Dynavax Technologies Corp (DVAX) 2005 Q2 法說會逐字稿

Good day, ladies and gentlemen and welcome to the second quarter 2005 Dynavax earnings conference call.

My name is Shawn and I will be your coordinator for today.

[OPERATOR INSTRUCTIONS]

I would now like to turn the presentation over to Ms. Jane Green, Vice President of Corporate Communications.

Please go ahead.

Hello and thanks for joining Dynavax's second quarter 2005 financial results conference call.

Participating in today's call are Dino Dina, President and Chief Executive Officer and Deborah Smeltzer, Vice President, Operations and Chief Financial Officer.

Following this introduction, Dino will provide a summary of the quarter's achievements, Deborah will review financial results for the quarter and Dino will provide additional commentary on the company's performance.

Following Dino's remarks, we'll open the call for questions.

Please be advised that statements included in this conference call that are not a description of historical facts or forward-looking statements.

Such forward-looking statements can be identified by the use of forward-looking terminology, such as we believe, we expect, we anticipate, or other similar terms.

These statements include without limitations, statements about the progress and timing of our clinical trials, a potential timing for registration filings for AIC and our HPV vaccine, the commercial opportunities that AIC and our HPV vaccine represents for the company and our options for defraying the costs associated with higher expenses we expect to incur with our maturing programs.

The inclusion of forward-looking statements should not be regarded as guarantees of future performance or a representation by Dynavax that any of its plans will be achieved.

Actual results may differ materially from those set forth in this conference call due to the risks and uncertainties inherent in Dynavax's business, including without limitations, uncertainties, difficulties, and delays in the development testing clinical trials, regulatory approval process, production and marketing associated with products, the scope and validity of patent protection for products, competition from other pharmaceutical or biotechnology companies, our ability to control expenses and maintain a strong financial position, and other risks detailed in the risk factor section of Dynavax's annual report on form-10K filed on March 18, 2005 and our quarterly report on form-10Q filed May 9, 2005.

We were caution not to place undue reliance on these forward-looking statements, which speak only as of the dates hereof.

Our forward-looking statements are qualified in their entirety by these questionary statement and Dynavax undertakes no obligation to revise or update statements made during this conference call to reflect events or circumstances after the date hereof.

Now, I'd like to turn the call over to Dino Dina.

Thank you, Jane.

We believe that Dynavax delivered a first half 2005 performance, highlighted by progress in advancing our lead clinical programs in (inaudible-- highly accented) allergy, medal (ph) therapy, and Hepatitis B Prophylaxis.

Enrollment in our AIC trial (inaudible-- highly accented)allergic children issued (ph) earlier in the quarter exceeded our expectations due to the (inaudible-- highly accented) efforts of our clinical investigators.

In addition, the second season boost our phase in our two-year phase to three-year pretrial has been completed and the reenrollment rates were subject in this trial was a very strong 86%.

Our (inaudible-- highly accented) Phase 3 (inaudible-- highly accented) vaccine trial is well underway and we are on track to (inaudible-- highly accented) our pivotal clinical trial in early 2006.

In anticipation of sustaining this rapid pace of development, we're continuing to sharpen our commercial strategy for both lead programs and believe that AIC and HPD represents significant commercial opportunities for our company.

We are appreciative of the heighten level of interest in the PLR (ph) base within the pharmaceutical sector and our leveraging (inaudible) seems to explore the potential for establishing strategic alliances that could help us advance our programs.

We're pleased with our overall progress and anticipate a productive second half of 2005.

Now, I'll ask Deborah to review our quarterly financial results.

Thank you, Dino.

Our financial performance for the second quarter 2005 was in line with our expectations.

Total revenues for the quarter in the June 30, 2005 were $1 million compared to $5.5 million to the same period in 2004.

Revenues in the second quarter 2005 left (ph) a decrease in collaboration revenue, following the March 2005 ending of the allergy collaboration between Dynavax and UCB Pharkim (ph) and the return to Dynavax a full rights to its allergy program.

Revenues in the second quarter 2005 were driven by grants awarded by the National Institute of Allergy and Infectious Disease and by the Alliance for Lucas Research.

For the six months ended June 30, 2005 total revenues were $13.7 million compared to $8.7 million for the same period in 2004.

Collaboration revenue of $12.2 million for the six months ended June 30, 2005 included a one-time non-cash amount of $7 million, resulting from the accelerated recognition of an up-front payment the company received from UCB in 2004.

Total operating expenses for the quarter ended June 30, 2005 were $10 million compared to $8.6 million for the same period in 2004.

The increase in operating expenses is primarily due to increased clinical trial and manufacturing activities related to the companies ragweed allergy and hepatitis B vaccine programs as well as overall organizational growth and expenses incurred to supported covered company compliance requirements.

Total operating expenses for the six months ended June 30, 2005 were $18 million compared to $15.8 million to the same period in 2004.

Net loss for the quarter ended June 30, 2005 was $8.6 million or $0.35 per diluted share compared to a net loss of $2.9 million or $0.12 per diluted shares to the same period in 2004.

The increase in net loss was primarily driven by the decline in collaboration revenue.

Net loss for the six months ended June 30, 2005 was $3.5 million or $0.14 per diluted share compared to a net loss of $6.8 million or $0.38 per diluted share for the same period in 2004.

The decrease in net loss for the six months ended June 30, 2005 resulted primarily from the one-time non-cash impact to collaboration revenue of $7 million.

As of June 30, 2005 cash, cash equivalence, and marketable securities totaled $58.2 million compared to $65.8 million at December 31, 2004.

The cash balance at June 30, 2005 includes cash proceeds that Dynavax received from UCB in April of 2005.

Now, I'd like to turn the call back to Dino.

Thanks.

I'll proceed to highlight what I believe were the company's key accomplishments this quarter.

We made significant progress in our clinical program for ragweed.

Clinical and regulatory strategy is to demonstrate safety and accuracy (ph) in a broad age range of allergy sufferers.

In June, we initiated a large clinical trial of AIC ragweed with allergic children age 6 to 15 years.

Ragweed allergic children face a very high risk of developing allergic asthma with serious medical conditions that requires long-term dependant on steroids and for which is safe and effective preventive therapies urgently needed.

Part of our blinded (inaudible-- highly accented) control trial would be conducted through (inaudible-- highly accented) ragweed seasons in the years 2005 - 2007.

The (inaudible-- highly accented) point of this trial is reduction in 80% of up to two seasons and a secondary (inaudible-- highly accented) point to the prevention of development of asthma over three seasons.

In the 2005 season, subjects will be treated with AIC or placebo in a one to one randomization scheme and will receive six doses over six weeks prior to the start of the ragweed season.

Those escalations is the same regiment when using the current Phase 3 trial and what we would plan to use in the pivotal Phase 3 trial.

Two (inaudible-- highly accented) shots will be administered prior to the 2006 and 2007 ragweed seasons on a blinded basis.

The company will perform an analogy so the results based on the primary end (ph) points after the second or 2006 season.

The secondary end points results will be evaluated following the 2007 season.

We work with (inaudible-- highly accented) gratified by the high level of interest in the study among the investigators.

As a result of increased demand, we increased enrollment from the plan terminated subjects to 315 subjects.

For enrollment we're accomplishing less 2.5 months.

We believe interest and (inaudible-- highly accented) was (inaudible-- highly accented) by the demonstrated to all our ability and potential to our firm or continued effect (inaudible-- highly accented)conventional (inaudible-- highly accented) therapy.

It's been estimated that approximately 25% of those who suffer from allergic rhinitis will progress to asthma and of the 20 million Americans who suffer from asthma, approximately 9 million are children.

Experts agree that there's need for a safer and more effective therapy to prevent the allergic march from allergy to asthma in children.

Ongoing phase to pre-clinical trials of AIC is also progressing quite well.

Their reenrollment rate for the second season of this two-year multi (inaudible) trial was also extremely high.

More than 86% of the initial patient population has remained in the study.

We attributed to such a strong investigator interest in AIC, the high level of (inaudible - highly accented) ability of the therapy in our aggressive retention program.

We're pursuing ambitious clinical development in the regulatory strategy for AIC.

Our timelines are driven by the seasonal nature of ragweed allergy, which determines when clinical trials must be conducted and completed and by the disease notifying (inaudible - highly accented) AIC which requires initiating those in well in advance of the season to allow the new (ph) systematical time to build tolerance to the target allergen.

We anticipate having results from the phase two pretrial early in the first quarter of 2006.

Assuming those results are positive, we plan to proceed quickly to finalize discussions with the FDA concerning the timing and design of the pivotal Phase 3 program with the goal of initiating the very same program in the first half of 2006.

Between now and then, we'll build infrastructure for the pivotal program.

We will continue to have informal discussions with FDA, we will manufacture Phase 3 (inaudible-- highly accented) AIC and create a clinical site network that will support the pivotal Phase 3 trial.

We plan to conduct a pivotal Phase 3 program in approximately 800 to 1,000 subjects.

The trial will be designed with a two-year primary end point.

We plan to build in one year in a one-year in term analysis (ph)which is positive, and if the FDA agreed, could enable us to file DLA in the 2007 timeframe.

I'm assuming positive results from the pediatric studies.

Those data could be part of our filing as well.

The DL would enable Dynavax to establish accuracy in additional target population and could be valuable in expanding the potential leading of (inaudible-- highly accented) AIC therapy should we receive marketing approval from FDA following the completion of the pivotal Phase 3 program.

As I mentioned, these are ambitious timelines.

We believe that AIC's considerable therapeutic and commercial potential warrant a reasonable and aggressive development strategy and schedule.

AIC is a novel therapy that could become a new standard of care not only for severe allergic, but also for those with mild to moderate allergies.

As such, we believe AIC represents a significant commercial opportunity for the company.

Moving on to hepatitis B, Dynavax hepatitis B vaccine has demonstrated superior effectiveness compared to edrix (ph) B, being the industry standard in clinical trials to date.

We believe the vaccine could become a new standard of care, especially for populations that are at high-risk, that are currently underserved and those who need protection, urgently.

The (inaudible-- highly accented) demonstration of sporadically (ph) of our HPD vaccine, especially in populations with (inaudible-- highly accented) responses is in fact the cornerstone of our global regulatory and commercial strategy.

We plan to focus our commercial efforts on target populations in major worldwide markets where the clinical need for an enhance vaccine is graded and where we believe we can achieve a significant commercial return.

These populations include (inaudible-- highly accented) dialysis patients, people infected with HIV, or Hepatitis C, people who refuse multiple transfusions as well as healthcare and emergency response personnel.

Our clinical strategy is broad.

Our goal is to demonstrate safety and superiority in sufficient number of subjects and in multiple geographies where the vaccine can potentially be used.

Our registration strategy will be planned to target selected markets such as dialysis markets, where we believe we can achieve significant market share with superior pricing.

The HPD clinical strategy is on track.

In June we initiated the first of two large scales, pivotal Phase 3 clinical trials.

This was a major milestone for the company.

The Phase 3 trial will enroll more than 400 (inaudible-- highly accented) adults, age 40 to 70 and will take place in study sites in Singapore, Taiwan, Korea, and the Philippines.

The trial with the one to one randomized and double blinded.

One group will receive three doses of Dynavax's HPD vaccine administered at those of 20 micrograms. (inaudible-- highly accented) plus 3 milligrams of ISR.

By intramuscular injection 0, 2, and 6 months.

The other group will receive three doses of (inaudible-- highly accented) be administered at those of 20 micrograms of hepatitis B (inaudible-- highly accented) by intramuscular injection at 0, 1, and 6 months.

The primary (inaudible-- highly accented) of protection four weeks after the third immunization at month seven. (inaudible-- highly accented)will also be also followed for an additional five months.

The trial is anticipated to be completed in the second half of 2006.

Early next year we anticipate initiating the second pivotal Phase 3 trial in Canada and Europe.

The trial will enroll approximately 400 (inaudible-- highly accented) subjects, age 15 to 39.

The primary endpoint will be a protection for weeks after the second immunization and prior to the start of the trial, we're conducting smaller scale trials to optimize the (inaudible-- highly accented) in this younger adult population.

Shifting from (inaudible-- highly accented) regiment to a 0, 1 month regiment.

The outcome of that trial will determine the doses of the second pivotal Phase 3 trial.

We're all planning to conduct trial in target populations of interest, including dialysis patients and potentially HIV positive and HCB (ph) positive subjects in Canada and Europe and potentially in the U.S.

In more detail, some (inaudible-- highly accented) plans will be available later this year.

We believe that if we successfully execute on these strategies we could potentially complete our (inaudible-- highly accented) patient filing in 2007.

In June, we announced positive top line results on primary and point analogy so our Phase 2, three clinical trial and older adults.

The data shows statistically, significant superiority in protective anti-body response and the robust (inaudible-- highly accented) of protective (inaudible-- highly accented) three immunizations when compared to injuring in the older adult population it's more difficult to immunize with conventional vaccines.

The primary endpoint of the ongoing Phase 3 trial is still protection, four weeks after administration of the third dose.

In September 2005 we plan to present the full results of these Phase 2, 3 clinical trial as a lead (inaudible-- highly accented) leading in the (inaudible - highly accented).

I'll now conclude my remarks with an observation concerning which we regard as the positive development for our company.

The recent upsurge of interest in (inaudible-- highly accented)receptor or (inaudible-- highly accented) technology.

We see a lot of interest coming from the pharmaceutical industry and we are pleased to increase double of attention that Dynavax is receiving.

We are currently in discussions with a number of parties concerning our allergy program and our HPD program as well as our earlier stage cancer and asthma program.

Well, I have to (inaudible-- highly accented) that there could be no guarantees that any of these discussions will lead to collaborate adventures.

We're gratified by the opportunities being presented to us to optimize the value of our clinical assets and by direct (inaudible-- highly accented) that Dynavax is entirely new (ph) in this technology.

Assuming that hepatitis B and A (ph), I see programs continued to advance as anticipated.

Dynavax could be the first company to successfully complete development of the (inaudible-- highly accented) agony space product with possible regulatory filings in the 2007 and 2008 timeframe.

This would be a (inaudible-- highly accented) in steady achievement for us and for our shareholders.

Our efforts and resources today are focused on realizing these very goals.

Along with our clinical success has become a familiar challenge.

Funding two broad Phase 3 programs and their attendant (ph) registration strategies.

But we're managing our resources carefully and investing only in high-value areas.

Our expenses will naturally increase as programs mature.

Currently we're exploring several options for defraying these costs. (inaudible-- highly accented) and we're actively pursing relationships with that may provide cash and milestones as well as significant (inaudible-- highly accented) in the commercial upside of our products.

The second option is strategic or structure financing vehicles to help pay for some if not all of our clinical expenses in one of two programs but sharing the risks of those programs.

Another option is equity financing, a strategy we would prefer to undertake as healthy as (inaudible-- highly accented)as possible.

We're currently exploring several of these options, a combination of options in all of these categories.

The timing of any potential venture is uncertain but we are pleased with the range of options potentially available to us.

In conclusion, I'd like to say that we believe Dynavax is on track and is anticipating a number of important (inaudible-- highly accented)in near term milestones.

As our (inaudible-- highly accented) and HPD programs advance and we draw near to realizing our corporate objectives.

Thank you for your attention and interest and we're now ready to open the call for questions.

Thank you. [OPERATOR INSTRUCTIONS]

You're first question comes from the line of Charles Duncan with JM Securities.

Please go ahead.

Hi.

It's J&P Securities.

Thanks a ton.

Dino and team, congratulations on a good quarter of progress.

Thank you.

I had a bunch of questions.

I'll try to be quick with them.

The first is with regard to the AIC Phase 2/3 trial.

Can you remind us what are the primary endpoints there?

The primary endpoint is the reduction of nasal symptoms.

In the population we received two immunizations at the end of the second season.

And with regard to the severity of the season that, in the different geographies in which you're running the trial, can you characterize it relative to say last year?

It would be hard to do since the season hasn't started yet.

Yes, but people are anticipating a strong ragweed season; aren't they, Dino?

Well, the information that's available to us is that there have been rain in all the areas that are affected by ragweed and that people are expecting a normal to high ragweed season but don't forget that last year we had the rain in certain areas during the ragweed season, which tends to wash the pollen out of the air.

That was a (inaudible-- highly accented) but sort of a knock, irreproducible and so we'll have to see how the season unfolds before we can say exactly how that will affect the outcome of the trial if at all.

So, let's not hope for or let's hope for no rain there.

Through summer, yes.

Hope for a good summer.

You said that there is 86% reenrollment in the -

Correct.

- (inaudible) trial?

In your experience, have you seen such high enrollment in a seasonal allergy trial?

Well, we've never conducted such a large trial before nor has anybody else but I would say that we're very pleased with the outcome because one of the risks in these trials is that people may become (inaudible-- highly accented) with the treatment that you may in fact lose (inaudible-- highly accented) your population where fundamentally a larger proportion of your control population has been coming back that would compare to the treated group, in particular if you have accuracy (ph) in the treated group.

And obviously we have enabled to retain those populations very effectively and that ensures that we're going to have a credible result.

So, the retention was across different arms?

There was not an impact on randomization.

We didn't have to introduce any correction.

Okay and you spoke of a pivotal trial that you thought you'd be able to start, I believe in the second half of '06?

Correct?

In the second quarter of '06.

Second quarter.

Okay.

(inaudible - multiple speakers) in the second half of '06.

Okay.

So, you talked about that being 800 to 1,000 patients, can you give us some sense as to what's really driving that?

Is it an observation based on what you're saying so far in the Phase 2, 3 in terms of the variability and the data or is it some safety database driven side.

The main driver is really ensuring that the sizable population treated with the drug and that we address both safety and accuracy in our larger population.

There are in a (inaudible-- highly accented) point (inaudible-- highly accented) considerations about the statistics or the size of the population required to show accuracy but we don't have those data on a firm basis here.

And the other - another question I had was moving onto the HPD program.

I've noticed since I've started covering stock that you're - the way with which you talk about the potential to commercialize the HPD vaccine in the U.S. has radically vault to one that sounds a lot more solid.

For example, you're expecting to be able to commercialize in the U.S. and hard to vaccine treated patients.

Can you give me some sense as to what's driving that?

Is it a clarification in the IT or is it a data driven observation that you're making?

The two main factors that have (inaudible-- highly accented) into our thinking not just in terms of the digital (ph) graphical approach to hepatitis B but also in the targeting which we tend to emphasize in fact as the prevalent reason is that the differential expect of the Dynavax vaccine in populations are more difficult to immunize appear to be even greater than what (inaudible-- highly accented) that we saw in the younger population.

So, in our view, there is the dramatic difference between the opportunity that is offered by essentially a convenience and compliance advantage which is what we see in younger populations and that is in itself remarkable because of the fact that as you know, only 50% of the people in the adult population comes back for the second shot and only 3% for their third based on CBC (ph) statistics.

So, being able to achieve 100% immunity with two shots, it's only important both, as I said from a convenience and compliance point of view.

However, when you demonstrate in a more difficult immunized that you can immunize people that would otherwise never be able to be immunized with conventional vaccine.

You have more than convenience.

You now have a non-met medical need that you can satisfy much more efficiently and so in that context, targeting the use of the vaccine for populations that would otherwise not be properly immunized, such as hemodialysis and all the other people and all the other groups that we've mentioned in our discussion, has become an increasingly high priority for us.

Taking into account as well, that pricing in those populations is much less competitive and therefore more favorable than in the young adult population.

So, all of those considerations combined have driven us to consider the U.S. as a possibility.

Keep in mind that we haven't formally committed to a development in the U.S. although we're becoming, as you said, increasingly positive about it.

Because of the reasoning that in a medical need is a very strong driver for the introduction of our product and we would count on that on resolving some of the potentially outstanding issues that you've mentioned, including IT and regulatory obstacles.

Okay.

Moving onto clinical data presentations, Ecoch (ph) is coming up.

Can you give us some sense as to what you expect the presented there possibly 12-month follow up out of the -

I thought you were going to ask me to discuss the data today and then I wouldn't have to go to Ecoch.

That would save me some money as well.

We're going to present the actual quantitative data that we obtained in the ongoing, Phase 2 and 3 trial and most notably, the statistics and actual responses in the populations immunized with our vaccine versus Endrex (ph) at the primary endpoint, which was after the third immunization.

In addition, we'll (inaudible-- highly accented)all the data concerning safety and some of the follow ups but I'm not sure whether or not we're going to have one-year data at that point.

I'd have to track.

Do you intend to hold an analyst call at that time or an event or something at Ecoch?

Okay.

We haven't made any plans at this point but we'll certainly review the possibility of doing something like that.

Has data been accepted for review and in what type of form?

We're going to have a poster.

Okay.

All right.

I'll hop back in queue.

Thanks.

[OPERATOR INSTRUCTIONS]

There are no further questions.

I'd like to turn it back for closing remarks.

Well, thank you-all for participating.

I hope that this has been informative and as usual, feel free to call us anytime for additional questions.

We're here to answer them.

Thank you.

Ladies and gentlemen, this concludes today's presentation.

You may now disconnect all lines.

Have a great day.