Dynavax Technologies Corp (DVAX) 2005 Q3 法說會逐字稿

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

My name is Coby, and I will be your coordinator for today. [Operator Instructions].

I would now like to turn the presentation over to your host for today's call, Ms. Jane Green, vice president, corporate communications.

Please proceed, ma'am.

Hello, everyone and thanks for joining Dynavax's third 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 to questions.

Please be advised that statements included in this conference call that are not a description of historical fact are 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, the potential timing for registration filing for TORAMBA and HEPLISAV, the commercial opportunities that TORAMBA and HEPLISAV represent for the company and our options for defraying the costs associated with higher expenses we expect to incur with our maturing program.

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 or delays in the development, testing, clinical trials, regulatory approval process, production and marketing associated with our products, the scope and validity of patent protections for our products, competition from other pharmaceutical biotechnology companies, our ability to control expenses and maintain a strong financial position and other risks detailed in the risk factors section of Dynavax's annual report on form 10-K of March 18th, 2005, our quarterly report on form 10-Q filed May 9th, 2005 and our prospectus supplement filed on October 11th, 2005.

You are cautioned not to place undue reliance on these forward-looking statements which speak only as of the dates hereof.

All forward-looking statements are qualified in their entirety by this cautionary 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'll turn the call over to Dino Dina.

Thanks, Jane.

We believe that Dynavax delivered a solid third quarter 2005 performance, highlighted by continued progress in advancing our lead clinical programs and you'll note, if you haven't already, that we have new names for our products.

TORAMBA, our immunotherapy for ragweed allergy and HEPLISAV, our hepatitis B vaccine.

These clinical programs, as well as our phase II cancer program continue on track and we anticipate presenting data at coming medical conferences in the fourth quarter that we believe will underscore the potential therapeutic and commercial value of these programs.

A key event for the company was the follow-on public offering we executed after the close of the quarter that netted $29.4 million for the company.

With this coming (ph) we have strengthened our ability to manage two large scale phase III programs in 2006 as well as to conduct ongoing company operations that are key to the advancement of our development portfolio and our overall growth.

We appreciate the confidence our shareholders have placed in our company and thank them for their support.

I will now ask Deborah to review our quarterly financial results and then I'll provide some additional commentary following her remarks.

Thank you, Dino.

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

Total revenues for the quarter ended September 30th, 2005 were $0.4 million, compared to $3.7 million for the same period in 2004.

Revenues in the third quarter 2005 reflect a decrease in collaboration revenue along the March 2005 ending of the allergy collaboration between Dynavax and UCB Pharma (ph) and a return to Dynavax of full rights to its allergy program.

Revenues in the third quarter 2005 derived from grants awarded by the National Institute of Allergy and Infectious Diseases and by the Alliance for Lupus Research.

For the nine months ended September 30th, 2005, total revenues were $14.1 million compared to $12.4 million the same period in 2004.

Collaboration revenue at $12.2 million for the nine months ended September 30th, 2005, included a one time non cash amount of $7 million resulting from the accelerated recognition of deferred revenue from an upfront payment the company received from UCB in 2004.

Total operating expenses for the quarter ended September 30th were $9.1 million compared to $7.9 million for the same period in 2004.

The increase in operating expenses is primarily due to increased clinical trial and manufacturing activities related to TORAMBA, our ragweed allergy immunotherapy and our HEPLISAV hepatitis B vaccine as well as overall organizational growth and expenses incurred to support public company compliance requirements.

Total operating expenses for the nine months ended September 30th, 2005 were $27.1 million, compared to $23.7 million for the same period in 2004.

Net loss for the quarter ended September 30th, 2005 was $8.3 million or 33 cents per diluted share, compared to a net loss of $4 million or 16 cents per diluted share in the same period of 2004.

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

Net loss for the nine months ended September 30th, 2005 was $11.8 million, or 48 cents per diluted share, compared to net loss of $10.8 million, or 54 cents per diluted share for the same period in 2004.

The increase in net loss for the nine months ended September 30th, 2005, resulted primarily from the increase operating expenses associated with our clinical program.

As of September 30th, 2005, cash, cash equivalents and marketable securities totaled $50.7 million compared to $65.8 million at December 31st, 2004.

On October 14th, after the close of the third quarter, Dynavax announced the closing of an underwritten public offering of 5 million shares of its common stock at a price of $6.25 per share.

The offering was made under the company's existing shelf registration statements and resulted in net proceeds to the company of approximately $29.4 million after payment of underwriting discounts and commissions but excluding estimated offering expenses.

Dynavax has also granted the underwriters an option to purchase up to an additional 750,000 shares of common stock to cover over-allotments, if any.

Relative to the outlook for 2005, please keep in mind that the following statements are forward-looking and are based on current expectations.

Actual results may differ materially.

Except as expressly stated, these statements do not include the potential impact that any equity offerings, business collaborations or other transactions that may be closed or entered into after September 30th, 2005.

We are advising our operating expenses outlook for 2005 to reflect decreased spending through September 30th, 2005.

We now anticipate operating expenses for 2005, excluding non-cash, stock-based compensation, to be in the range of $38 million to $40 million.

We are revising our cash outlook for 2005 to reflect decreased operating expenses as well as $29.4 million in net proceeds from the underwritten public offering of 5 million shares of common stock at a price of $6.25 a share completed October 14, 2005.

We now anticipate the cash, cash equivalents and marketable securities should be in the range of $65 million to $68 million at the end of 2005.

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

Thank you.

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

We continue to make good progress in advancing our clinical program for TORAMBA, our ragweed allergy immunotherapy.

We currently have two major clinical trials underway.

Our ongoing phase II/III clinical trial, and our trial in ragweed allergic children and anticipate initiating large scale, pivotal phase III trial in the first half of 2006.

I will now briefly review the trial designs and timelines for this multifaceted program.

The primary endpoint of our ongoing phase II/III program is a reduction in nasal symptom scores up to two ragweed seasons.

The second season is the 2005 season, which is just ending.

This trial originally enrolled 462 ragweed-allergic subjects and we have successfully retained more than 85 percent of the original subjects.

We anticipate the final analysis of the data should be completed in the first quarter.

When we have the final results, it is likely that we will make a top line public announcement and review our presentation of the full data package for our lead investigator at the IIII meeting in early March.

Assuming the results of the phase II/III trial are positive, we plan to complete the final arrangements for initiating the pivotal phase III clinical trials in time to capture the 2006 ragweed season.

We are building the infrastructure for that trial now and anticipate the trial design that is similar to the current phase II/III trial.

We plan to enroll 800 to 1,000 subjects with a goal of completing treatment in the April/June timeframe, well in advance of the start of the ragweed season in 2006.

We believe this is achievable and we have successfully met such tight timelines before.

At the same time we will be discussing with the FDA the goal of coming to agreement on important trial designs and endpoint issues.

One key issue is the agreement to build into the phase III trial mid term analysis at the end of the 2006 ragweed season.

If this mid term analysis were positive, it could be included in a regulatory package that would also include the two year data from the phase II/III trial and two year data from the trial in ragweed allergic children.

The trial in 313 children, age six to 15, was initiated in the first half of 2005.

The primary endpoint of this trial, the reduction of allergy symptoms after the second, or 2006 season and the secondary endpoint is the reduction of asthma symptoms after the third, or 2007 season.

Children treated with TORAMBA in this trial received the same six shot course of treatment at the same dose as the adult population and two shot boosters were administered in the second and third season.

The primary endpoint analysis for this trial should be completed in early 2007.

Assuming a positive outcome, this data would enable Dynavax to establish efficacy in additional target populations and could be valuable in expanding the potential labeling for the TORAMBA therapy.

In early November, one of our key TORAMBA investigators will present data from the phase I safety study conducted in children and this will be presented at the annual meeting of the American College of Allergy, Asthma and Immunology or quadruple - I'm sorry, ACAAI.

Different meeting.

Our ability to demonstrate safety in this patient population at the dose used with adults lays the foundation for getting regulatory permission to mount the large scale efficacy study currently underway in children.

As we said before, we're pursuing the aggressive development and regulatory strategy for TOLAMBA.

If everything proceeds according to plan, positive data for these three trials could converge in the late 2006, early 2007 timeframe and could form the core of a regulatory submission later in 2007.

If the FDA does not agree to a one-year mid term analysis, or if the data on the phase II/III trial do not warrant immediate initiation of a physical phase III trial, it will be difficult to adhere to this aggressive development timeline.

Moving now to HEPLISAV.

HEPLISAV has consistently demonstrated superior effectiveness compared to injerex (ph) B, being the industry standard.

In clinical trials that we performed to date.

We believe that our vaccine could become the new standard of care, especially for populations that are at high risk that are currently underserved and those who need protection in an urgent manner.

Our ability to demonstrate safety and superiority of our HEPLISAV, especially in populations with weakened immune responses is in fact key to our goals of regulatory and commercial strategy.

We plan to focus our initial commercial efforts on target populations in major markets with the clinical need for enhanced vaccine the greatest and where we believe we can achieve a significant commercial return.

These populations include hemodialysis patients, virtually all of whom must be immunized against hepatitis B as well as people infected with HIV or hepatitis C, who are at risk of co-infection with hepatitis B.

We also believe that we will be able to develop an advantageous product for healthcare and emergency response personnel, as well as others who face the risk of occupational infection and who we believe would benefit from having access to a vaccine that provides a high level of seroprotection quickly.

Our hepatitis B clinical program is fully on track.

In June we initiated large, pivotal phase III clinical trial in seronegative adults age 40 to 70 in Asia.

In this trial of difficult-to-immunize adults, we are comparing the three dose regimen of HEPLISAV with a three dose regiment of injerex B. The primary endpoint is seroprotection four weeks after the third vaccination or at month (ph) seven.

Study subjects will also be followed for an additional five months.

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

In the first half of 2006 we anticipate initiating a second large-scale trial.

This trial which will predominantly take place in Canada, will be designed to round out our efficacy and safety database and support the potential regulatory filing.

We are also planning to conduct trials in target populations of interest, including dialysis patients and potentially HIV positive and HCB positive subjects.

We anticipate being able to elucidate with clinical trials strategy (ph) further in the very near future.

We believe that if we successfully execute on this strategy, we could potentially complete our first registration filing in 2007.

Overall, we are increasingly optimistic about the potential of HEPLISAV, especially in the dialysis market.

Evidence suggests that less than 50% of dialysis patients are successfully immunized against hepatitis B today and that there level of protection can wane in a matter of months, indicating a need for both greater monitoring of their antibody titles (ph) and vaccination with a more potent vaccine.

Because of the serious risk of contamination within dialysis facilities, these organizations maintain a high level of surveillance among patients.

In our initial discussions with dialysis centers confirm assumptions that purchasing decisions are made on the basis of efficacy and price.

In fact, we believe that there is no brand loyalty in this market and that a superior vaccine could be readily adopted and that this could be a significant market for HEPLISAV.

If our development in the regulatory strategies remain on track, HEPLISAV could be the first TR-9 agonist based product to successfully reach the market.

HEPLISAV could also pave the way toward development of additional ISS based vaccines and at the top of our priorities, as you know, we have an early stage influenza program that has show promising preclinical activity in advancing the protective antibody response generated by a standard flu vaccine and that we believe may represent the potent new vaccine approach against pandemic strains of the flu virus.

We believe that this program has significant potential and we anticipate that it could become a meaningful part of our clinical pipeline in the next 12 to 18 months.

I'd like now to spend a moment describing our set-based (ph) phase II cancer drug development program.

This is reaching an interesting stage of development.

We have pursued the cancer indication quietly but carefully while devoting a majority of our resources to our lead programs in allergy and vaccines.

For the past couple of years we have been evaluating the potential of ISS to enhance the effect of monoclonal antibodies in cancer therapies.

This strategy has been shown to be effective in preclinical models using various anticancer monoclonal antibodies.

We have conducted an open-label phase I dose escalation trial of ISS in combination with Rituximab in 20 patients with non-Hodgkin's lymphoma.

Results of this study showed dose dependent pharmacological activity without significant toxicity.

The follow-up phase II trial in ISS with Rituximab in non-Hodgkin's lymphoma is currently underway in 30 patients with histologically confirmed 20 positive B-cells follicular lymphoma who have received at least one previous treatment regimen for lymphoma.

The primary objective is to assess the proportion of patients who are alive and without disease progression one year after initiating the Rituximab therapy.

Mechanistic studies will be performed to characterize the enhancement of antitumor activity by ISS.

One of our investigators will present some safety and mechanistic data from this study at the upcoming American Society of Hematology, or ASH, in December.

While the data are early, they are suggestive of the utility of our continuing to pursue a cancer indication with ISS.

In order for us to advance our cancer programming to later stage trials, we are seeking the support of a strategic partner or an alternative funding source.

We are in active discussions on both of these fronts and we would like to build on the momentum we think this program is generating.

Over the next several months we anticipate generating news flow (ph) concerning our clinical programs and potentially other strategic developments.

With regards to HEPLISAV, in December '05 we'll present the primary endpoint data from our completed phase II/III trial in older adults, difficult to immunize population.

By midyear 2006 we have completed our first pivotal trial in the phase III trial and have results shortly thereafter.

This is also in the difficult to immunize population and then we anticipate initiating a second large-scale trial in the first half of 2006 along with safety studies concomitant with that.

We intend to extend our clinical program with HEPLISAV to include predialysis patients and potentially HIV and HCB positive patients and we anticipate bringing additional clarity to these trials in the near term.

The full aspect (ph) of the programs remain on track.

We believe that the DLA filing in the second half of 2007 will remain feasible.

With respect to TOLAMBA, we expect to report in the first quarter of 2006 the final results of the ongoing phase II/III trial.

Assuming a positive outcome we will be in a position to shape a pivotal phase III trial shortly thereafter with the goal of capturing the 2006 ragweed season.

We will also be discussing with the FDA concerning trial design for the very same phase III trial.

In the early 2007 timeframe we anticipate getting primary endpoint results from the TOLAMBA trial in ragweed allergic children.

And finally, in cancer, as I just mentioned, in December we anticipate the presentation of initial phase II clinical trials at the ASH meeting.

In conclusion, we are pleased with our progress to date.

We believe that we are strengthening our leadership role in the field of immunotherapy and that we have an established position in the TR-9 agonist based product development.

We believe that we have a solid strategy in place to build commercially viable therapeutic franchises both in allergy and in vaccine.

We are continuing to flesh out our commercial strategy for both the programs and we're continuing to pursue partnering opportunities with the dual goals of bringing valuable resources to advance these programs through the market and of that (ph) enabling Dynavax to retain significant commercial upside.

I am now done with my update and operator, if you'd like to open the call for questions we will take those questions.

Yes sir. [Operator Instructions]

Your first question comes from the line of Catherine Chiu (ph) with Pacific Growth Equities.

Please proceed.

Hello.

Hi, Catherine.

Hi.

A couple of questions here.

So with regards to the TOLAMBA study, the phase II/III, could you elaborate on how the trial is going with regards to sites?

How many sites have concluded?

How many sites are still ongoing because the peak season is not passed yet and also how are the polling counts this year on all sites?

I don't have the details with me exactly where the season has been completed or not but all sites are now open and collecting data in that there is a one month follow-up beyond the end of the season and we anticipate that the database will be clearest (ph) then ultimately locked up after November 15th.

So the trials are ongoing, it has gone well, it has good retention and as you know we reported earlier on the successful completion of the booster immunization of a third of the patients from a randomized to that group and that was done both on time and with very good safety records.

Of course, so far on the blinded (ph) basis.

With respect to the pollen season, I think it generally has been a straightforward season.

We've had reports of sites that have experienced alternating days of rain and pollen.

We don't have any way at this point to establish how that might impact the symptoms but I believe that we are well within the norm of the typical pollen season.

OK.

And with regards to HEPLISAV, I remember Fingerix (ph) was approved also for the dialysis market in Europe.

Did they actually conduct a study in the target population or they just conducted the studies in normal people?

The only data that are available to us and have been published are data in normal people.

It is probable and I think probably required that data be obtained in the target population for which they sought licensure but those data are not publicly available.

And with regard to the flu vaccine you just mentioned, so you are working on a program with regard to perhaps the H5N1 flu?

Our plans for flu are based on a totally different approach that complements existing vaccines that is not directed specifically in house to H5N1.

Let me explain briefly.

We have developed technology that allows us to use protein conjugates generated to internal bioproteins and in the specific case of our program, nuclear protein and the advantage of using such an approach is that nuclear protein is virtually invariant across all strains so you don't have to generate a new conjugate every year.

And what we've shown is that ISS nuclear protein conjugates afford significant immungenisty (ph) in test animals and in fact are capable, by themselves, to offer significant protection against flu challenge.

The plan for moving this into the clinic consists of adding this nuclear protein conjugate to the conventional vaccine and that includes both influenza A and B strains, consisting typically of humoglutonine (ph) and nurominivase (ph) as well as H5N1 type variants of avian flu and what we've already shown is that the additional conjugates to conventional vaccines can enhance very dramatically the immunogenisty (ph) of those vaccines so if you combine these two features, we believe that our approach can address the three fundamental shortcoming of currently existing vaccines for pandemic flu which are the need to use very large doses.

Increasing the immunogenisty we believe will allow the reduction of the required dose to achieve protective levels.

Second, the enhancement of seroimmunity which will afford protection against the more serious aspects of infection, including pneumonia, which is typically what kills people in the case of pandemic flu and then third, the ability to potentially protect against heterologous (ph) strains that have not been anticipated by the CDC and the WHO and therefore are not included in the mix.

So these three combined features, if confirmed in early human trials could provide really the momentum for the introduction of successful product.

As I said, we're still several steps removed from being there and one of the key challenges that we have ahead of us that we're trying to address in the near future is in fact access to H5N1 strains in that we don't produce them and we'd have to rely on vaccine produced by somebody else for that.

Great.

Thank you.

[Operator Instructions]

There are no more questions appearing in the queue at this time, sir.

There must have been a few of you here (ph), but thank you, operator, and thank you all and we'll meet again with you next quarter.

Thank you for your participation in today's conference.

This concludes the presentation.

You may now disconnect.

Good day.