Dynavax Technologies Corp (DVAX) 2011 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to Dynavax's topline Phase 3 data and second-quarter financial results call. I would now like to turn the call over to Shari Annes of Dynavax's Investor Relations team. Please go ahead.

Good morning. I'm Shari Annes of the Dynavax Investor Relations team and I'd like to thank you for joining this call. Today, we reported positive topline results from our Phase 3 trial comparing HEPLISAV, Dynavax's investigational hepatitis B virus vaccine, to a currently marketed HBV vaccine, Engerix B.

Earlier this morning, we also reported our financial results for the 2011 second quarter. Copies of both releases may be found on our website. Participating with me on the call today are Dr. Dino Dina, our CEO; Dr. Tyler Martin, President and Chief Medical Officer; and Michael Ostrach, our Vice President and Chief Business Officer.

Before discussing today's topics, we need to advise that we will use forward-looking statements that are subject to a number of risks and uncertainties, including statements regarding our cash position, our expectation of confirmation by the FDA of our analysis of lot-to-lot consistency, and our other clinical programs.

Actual results may differ materially due to the risks and uncertainties inherent in our business, including the FDA's assessment of the data from the study and any requests it may make to conduct additional studies; whether successful clinical development and regulatory approval of HEPLISAV and our process for manufacture can occur in a timely manner, or without significant additional studies or difficulties or delays in development; whether our 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.

I'd now like to turn the call over to Dino Dina, our CEO, to walk you through the topline results of our Phase 3 trial. As we will make an oral presentation of the full results of the study at ICAAC on September 18 in Chicago, we will be discussing the results of our primary endpoint analyses, and leave most of the secondary endpoint analyses to ICAAC and other medical meetings, posters, and presentations.

At the conclusion of Dino's comments, Dr. Tyler Martin, President and CMO, will also provide perspective on the data, and then we'll open the call to Q&A in which Tyler and Michael Ostrach will participate. Dino?

Thank you, Shari, and good morning to all of you. And thank you for joining this call. Before I jump into the Phase 3 data and provide my perspective on that, I'd like to comment about our second-quarter financials, and specifically our cash position of $61.7 million.

Earlier in the year, we committed to maintaining a cash balance of [more than the unit of] cash and we've clearly accomplished that in the second quarter. We intend to use, and continue to use, a variety of mechanisms available to us to maintain such a strong cash position. And therefore, enabling to maintain flexibility and evaluating potential opportunities, and of course, continue to develop HEPLISAV and bring it to completion.

Getting then to the results of the study, let me remind you that, in this study, we evaluated a two-dose regimen of HEPLISAV given at zero and one month, compared to three doses of Engerix given at zero, one, and six months in 2,449 healthy adults, and that the age was 40 to 70 years. The results we're reporting today for this study are clearly consistent with that obtained before our prior studies. Data show that HEPLISAV is as safe as Engerix B; superior to Engerix B in terms of rapid onset, [serial] protection and superior peak protection. What's new and remarkable is that duration of immunity is also vastly improved over Engerix.

With respect to the consistency analysis of the -- three consecutively manufactured lots of HEPLISAV, we've concluded that this study showed consistency based on the complete immunogenicity data demonstrated by the three vaccine lots over six months following the second immunization. By the way, we have provided a clear view of the data in a graph that is at the bottom of our press release, as this may not be present in data reported through various agencies. Anybody who wants to see that can go to our website and see clearly there.

And I think it is quite definitive on scientific grounds that the three lots behaved in a very similar way throughout the duration of the study, by two measures -- GMC and SPR, which are different measures but consistent, again, throughout this study. We met the pre-specified consistency criteria for the five time-points. In all of these time-points, each lot was superior to Engerix as well.

Where we missed one lot was shown to be slightly higher than the pre-specified 150% upper limit as compared to the GMC's of the other two other vaccine lots. This was due to a higher-than-expected standard deviation and not to an inconsistency in how the lot was manufactured or behaved.

We submitted these data in FDA and we expect to have confirmation of our analysis in the near future. We're confident that our assessment of the lot consistency data is accurate, and indicates that our manufacturing process can reliably produce vaccines with a profile significantly better to that of Engerix B.

You know, at the end of the day -- and I think that this is the most important aspect -- and while we're confident that we're going to succeed on scientific grounds in our conclusion that we have achieved consistency, and I think Tyler can comment both about the precedent and how this is viewed, in terms of how other vaccines have been licensed -- if we, by any -- for any reason have to do a confirmatory study, not only we're prepared to do it, but we could complete it in time to incorporate this in a filing that would contain data from both CKD and the HPV 16, and stay on the timeline that we have always outlined for that specific strategy.

So, this in our view, amounts at worst to an inconvenience, but our level of confidence that we're going to come out with a confirmation of consistency is high.

Tyler, it'd be useful, perhaps, if we could comment a little bit more at this point on the safety, and how it compares to what we've seen before, and the distribution we've seen among the two vaccines.

Thank you, Dino. Good morning, everyone. This protocol included careful active surveillance for new onset autoimmune disease that was -- that would result in a more robust safety evaluation than in our previous trials. We want to make the point that our previous trials did not show evidence for an increased rate of autoimmune disease.

At each visit, subjects were administered a questionnaire to identify signs and symptoms of autoimmune disease. Anyone who developed signs or symptoms of autoimmune disease by that questionnaire was referred for specialist evaluation. Those specialist evaluations were then sent forward to a committee that we call The Safety Evaluation and Adjudication Committee, which consisted of three independent experts at the Mayo Clinic who would assess each of these potential autoimmune adverse events.

We also had a Data Safety Monitoring Board, which is an objective, independent group of experts who could look in an unblinded fashion at the potential accumulation of events in either treatment group. So, with all that background -- and again, it's a very careful, active surveillance plan -- I'd like to discuss the results.

There were seven potential autoimmune adverse events reported by investigators to the safety endpoint -- Safety Evaluation and Adjudication Committee. The Committee determined that five of those events were, in fact, autoimmune adverse events. Further investigation showed that two of them existed prior to study entry, so there were a total of three autoimmune adverse events that occurred while on study.

The study included a 4-to-1 randomization; therefore, the probability of being assigned to HEPLISAV was 80% for any individual subject. All three of the subjects were in the HEPLISAV arm. Given the 4-to-1 randomization and three events occurring, the probability of all events occurring in the HEPLISAV arm was 51.2%. So this finding is not unexpected, based on the 4-to-1 randomization.

I would specifically mention that none of these three cases were serious adverse events. In fact, there were two cases of hypothyroidism that occurred in females and one case of vitiligo that occurred in a male. So, minor adverse events that are expected in the population study.

We conducted an analysis and forwarded our analysis to both the [CIAC] and the DSMB looking at the literature, and what would be the expected event rate in a population of healthy adults aged 40 to 70 for hypothyroidism. And amongst a population of 2,449 subjects, we would have expected there to be approximately 8 cases. So the fact that there were only three is evidence of the excellent screening that was done at baseline. And therefore, only three cases occurred on study.

I would also specifically like to mention that there were no cases of associated vasculitis and no cases of Wegener's granulomatosis in this trial. Dino?

So, you know, I think that -- we believe that this provides us with a very strong starting point for continuing on our path to filing for approval. And I'd like to open it at this point for questions, and then re-visit some of the issues based on our questions and answers before we close.

(Operator Instructions). Thomas Wei, Jefferies & Company.

I wanted to ask a little bit more about the autoimmune adverse events that occurred in this study. If you -- first of all, for the hypothyroidism cases, was I hearing correctly that those were found because the patients were symptomatic? Or was that a subclinical case of hypothyroidism that was really just detected through laboratory measurements?

These -- Thomas, these were clinical diagnoses that occurred during the 12 months that subjects were followed-up for this study. And again, to emphasize the point that one would expect in a population of this age, is there to be 8 events that would occur spontaneously in a population of this age over a 12-month follow-up period.

And it's also worth noting, Tom, that in the fast studies, the rate of occurrence of this particular disease was approximately 0.1%. And that's exactly what we've seen in these studies. So there's really nothing out of the norm in the results.

And what has happened subsequently to those patients who -- these three patients who did develop these autoimmune events? What is the treatment and the outcome like for those particular side effects?

So the treatment for hypothyroidism is to be put on thyroid hormone, which is -- the brand name is Levothyroxine. It's a very common drug that women over the age of 40 are commonly on. In fact, my mother was prescribed Levothyroxine just this last week. So it's a very common event that occurs in older women.

The subject with vitiligo -- there is no treatment for vitiligo. And I will just make a comment -- the CIAAC struggled with this particular case because the diagnosis occurred because the subject received a sunburn. And as a result of the sunburn, they identified that the person had hypopigmented patches in their skin. The sunburn occurred while the subject was on study, but of course, the onset of when the actual vitiligo occurred is unknown. So to be conservative, the Committee considered it to be a new onset autoimmune adverse event, because, in fact, the diagnosis was made on study; but the actual onset in that case was difficult to -- well, in fact, impossible to assess.

And can you share with us, with the other -- I guess, the other four autoimmune adverse events that were submitted to the Committee -- what were those? (multiple speakers) And I guess, in particular, the two that were deemed not to be autoimmune adverse events?

So the two that were deemed not autoimmune adverse events, I must say I would have to go back and review their information, because we focused on those that the expert Committee determined to be autoimmune adverse events for our analysis. The two that we excluded from the analysis were two other cases of hypothyroidism; but in the screening samples for those subjects, they were found to be hypothyroid at screening, and therefore, they were excluded as not being new onset cases.

I'm sorry, one last question and then I'll jump back in the queue. The two that were deemed not to be -- were those on the HEPLISAV arm?

Yes, they were.

So it would have been -- so, excluding the two hypothyroid -- I'm sorry, just to be clear -- the two that were deemed not to be autoimmune adverse events were in the HEPLISAV arm?

The two that were determined not to be -- the two that were not new onset events, that is, they were hypothyroidism that was preexistent before they came into the study, were in the HEPLISAV arm.

And then the two others -- that's basically what I was asking -- the two other cases -- were those in the HEPLISAV arm or in the control arm?

They were also in the HEPLISAV arm.

Okay. Thank you.

Phil Nadeau, Cowen and Company.

Thanks for taking my questions. First, on the autoimmune reactions, I believe in the data that you've presented previously from the Phase 3 population as a whole, there was a missed balance in autoimmune reactions that actually favored HEPLISAV. If I remember the incidence correctly, it was a 0.2% autoimmune event for HEPLISAV in the Phase 3 data as a whole, and 0.4% for Engerix.

So when I put this morning's data into the context of all the other Phase 3 data, it seems like the autoimmune events are now perfectly balanced about 0.2% for HEPLISAV and 0.2% for Engerix. Is my analysis there correct? Is that what you guys also see when you integrate the autoimmune events now from all the Phase 3 studies that you've done?

Yes, Phil, that is correct. To be specific, the analysis for HEPLISAV is now 0.22% and for Engerix it's 0.28%.

That's based on 4,500 people for HEPLISAV and roughly 1,500 for Engerix.

Okay. That's great. That's very helpful. Then on the manufacturing consistency data, just one clarification. Looking at the graph that's in the press release on your website, it actually looked like two of the bars went above the upper 50% (multiple speakers) --

Yes, so (multiple speakers) --

(multiple speakers) -- the [physical] criteria. Is that a misprint? What's the discrepancy between the one that you're talking about in the press release and the conference call, and the -- what seems to be appearing on the [official list]?

Yes, so, Phil, there's actually not a discrepancy. The bars that are shown on the slide represent ratios of the GMC from Lot A to Lot B. So the two bars that are out of the bound our lot -- the ratio of Lot 10 to Lot 8, and the ratio of Lot 10 to Lot 9. So the point that Dino made in his commentary is that there was, in fact, the higher immunogenicity of Lot 10 versus 8 and 9 that resulted in those two bars at that one time-point being out of the prespecified range.

Okay.

So, in fact, if you look at the red bar, which reflects 8 versus 9, it's entirely within the bounds all the way through the study. So, the basic issue we're dealing with is that Lot 10 was slightly more immunogenic than the other lots. And that the increased standard deviation, which is obvious from the bars on the graph -- but we can't use the one that caused it to fall outside the limits. But as you can see, the GMC's per set, which are the symbols in the middle of the standard deviation bars, are very consistent throughout the study and very similar.

Okay. In your prepared remarks, you briefly mentioned that Tyler would provide us some precedent with how the FDA has dealt with situations like this in the past. Now Tyler, do you have any examples where this has happened and what the FDA has done about it?

So, I would just say that from a historical perspective, this is an area that is often subject to negotiation. So, one specific example I can give you that's fairly recent is the Prevnar 13 approval and for -- which is a Pfizer vac -- pneumococcal vaccine.

For Prevnar 13, in their consistency studies, three of the 13 serum types missed the prespecified criteria and that product was approved based on the -- what I assume was negotiation. And you can specifically find that by looking at the FDA reviewer's comments beginning on the clinical review page 252.

Another example would be the recent approval of Menveo, which is the Novartis meningococcal vaccine. For that product, there was a higher standard deviation than most products have. And therefore, the prespecified consistency criteria were [0.5 and 0.2]. And you can see by the figure that we've provided with you, that had we prespecified the criteria at [0.5 and 0.2], all of our endpoints would have been within that boundary. So this is often an area that, for vaccine approvals, is based on negotiation when you look at the data that's available.

Okay.

Yes. You know, I think it's important to consider that while some of self-appointed experts out there have defined this as a failed study, that consistency lot comparisons are not in the same category as efficacy and safety, which are definitive prerequisite requirements for approval. And while, in fact, we have to show consistency for approval, the whole notion that this would be considered a failed study simply because one of the points was slightly higher than the others, is downright silly.

Okay. (multiple speakers)

Can I just make one other comment on this point. It's really an important one that Dino made before. And that is that each of the HEPLISAV lots at each of these time-points was superior to the Engerix lots. So, in fact, what we actually have in this scenario was that at week eight, one of them was more superior than the other. So we have consistency of superiority versus the comparative product throughout the study. And consistency amongst our own products over the other time-points that we've mentioned in our -- in the figure.

Okay. You've mentioned that you submitted this data to the FDA essentially to get their sign-off on it. Do you have a sense of when they'll get back to you and what type of communication that will be? Do you need it (inaudible) negotiation here or is it possible to look at the data and say, that seems fine to us and clearly communicate that to you?

I don't think anything is ever that simple when you're dealing with regulatory agencies. But I think we have reason to believe that we'll get an answer soon. And we'll be able to comment on that when it's formalized, and particularly in the form of a letter or a fax that would reflect their views.

Okay. And in the worst case, if you had to do a new consistency trial, it sounds like you could do a 12-week study. Do you have a sense of the size of that trial and the cost? Is it a relatively small study?

So, there's a range. And that would depend -- if we were requested to do another study, it would depend on how we would negotiate that new study. So, for instance, if we were to use younger patients, which would have a smaller standard deviation, we could have a smaller sample size. If we redefined the consistency criteria to be between the 0.5 and 0.2 range, we could use a smaller sample size.

So there's a variety of variables that we would have to negotiate out, but it could be very straightforward. And again, if you look at the data we have, Phil, that we provided in this figure, you can see that simply redefining the endpoint to 12 weeks would meet those criteria with the same population.

So as I mentioned earlier, this is definitely not on the critical path to approval. And at worse, if we were to redo it, it would be essentially at a modest cost and an inconvenience. But we could still fit it in our basic plan for filing in the first half of next year.

Okay. And just one last question. What do you think happened with that lot at the 8-week time-point? You mentioned it doesn't seem to be a manufacturing issue or a discrepancy. Is it just simply a fluke that in some number of patients they had better antibody titers at week eight than you would have expected?

I think it was really strictly related to a higher -- a miscalculation on our part with the standard deviation would be in this population, based on looking at previous studies. I think it's obvious if you look at the data, that the error bars on the first point are much wider than those on the later points. And that was unexpected and that's the nature of the problem.

Okay. That makes a lot of sense. Thanks for taking my questions.

Katherine Xu, William Blair.

So any other -- from your studies, have you seen any hypothyroidism from Engerix B arm ever?

Yes, in our previous integrated autoimmune event slide, Katherine, that you've seen and we've publicly shown on many occasions, there was -- there has been one case in the Engerix arm from previous studies.

So it was one in 1,000 in that study and it's two in 2,000 in this study.

Great. The SPR for the study is 90%, I mean, it's kind of lower -- I mean, it's good, but it's lower than what we saw before. I'm just curious, is people dropping out? Or you're -- why that's the case. And also, why did it climb to 92% at one year?

Well, it's totally consistent, Katherine, with what we've seen before. And I can tell you from my perspective that that's one of the things that happen when you get older. (laughter) This population was 40 to 70 instead of 40 to 55. And so what you see is the impact of having an older population affecting the outcome by approximately 5%. It was 95%, as I recall, in the fast study, climbing to 98%. And it's 90% climbing to 95% in this study.

So the important point, though, that I'd like to remind you is that not only the same thing happens to Engerix but it happens more to Engerix. So instead of 80%, 82%, it's 70% and it climbs to -- what is it, 72%? -- versus 75%. And once more, let me go back to the point that I made earlier. 11 months out, HEPLISAV is still higher than 90% and Engerix is close to 50%, six months after the last immunization. So, one of the critical issues that is still unresolved in hepatitis B immunization in adults is duration of immunity. And I think we can make a huge difference from that point of view.

I just want to -- since the FDA is known to go by the books, I just want to assess your level of comfort, if you go in and do the negotiations. The data looks compelling, but if the eighth week is the primary endpoint, of course, you didn't specify a wider interval. I mean, what are your sense, basically, on your level of comfort and confidence on that negotiation?

Well, you know, what we found consistently and that is really how we got off clinical hold in the past is that the FDA responds very well to scientific arguments. That is their mantra. And I can tell you that we've found that if you approach them on rational grounds, they respond in kind. And given the precedent and given, as you pointed out, how solid the data are, I think we're very comfortable that they will agree with our analysis. Needless to say, we need to see their response before we can be sure, but I think our level of comfort is high.

Okay. So again, when do you think you will hear -- can you give us an interval?

There are no PDUFA timelines that mandate responses on these kind of direct interactions, but we have every reason to believe that it will be in the near future.

So, on the filing strategy, I mean, do you -- are you pretty much thinking that you're going to do the filing together -- of protocol 16 and 17 together next year, that same quarter next year? Or you're still striving for it on (multiple speakers) --?

(multiple speakers) No, that decision has not been made. And once we have settled this issue, I think we'll be in a position to start talking to FDA about a pre-BLA meeting that, which we hope will happen this fall. And it's at that meeting that we will identify a strategy and get their concurrence on that strategy.

So the option still exists for filing with 16 alone. We simply can't say at this point. And we've always said that that was going to be a negotiated outcome. And we'd either file with 16 alone by the end of the year or with both in the second quarter of next year. And that's unchanged.

And I would just reinforce Dino's point to say that the team is working towards and executing on the support that's required to be able to file 16 alone by the end of the year, should that pathway be clarified.

Thank you.

Duane Nash, Wedbush Securities.

So we've briefly addressed this already, but on the lot-to-lot consistency topic, can you discuss the likelihood that the Company would institute any changes in the manufacturing process?

And of related note, the two precedents that Dr. Martin discussed of prior third-party trials -- which had issues but were approved anyway -- do we know if there were any manufacturing changes there? Or if the FDA accepted the data purely based on scientific arguments?

You know, we're not planning on manufacturing changes. In fact, we are manufacturing commercial lots starting this week, so I don't believe that that's going to be an issue.

And the two precedents that Dr. Martin discussed -- do we know if they made any manufacturing changes?

We have no visibility to those issues.

Okay. Great. Well, thank you very much.

Tom Brakel, Federated Investors.

Yes, hi, Dino. Congratulations with the data --

Thank you.

-- I guess could be said. I was just wondering, do you have a sense this supports the favorable cost-benefit analysis regarding vaccination in diabetes patients?

You know, we have commented on that based on past results. We will present data on various hyper-responsive populations at next meetings. But I think it would be reasonable to expect that HEPLISAV is better than Engerix in all of those target populations. And let me leave it at that.

All right, good. All right, thanks a lot. That was it.

(Operator Instructions). Alan Leong, Biotech Stock.

Thanks for taking my question. Any plans for an extension study on the [serio] protection rates? I recognize you have one on chronic kidney disease, but any for normal patients or other groups?

You know, what's typically done as part of completing the range of studies that you do in vaccines, that you go for approval for a specific population, typically an age group. And then there are small studies, investigators-initiated studies or small studies that are done in specific target populations.

In our case, I think it would be reasonable for us to do such studies in HIV-infected individuals and perhaps in chronic liver disease individuals. We will have data on diabetics. So I expect that there will be some rounding up. But those are most likely going to happen either during the approval process of [forced] approval.

And just a confirmatory question. If you have the -- if you file on consistency alone, are there any other small trials that have to be completed between now and any hypothesized submission in December?

None other than those that we have outlined previously. We have an ongoing study in CKB on boosting patients with -- that have been previously been immunized. And then we have a longevity study, but that will not be required for filing.

Thank you.

Thank you, ladies and gentlemen. This ends the Q&A portion of today's conference. I'd like to turn the call over to Dr. Dino Dina for any closing remarks.

Thank you. So I'd like to close by reminding you that we've set for ourselves this year four key objectives.

One was to maintain a strong cash position, that's critical both in terms of supporting our programs and also continuing our negotiations with potential partners for the commercialization of the vaccine, especially outside of the US; the completion of the Phase 3 studies and the submission of our BLA and MAA for HEPLISAV; identifying partners for the commercial launch of HEPLISAV; and then continuing our earlier program, and in particular, the clinical development of universal flu and the TLR9 and 7 inhibitors that are part of the collaboration with GSK.

I think we've shown both diligence and success on all of these points, so we are moving forward in a very meaningful, consistent, and I think, timely way. With the Phase 3 results we reported today, I think we are definitely one step closer to completing the program and a lot closer to filing. And I think this is a very strong foundation of data that shows not only superiority, but most importantly -- and let's not forget that -- the impeccable safety of the vaccine.

This really provides us then a much stronger basis for continuing our discussions on commercial partnering. I've commented before on the fact that we have a number of initiatives ongoing. Those discussions have been quite active for many months and some new ones have gained momentum recently.

Potentially, these discussions to anticipate the questions that you're not going to be able to ask is, of course, between our desire to retain profitability and our potential partners' desire to increase theirs. And (laughter) these are never particularly easy discussions, but I think that we're on solid ground. And we will find a very strong partner to commercialize outside of the US.

We remain committed to selling the vaccine in the US ourselves, keeping, of course, the option open of a potential alliance with GSK or Merck. And those discussions are also underway, although that's all I can say about them at this point in time. In addition, we've been successful in maintaining a very strong cash position that addresses both the issue of finishing the programs and maintaining a competitive attitude, with respect of the negotiations that I just mentioned.

Before closing, I'd like to remind you that we have two partner programs. One is with AstraZeneca and the other one with GSK. We continue to make progress on both of them. In the case of GSK, the autoimmune disease program, we did a Phase 1 study that has been completed now. And we have received the expected $6 million milestone from them. And we're making progress with AZ on the potential start of a clinical program, although we are not yet 100% there.

Finally, we did two studies with flu. Those have provided results are completely in line with the preclinical data we have obtained. And I'm showing that the biology and the pharmacodynamic immune responses generated by the vaccine are appropriate for continuing the program and moving to a proof of concept study.

Thank you for your attention and your time, and we will update you soon again on our progress.

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