Dynavax Technologies Corp (DVAX) 2010 Q1 法說會逐字稿

Good day ladies and gentlemen and welcome to the Dynavax Technologies Corporation's first quarter 2010 financial results call. At this time all participants are in a listen-only mode. Later we will conduct a question and answer session and instructions will follow at that time.

If anyone should require assistance during the conference, please press * then 0 on your touchtone telephone. As a reminder, this conference call is being recorded.

I would now like to introduce your host for today's conference, Ms. Jennifer Lew.

Good afternoon. I'm Jennifer Lew, Vice President of Finance at Dynavax and I'd like to thank you for joining our call.

Participating with me today are Dr. Dino Dina, President and CEO and Michael Ostrach, Vice President and Chief Business Officer.

On today's call we need to advise that we will use forward-looking statements that are subject to a number of risks and uncertainties including statements related to the nature and timing of planned clinical trials of HEPLISAV and our other product candidates and development and commercial plans and expectations for HEPLISAV and our other product candidates.

Actual results may differ materially due the risks and uncertainties inherent in our business including whether successful clinical development and regulatory approval of HEPLISAV can occur in a timely manner or without significant additional studies or difficulties or delays in development, whether the studies can support registration for commercialization of HEPLISAV, the results of clinical trials and the impact of those results on the initiation and completion of subsequent trials and issues arising in the regulatory process, our ability to obtain additional financing to support the development and commercialization of HEPLISAV and our other operations, possible claims against us based on the patent rights of others, and other risks detailed in the risk factors section in our current SEC report.

Dynavax undertakes no obligation to revise or update information herein to reflect events or circumstances in the future even if new information becomes available.

Today we reported results for the first quarter ended March 31, 2010. A copy of our press release can be found on our Website at www.dynavax.com.

Although not reflected in the first quarter results, we completed a $44 million financing transaction on April 16th which resulted in net proceeds of $41 million. Our cash position at the end of April was approximately $70 million.

The institutional investors who participated in the offering included Federated Kaufmann Funds, Great Point Partners, Vivo Ventures, RA Capital, and Deerfield along with several other premier life science investors. We believe the participation of these investors represents a significant vote of confidence in the future of our Company. In addition, we now have the financial flexibility to continue progressing toward our most critical goals.

Before turning the call to Dino to give you additional perspective on our corporate strategy and the status of our programs, I'd like to quickly recap the financial results for the first quarter.

As of March 31, 2010, Dynavax reported $30.1 million in cash and cash equivalents. This compared to $36.7 million at December 31, 2009. The $6.6 million spend for the first quarter primarily reflected ongoing activities for the two Phase III trials for HEPLISAV, net of certain one time cash reimbursements including $4 million from Merck for wind down costs.

Total revenues for the first quarter 2010 were $8.3 million compared to $19.3 million reported for the first quarter in 2009. The first quarter 2009 revenues included the recognition of $15.5 million of non-cash deferred revenue that was accelerated following the termination of the Merck collaboration.

Total operating expenses were $17.3 million for the first quarter 2010 compared to $15 million for the first quarter of 2009. The increase in operating expenses was primarily due to higher clinical development costs associated with HEPLISAV.

The net loss for the first quarter 2010 was $9.2 million or $0.17 per share. This compares to net income for the first quarter 2009 of $5.1 million or $0.13 per share. The year over year variance is due to the recognition of non-cash deferred revenue in 2009 and an increase in operating expenses during 2010.

I would now like to turn the call over to Dino, our CEO. At the conclusion of his comments we will open the call to Q&A. Dino?

Thank you Jennifer. With financing complete, Dynovax's position to execute its strategic plan is really focused on three objectives -- completion of the phase III study required for submission of BLA for HEPLISAV, identifying appropriate partners in commercial launched strategy for HEPLISAV, and initiating clinical development for our universal flu and TLR autoimmune product candidates.

We expect that by yearend, all of our programs will have reached key clinical milestones. As a result, we have begun the task of actively refocusing the Company to efficiently translate these clinical opportunities into important commercial products.

We intend to use our current financial resources wisely. We will continue to invest almost exclusively in HEPLISAV. We believe that Dynavax has the surest and most immediate opportunity for value creation by completing HEPLISAV development. Our recent financing represents the best way to achieve that objective.

HEPLISAV's commercial success and subsequent returns to our stockholders will be propelled by commercialization partnerships that we can now negotiate from a position of financial strength. We also plan to make limited investments in the early clinical development of our universal flu program. The other programs in our portfolio are either being positioned for outlicensing or are funded by partnerships and grants. This strategy enables us to focus on the core clinical assets that generate the greatest value for Dynavax and to maintain tight control over our cash utilization.

We're planning to manage our underlying net cash usage to approximately $6 million per quarter by limiting our activities to clinically and funded programs. This includes our fully burdened internal costs, net of funding from existing partners and contracts.

In addition, we will incur a total cost of $30 million to $35 million to complete the Phase III HEPLISAV clinical trials and that includes costs already incurred since the restart of HEPLISAV clinical program in the fall of 2009.

Now I'd like to move to an update on our progress in our three focus areas, that is HEPLISAV's clinical program, HEPLISAV partnering, and putting our universal flu and TLR autoimmune products into the clinic.

Let's start with the Phase III program for HEPLISAV. The U.S. Safety Monitoring Board of DSMB established for two ongoing Phase III HEPLISAV trials just completed a review of the safety information for over 1,500 subjects who received their first injection as well as over 1,200 subjects who received their second injection. As we announced last week, the DSMB has allowed the studies to continue without modification to the protocols.

We announced today and as a result of that, that over 2,000 subjects in our major Phase III lot-to-lot consistency and safety study have received their first immunizations. This puts us precisely 12 months away from finishing the study. We are ahead of schedule and now we anticipate submitting the BLA for HEPLISAV in the second half of 2011.

The remarkable progress we made in the first half, part of 2010 brings new strength to our already active partnering discussions. Our goal in identifying one or more appropriate partners for HEPLISAV are twofold. On one side, we intend to support the cost of completing the program and on the other side, we also want to accelerate market penetration and peak sales for HEPLISAV through targeted alliances.

We are evaluating a number of approaches including partnering on a regional basis and working with vaccine or other companies that offer a good strategic fit for the program. We believe we have a blockbuster product in HEPLISAV and we intend to retain rights to the product that will maximize instant care and profitability.

HEPLISAV's approval will be a defining event in a platform for Dynavax's growth strategy. We expect to identify new markets and expand the product potential in a way that will produce revenue growth from launch forward. We believe HEPLISAV can be the cornerstone of our commercial activities in the adult vaccine market. Given the manufacturing capabilities we have in Düsseldorf, we have a good position to execute quickly and effectively capture high value market segments that are underserved today.

Beyond HEPLISAV our next major initiative is the universal flu vaccine. Our experience with HEPLISAV trials has translated directly into valuable lessons that have guided our design for a differentiated universal flu product, another potential blockbuster that we plan to enter into clincial development this year. The importance of immunizing individuals over the age of 65 is well established and our HEPLISAV trials have provided insight into the potential of TLR-9 vaccine to overcome the poor responses of the elderly.

Similarly, we expect our universal flu technology to be substantially enhanced immunity for this population group. We have a unique product profile that is designed to protect vaccinated individuals also from pandemic strains.

We believe that we are on track for (inaudible) submission that allows us to begin clinical development in the middle of this year. We've selected a clinical universal flu vaccine candidate. We have manufactured this product for the clinic and key preclinical studies have just been completed.

Last week we presented data which showed the universal components of Dynavax's vaccine enhance the efficacy of the standard flu vaccine by increasing antibody production directed at virus neutralization. As we exit the clinic, we now have a strong foundation of data on the activity of all three different shading components that are part of the efficacy of this vaccine. I'd like to add that there is considerable upside in the option that our partner, Novartis, can exercise should they choose to partner with us for its commercialization. At a minimum, our Novartis agreement provides for the supply of the trivalent flu vaccine to which we can add our TLR-9 agonist and conserved antigens.

We have two early stage clinical programs in our hepatitis franchise. These are therapeutic drugs for Hepatitis B and Hepatitis C chronic infections for which we are seeking development and commercialization partners. Over the past several months we've streamlined activities surrounding these programs and minimized spend but we believe that we've preserved their value as monetizable assets.

In the case of Hepatitis C we've completed two studies, the results of which differentiate our therapeutic candidates, SD-101 from standard of care as well as emerging treatments for chronic cases of the infection.

Timing of the Phase Ib clinical trial and invitro studies of SD-101's mechanism of action showed that this second generation TLR-9 agonist is a) very well tolerated and showed clean safety profile and it induces both IFN-lambda and IFN-alpha at concentrations that are capable of producing strong antiviral activity. The data that was presented was recently an easel(ph) in Vienna, Austria.

Our therapeutic Hepatitis B data should be available by the end of the year and shortly thereafter. Outlines of significant activities will be initiated. In addition to that, our partner programs with Astra Zeneca and GSK have continued to make progress and by yearend 2010 they will all either be in the clinic or clinic-ready. In the case of GSK, our autoimmune disease program, initiation of the Phase I study by the end of this year will generate a significant cash milestone payment.

We're now ready for your questions so Operator, can you open the question line?

Thank you. Ladies and gentlemen if you have a question at this time, please press the * then 1 key on your touchtone telephone. If your question has been answered or you wish to remove yourself from the queue, please press the * key.

Our first question comes from Bret Holley of Oppenheimer.

Hi there, it's actually Matt Lowe in for Bret today. Just regarding a potential partner, I was just wondering if you could speak to kind of what level of interest you're currently seeing, what kind of terms you think would be acceptable and if you feel you could still launch the product in the U.S. alone if necessary? Okay, thanks.

Let me start with the last piece of your question because it's the simplest. We definitely are and will be in a position to launch the product alone in the U.S. if that appears to be the best strategy.

With respect to the other aspects, I think that I can comfortably say that there is a high degree of interest in the product, that we are finding in our discussions a good strategic fit with the potential partners that we're reviewing this with and the only comment that I can really make at this point on terms is that we remain totally committed to maintaining high levels of profitability in the product and therefore, it's unlikely barring some real changes or an offer that we couldn't possible refuse that this will end up being a typical licensing agreement with royalty. The program is at the stage and has reached a level of maturity whereby we believe we can structure a potential deal along the lines of a distribution agreement, therefore retaining the majority of the profitability built into the product.

Okay, that's great. Thank you very much.

You're welcome.

Once again if you'd like to pose a question please press * then 1. We'll pause one moment to see if there are any additional questions.

I'm not showing any further questions. Would you like to continue with any further remarks?

Yes, let me make some final remarks. First of all, this confirms the amazing clarity that we always achieve on these presentations, to leave absolutely no question unanswered to start with.

In addition to that, I'd like to thank you for participating in today's call. We are clearly excited about the progress we've made and we expect to keep the momentum going by embarking on significant outreach efforts to continue to tell the Dynavax story. Having persevered through a challenging limbo during the FDA imposed clinical hold and having successfully restored the profit for HEPLISAV, we're now confident that we can bring to fruition what is definitely a best in class product with blockbuster potential.

We look forward to providing you with updates on further progress. Thank you.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program. You may all disconnect. Everyone have a great day.