes was $265.2 million, comprising $40.2 million of 2026 Notes (due May 2026) and $225.0 million of 2030 Notes (due March 2030)[185] Item 3. Quantitative and Qualitative Disclosures about Market Risk The company states there were no material changes to its market risk disclosures during the six months ended June 30, 2025, as compared to those in its 2024 Annual Report on Form 10-K - No material changes to market risk disclosures were reported for the period[196] Item 4. Controls and Procedures Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of June 30, 2025, with no material changes in internal controls over financial reporting during the quarter - Management concluded that disclosure controls and procedures are effective at a reasonable assurance level[198] - No material changes to internal controls over financial reporting were identified during the most recent fiscal quarter[199] PART II OTHER INFORMATION Item 1. Legal Proceedings The company is not currently aware of any material legal proceedings involving the company - The company reports no material legal proceedings as of the filing date[201] Item 1A. Risk Factors The company highlights several material risks, including significant competition for HEPLISAV-B, potential for financial results to vary significantly, and reliance on third parties for manufacturing, alongside new risks from global trade policies, activist stockholders, and financial risks associated with its convertible notes - HEPLISAV-B, the company's first and only marketed product, faces significant competition in the U.S., and its commercial success is not guaranteed[206] - The company relies on its facility in Germany and third-party suppliers for manufacturing, including a single supplier for the pre-filled syringe presentation of HEPLISAV-B, creating supply chain risk[226] - A new risk factor was added concerning global trade issues, noting that new tariffs (such as a 10% global tariff and 125% on Chinese goods) could increase manufacturing costs and disrupt the supply chain, as key manufacturing processes occur in Germany[269][270][273] - The company notes that actions by activist stockholders, such as the recent proxy contest, can be disruptive, costly, and divert management's attention[352] - Servicing the $265.2 million in outstanding convertible notes requires significant cash, and conversion of the notes could dilute shareholder ownership[353] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company reports the completion of its $200.0 million share repurchase program as of June 30, 2025, with 6,596,048 shares repurchased during the second quarter of 2025 at an average price of $10.75 per share - The company has completed all repurchases under its authorized $200.0 million share repurchase program[383] Share Repurchases in Q2 2025 | Period | Total Shares Purchased | Average Price Paid per Share ($) | | :--- | :--- | :--- | | April 2025 | 3,342,919 | $11.36 | | May 2025 | 3,253,129 | $10.12 | | June 2025 | 0 | $0.00 | | Total Q2 | 6,596,048 | $10.75 |