Dynavax(DVAX) - 2022 Q1 - Quarterly Report

PART I FINANCIAL INFORMATION This section presents the unaudited condensed consolidated financial statements and management's discussion and analysis for the company Item 1. Financial Statements (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 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 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][180] Condensed Consolidated Statements of Comprehensive Income (Loss) 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] Condensed Consolidated Statements of Stockholders' Equity 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 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][207] Notes to Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements 1. Organization and Summary of Significant Accounting Policies 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] - The company manufactures and sells CpG 1018® adjuvant, used in HEPLISAV-B and in global commercial supply agreements for COVID-19 vaccines[31] - 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] 2. Fair Value Measurements 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][62][143] - The fair value of the Convertible Notes was $303.1 million as of March 31, 2022, estimated using Level 2 observable inputs[64] 3. Cash, Cash Equivalents, Restricted Cash and Marketable Securities 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] - No realized gains or losses from the sale of marketable securities were recorded during the three months ended March 31, 2022, or 2021[69] 4. Inventories, net 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] - 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] 5. Commitments and Contingencies 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][75] - A new commercial lease agreement for the Düsseldorf, Germany facility became effective on January 1, 2022, with an initial term of 10 years[78] | 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][212] 6. Collaboration, Development and Supply Agreements 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] - 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] - 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] - 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][108] - 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] 7. Convertible Notes 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] - 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] | 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][124] 8. Revenue Recognition 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] | 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 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] 10. Common Stock, Preferred Stock and Warrants 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] - 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] - 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] - As of March 31, 2022, $120.5 million remained available under the 2020 At Market Sales Agreement for potential common stock sales[140][209] 11. Equity Plans and Stock-Based Compensation 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][195] | 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 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][200] - 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][200] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 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 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] - 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] - The company manufactures and sells CpG 1018 adjuvant, used in HEPLISAV-B and in global commercial supply agreements for COVID-19 vaccines[153] - Clinical pipeline leveraging CpG 1018 adjuvant includes Phase 1 trials in Tdap and shingles, and a DoD-funded Phase 2 trial in plague[153][165] COVID-19 Update 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][236] - HEPLISAV-B continues to gain market share in the U.S. hepatitis B adult vaccine market[170] - 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] - 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] Critical Accounting Estimates 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] Results of Operations 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 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] - 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][181] - Other revenue increased by 270% year-over-year, primarily due to $1.6 million revenue recognized from the agreement with the U.S. Department of Defense[180][183] Cost of Sales – Product This section examines the cost of products sold, attributing increases to higher sales volumes of HEPLISAV-B and CpG 1018 adjuvant | Cost of Sales Component | Q1 2022 (in thousands) | Q1 2021 (in thousands) | Change ($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 | $15,337 | 62% | - The increase in HEPLISAV-B cost of sales was primarily due to higher sales volume driven by improved market share and adult vaccine utilization[185] - The increase in CpG 1018 adjuvant cost of sales was due to increased sales volume from supply and collaboration agreements[185][186] Research and Development Expense This section analyzes the company's R&D expenditures, highlighting investments in new vaccine candidates and increased stock-based compensation | R&D Expense Component | Q1 2022 (in thousands) | Q1 2021 (in thousands) | Change ($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 $5.1 million increase in investment in product candidates with CpG 1018 adjuvant and additional discovery efforts[188][191] - Significant increases were seen in shingles program R&D (5540%) and the new plague vaccine program (DoD-funded)[188] - Non-cash stock-based compensation in R&D increased by 46%, mainly due to higher headcount supporting clinical vaccine programs[188][192] Selling, General and Administrative Expense This section details the increase in SG&A expenses, driven by higher compensation, outside services, and stock-based compensation due to sales force expansion | SG&A Component | Q1 2022 (in thousands) | Q1 2021 (in thousands) | Change ($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 | $9,749 | 43% | - Compensation and related personnel costs increased by 43% due to higher headcount, primarily from the expansion of the field sales force in July 2021, increased business travel, and recruiting expenses[194] - Outside services increased by 53%, mainly due to an overall increase in sales and marketing activities[195] - Non-cash stock-based compensation in SG&A increased by 73%, driven by higher headcount related to the sales force expansion[195] Other Income (Expense) This section covers non-operating income and expenses, including interest, sublease income, and changes in warrant liability fair value | Other Income (Expense) Component | Q1 2022 (in thousands) | Q1 2021 (in thousands) | Change ($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] - 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] - 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] Income Taxes 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] Liquidity and Capital Resources 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] - 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] - 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][206] - Net cash used in investing activities was $216.5 million in Q1 2022, mainly driven by purchases of marketable securities[207] - Net cash provided by financing activities was $10.3 million in Q1 2022, primarily from warrant and stock option exercises[208] - As of March 31, 2022, $120.5 million remained available under the 2020 At Market Sales Agreement[209] Contractual Obligations 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] Item 3. Quantitative and Qualitative Disclosures about Market Risk 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] Item 4. Controls and Procedures 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 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][216] (b) Changes in internal controls 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] PART II OTHER INFORMATION This section provides additional information beyond the financial statements, including legal proceedings, risk factors, equity sales, and exhibits Item 1. Legal Proceedings 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] Item 1A. Risk Factors 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] - A summary of material factors that make an investment in the company's securities speculative or risky is provided[12] Risks Related to our Business and Capital Requirements 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] - 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][236] - Financial commitments to increase supply capacity for HEPLISAV-B and CpG 1018 adjuvant might outpace actual demand, leading to unrecovered costs[244] - Uncertainty regarding coverage, pricing, and reimbursement from third-party payors may make it difficult to sell products on commercially reasonable terms[256] - Ongoing FDA and EMA post-marketing obligations for HEPLISAV-B may result in significant additional expense and potential penalties for non-compliance[259][261][262] - 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][273] - 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][286][290] Risks Related to our Intellectual Property 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][320] - 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] - Uncertainty in the biopharmaceutical patent environment outside the U.S. may limit patent protection, particularly for method of use claims[324] - 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] Risks Related to our Common Stock 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][332] - 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][336] Risks Related to Our Outstanding Convertible Notes 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][339] - 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] - 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] - Conversion of the Convertible Notes may dilute the ownership interest of existing stockholders or otherwise depress the price of common stock[342] - The Capped Calls, while intended to offset dilution, expose the company to counterparty risk if the option counterparties default[345][347] General Risk Factors 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][350] - 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][354] - 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][357][361] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 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] Item 3. Defaults upon Senior Securities This section states that there were no defaults upon senior securities to report for the period - No defaults upon senior securities were reported[364] Item 4. Mine Safety Disclosures This section indicates that there were no mine safety disclosures required for the period - No mine safety disclosures were reported[365] Item 5. Other Information This section states that there was no other information to report for the period - No other information was reported[366] Item 6. Exhibits 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][371] - 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] 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 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]