SEC Filing | Dynavax Technologies Corporation

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10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission file number: 001-34207

Dynavax Technologies Corporation

(Exact name of registrant as specified in its charter)


Delaware		33-0728374
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

2100 Powell Street, Suite 900

Emeryville, CA 94608

(510) 848-5100

(Address, including Zip Code, and telephone number, including area code, of the registrant’s principal executive offices)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class:	Trading symbol(s):	Name of each exchange on which registered:
Common Stock, $0.001 par value	DVAX	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registration was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

As of November 1, 2021, the registrant had outstanding 119,952,132 shares of common stock.

INDEX

DYNAVAX TECHNOLOGIES CORPORATION


		Page No.
PART I FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)	7
	Condensed Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020	7
	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2021 and 2020	8
	Condensed Consolidated Statements of Comprehensive Loss for the Three and Nine Months Ended September 30, 2021 and 2020	9
	Condensed Consolidated Statements of Stockholders’ Equity for the Three and Nine Months Ended September 30, 2021 and 2020	10
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2021 and 2020	11
	Notes to Condensed Consolidated Financial Statements	12
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	33
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	42
Item 4.	Controls and Procedures	42
PART II OTHER INFORMATION
Item 1.	Legal Proceedings	43
Item 1A.	Risk Factors	43
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	66
Item 5.	Other Information	66
Item 6.	Exhibits	67
SIGNATURES		69

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are subject to a number of risks and uncertainties. All statements that are not historical facts are forward-looking statements, including statements about the direct and indirect impact of the ongoing COVID-19 global pandemic on our business and operations, including sales of HEPLISAV-B®, our ability to successfully commercialize HEPLISAV-B, our anticipated market opportunity and level of sales of HEPLISAV-B, our ability to manufacture sufficient supply of HEPLISAV-B to meet future demand, our business, collaboration and regulatory strategy, our ability to successfully support the development, manufacture and commercialization of other vaccines containing our CpG 1018® adjuvant, including any potential vaccine for COVID-19 stemming from our multiple collaborations, our ability to manufacture sufficient supply of CpG 1018 to meet potential future demand in connection with new vaccines, and to meet regulatory requirements, uncertainty regarding our capital needs and future operating results and profitability, anticipated sources of funds, liquidity and cash needs, as well as our plans, objectives, strategies, expectations and intentions. These statements appear throughout this Quarterly Report on Form 10-Q and can be identified by the use of forward-looking language such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “future,” or “intend,” or the negative of these terms or other variations or comparable terminology.

Actual results may vary materially from those in our forward-looking statements as a result of various factors that are identified in “Item 1A—Risk Factors” and “Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this document. No assurance can be given that the risk factors described in this Quarterly Report on Form 10-Q are all of the factors that could cause actual results to vary materially from the forward-looking statements. All forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q. Readers should not place undue reliance on these forward-looking statements and are cautioned that any such forward-looking statements are not guarantees of future performance. We assume no obligation to update any forward-looking statements.

This Quarterly Report on Form 10-Q includes trademarks and registered trademarks of Dynavax Technologies Corporation. Products or service names of other companies mentioned in this Quarterly Report on Form 10-Q may be trademarks or registered trademarks of their respective owners. References herein to “we,” “our,” “us,” “Dynavax” or the “Company” refer to Dynavax Technologies Corporation and its subsidiaries.

RISK FACTOR SUMMARY

Below is a summary of material factors that make an investment in our securities speculative or risky. Importantly, this summary does not address all of the risks and uncertainties that we face. Additional discussion of the risks and uncertainties summarized in this risk factor summary, as well as other risks and uncertainties that we face, can be found in the more detailed discussion that follows this summary, and the below summary is qualified in its entirety by that more complete discussion of such risks and uncertainties. You should consider carefully the risks and uncertainties described herein as part of your evaluation of an investment in our securities:



HEPLISAV-B has been launched in the United States, and approved in the European Union, and there is significant competition in these marketplaces. Since this is our first marketed product, the timing of uptake and distribution efforts are unpredictable and there is a risk that we may not achieve and sustain commercial success for HEPLISAV-B.



Our business and operations have been and may continue to be adversely affected by the evolving and ongoing COVID-19 global pandemic. While we have entered into collaborative relationships to develop vaccines utilizing our CpG 1018 adjuvant, including collaborations to develop a vaccine for COVID-19, our collaborators generally have primary responsibility for the development, conduct of clinical trials, for seeking and obtaining regulatory approval, and for the manufacture and commercialization of any approved vaccine, and these collaborations may not be successful. If the combination of patents, trade secrets and other proprietary rights that we rely on to protect our intellectual property rights in CpG 1018 adjuvant are inadequate; we may be unable to realize any commercial benefit from the development of a vaccine containing CpG 1018 adjuvant.



Our financial results may vary significantly from quarter to quarter or may fall below the expectations of investors or securities analysts, each of which may adversely affect our stock price.



We face uncertainty regarding coverage, pricing and reimbursement and the practices of third-party payors, which may make it difficult or impossible to sell our products or product candidates on commercially reasonable terms.



We are subject to ongoing United States Food and Drug Administration (“FDA”) and European Medicines Agency (“EMA”) post-marketing obligations concerning HEPLISAV-B, which may result in significant additional expense, and we may be subject to penalties if we fail to comply with regulatory requirements or experience unanticipated regulatory issues with HEPLISAV-B.



If HEPLISAV-B or any products we develop are not accepted by the market or if regulatory agencies limit our labeling indications, require labeling content that diminishes market uptake of HEPLISAV-B or any other products we develop, or limit our marketing claims, we may be unable to generate significant revenues, if any.



Many of our competitors have greater financial resources and expertise than we do. If we are unable to successfully compete with existing or potential competitors as a result of these disadvantages, we may be unable to generate sufficient or any revenues and our business will be harmed.



Servicing our debt requires a significant amount of cash, and we may not have sufficient cash flow from our business to pay our substantial debt. Conversion of the Convertible Notes (defined below) may dilute the ownership interest of our stockholders or may otherwise depress the price of our common stock.



Despite recent profitability, we have incurred annual net losses in each year since our inception and anticipate that we could continue to incur significant losses for the foreseeable future unless we can successfully commercialize HEPLISAV-B and/or continue to sell significant quantities of our CpG 1018 adjuvant, and if we are unable to sustain profitability, the market value of our common stock will likely decline. Until we are able to generate significant revenues or achieve profitability through product sales on a consistent basis, we could require substantial additional capital to finance our operations.



We may develop, seek regulatory approval for and market HEPLISAV-B or any other product candidates we may develop outside the U.S., requiring a significant commitment of resources. Failure to successfully manage our international operations could result in significant unanticipated costs and delays in regulatory approval or commercialization of our product and product candidates.



Clinical trials for our commercial product and product candidates are expensive and time consuming, may take longer than we expect or may not be completed at all, and their outcomes are uncertain.



As a biopharmaceutical company, we engage clinical research organizations (“CROs”) to conduct clinical studies, and failure by us or our CROs to conduct a clinical study in accordance with good clinical practice standards and other applicable regulatory requirements could result in disqualification of the applicable clinical trial from consideration in support of approval of a potential product.



Regulatory authorities may require more clinical trials for our product candidates than we currently expect or are conducting before granting regulatory approval, if regulatory approval is granted at all. Our clinical trials may be extended which may lead to substantial delays in the regulatory approval process for our product candidates and may impair our ability to generate revenues.



HEPLISAV-B and most of our earlier stage programs, including our CpG 1018 adjuvant, rely on oligonucleotide toll-like receptor (“TLR”) agonists. Serious adverse event data relating to TLR agonists may require us to reduce the scope of or discontinue our operations, or reevaluate the viability of strategic alternatives.



As we plan for broader commercialization of HEPLISAV-B and for expanded capacity to manufacture our CpG 1018 adjuvant, our financial commitments to increase supply capacity might outpace actual demand for our products. Also, if we are unable to maintain our production operations in Dusseldorf and our existing supplier for CpG 1018 adjuvant, we would have to establish alternate qualified manufacturing capabilities, which could result in significant additional operating costs and delays in developing and commercializing HEPLISAV-B and any approved or potential vaccine utilizing CpG 1018. There can be no assurance that we or other third parties will be able to produce CpG 1018 at a cost, quantity and quality sufficient to support our existing or any future collaborations.



We rely on our facility in Düsseldorf, Germany and third parties to supply materials or perform processes necessary to manufacture HEPLISAV-B. We rely on a limited number of suppliers to produce the oligonucleotides we require for development and commercialization. Additionally, we and our collaborators have limited experience in manufacturing our products and product candidates in commercial quantities. With respect to HEPLISAV-B, we use a pre-filled syringe presentation of the vaccine and our ability to meet future demand will depend on our or our contract manufacturer's ability to provide sufficient supply in this presentation.



As we continue to grow as a commercial organization and enter into supply agreements with customers and collaborators, those supply agreements will have obligations to deliver product for which we are reliant upon third parties to manufacture on our behalf.



HEPLISAV-B is subject to regulatory obligations and continued regulatory review, and if we receive regulatory approval for our other product candidates, we will be subject to ongoing FDA and foreign regulatory obligations and continued regulatory review for such products.



A key part of our business strategy for products in development is to establish collaborative relationships to help fund or manage development and commercialization of our product candidates and research programs. We may not succeed in establishing and maintaining collaborative relationships, which may significantly limit our ability to continue to develop and commercialize those products and programs, if at all.



We rely on CROs and clinical sites and investigators for our clinical trials. If these third parties do not fulfill their contractual obligations or meet expected deadlines, our planned clinical trials may be delayed and we may fail to obtain the regulatory approvals necessary to commercialize our product candidates.



As we focus on commercialization of HEPLISAV-B, we may encounter difficulties in managing our commercial growth and expanding our operations successfully.



If we fail to comply with the extensive requirements applicable to biopharmaceutical manufacturers and marketers under the healthcare fraud and abuse, anticorruption, privacy, transparency and other laws of the jurisdictions in which we conduct our business, we may be subject to significant liability.



The loss of key personnel could delay or prevent achieving our objectives. In addition, our continued growth to support commercialization may result in difficulties in managing our growth and expanding our operations successfully.



We face product liability exposure, which, if not covered by insurance, could result in significant financial liability. Our business operations are vulnerable to interruptions by natural disasters, health epidemics and other catastrophic events beyond our control, the occurrence of which could materially harm our manufacturing, distribution, sales, business operations and financial results. Significant disruptions of information technology systems or breaches of data security could also adversely affect our business.



We rely on licenses to intellectual property from third parties. Impairment of these licenses or our inability to maintain them would severely harm our business.



If third parties successfully assert that we have infringed their patents and proprietary rights or challenge our patents and proprietary rights, we may become involved in intellectual property disputes and litigation that would be costly, time consuming and delay or prevent development or commercialization of our product candidates.



Future sales of our common stock or the perception that such sales may occur in the public market could cause our stock price to fall.

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Dynavax Technologies Corporation

Condensed Consolidated Balance Sheets

(In thousands, except per share amounts)


	September 30,			December 31,
	2021			2020
	(unaudited)			(Note 1)
Assets
Current assets:
Cash and cash equivalents	$	246,351		$	32,073
Marketable securities available-for-sale		167,804			132,963
Accounts and other receivables, net		200,362			22,661
Inventories, net		67,297			63,689
Prepaid manufacturing		109,763			29,423
Prepaid expenses and other current assets		61,093			9,206
Total current assets		852,670			290,015
Property and equipment, net		34,251			30,567
Operating lease right-of-use assets		26,772			26,583
Goodwill		2,171			2,297
Restricted cash		224			237
Other assets		3,623			3,573
Total assets	$	919,711		$	353,272
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	3,596		$	3,312
Accrued research and development		3,935			2,805
Accrued liabilities		87,910			19,099
Warrant liability		72,017			10,736
Deferred revenue		358,588			38,212
Other current liabilities		2,889			3,247
Total current liabilities		528,935			77,411
Long-term debt, net of debt discount of $1,094 at December 31, 2020		-			179,811
Convertible Notes, net of debt discount of $5,277 at September 30, 2021 (see Note 7)		220,223			-
Long-term deferred revenue		67,969			-
Long-term portion of lease liabilities		34,929			34,789
Other long-term liabilities		79			2,568
Total liabilities		852,135			294,579
Commitments and contingencies (Note 5)
Stockholders’ equity:
Preferred stock: $0.001 par value
Authorized: 5,000 shares; Issued and outstanding:		-			-
Series B Convertible Preferred stock ̶ no shares and 4 shares at September 30, 2021 and December 31, 2020, respectively		-			-
Common stock: $0.001 par value; 278,000 shares authorized at September 30, 2021 and December 31, 2020; 119,787 shares and 110,190 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively		120			110
Additional paid-in capital		1,386,114			1,352,374
Accumulated other comprehensive (loss) gain		(1,528	)		273
Accumulated deficit		(1,317,130	)		(1,294,064	)
Total stockholders’ equity		67,576			58,693
Total liabilities and stockholders’ equity	$	919,711		$	353,272

See accompanying notes.

Dynavax Technologies Corporation

Condensed Consolidated Statements of Operations

(In thousands, except per share amounts)

(Unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020
Revenues:
Product revenue, net	$	106,996		$	13,276		$	242,558		$	26,195
Other revenue		1,274			138			1,814			806
Total revenues		108,270			13,414			244,372			27,001
Operating expenses:
Cost of sales - product		60,090			4,031			99,560			7,352
Cost of sales - amortization of intangible assets		-			-			-			2,500
Research and development		6,186			8,521			21,111			19,058
Selling, general and administrative		26,926			21,538			70,932			61,418
Gain on sale of assets (Note 5)		(1,000	)		(6,851	)		(1,000	)		(6,851	)
Total operating expenses		92,202			27,239			190,603			83,477
Income (loss) from operations		16,068			(13,825	)		53,769			(56,476	)
Other income (expense):
Interest income		39			269			134			1,190
Interest expense		(1,676	)		(4,794	)		(9,497	)		(14,257	)
Sublease income		2,022			1,926			5,714			5,779
Loss on debt extinguishment (Note 8)		-			-			(5,232	)		-
Change in fair value of warrant liability (Note 11)		(45,121	)		21,245			(68,576	)		4,200
Other		238			(420	)		622			(209	)
Net (loss) income		(28,430	)		4,401			(23,066	)		(59,773	)
Net (loss) income per share attributable to common stockholders
Basic	$	(0.24	)	$	0.04		$	(0.20	)	$	(0.61	)
Diluted	$	(0.24	)	$	(0.15	)	$	(0.20	)	$	(0.65	)
Weighted-average shares used in computing net (loss) income per share attributable to common stockholders:
Basic		116,903			109,816			114,540			97,589
Diluted		116,903			111,973			114,540			98,577

Condensed Consolidated Statements of Comprehensive Loss

(In thousands)

(Unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020
Net (loss) income	$	(28,430	)	$	4,401		$	(23,066	)	$	(59,773	)
Other comprehensive (loss) income, net of tax:
Reclassification of realized gain on available-for-sale securities recognized in interest income		-			(108	)		-			(21	)
Change in unrealized gain (loss) on marketable securities available- for-sale		(18	)		(75	)		11			30
Foreign currency translation adjustments		(797	)		1,256			(1,812	)		1,356
Total other comprehensive (loss) income		(815	)		1,073			(1,801	)		1,365
Total comprehensive (loss) income	$	(29,245	)	$	5,474		$	(24,867	)	$	(58,408	)

See accompanying notes.

Dynavax Technologies Corporation

Condensed Consolidated Statements of Stockholders’ Equity

(In thousands)

(Unaudited)


	Common Stock				Preferred Stock					Additional Paid-In			Accumulated Other Comprehensive			Accumulated			Total Stockholders'
Three Months Ended September 30, 2021	Shares		Par Amount		Shares			Par Amount		Capital			(Loss) Income			Deficit			Equity
Balances at June 30, 2021		114,756	$	114		4		$	-	$	1,372,679		$	(713	)	$	(1,288,700	)	$	83,380
Issuance of common stock upon exercise of stock options and restricted stock awards, net		582		2		-			-		3,980			-			-			3,982
Issuance of common stock upon exercise of warrants		196		-		-			-		3,625			-			-			3,625
Conversion of preferred stock		4,140		4		(4	)		-		(4	)		-			-			-
Issuance of common stock under Employee Stock Purchase Plan		113		-		-			-		458			-			-			458
Stock compensation expense		-		-		-			-		5,376			-			-			5,376
Total other comprehensive loss		-		-		-			-		-			(815	)		-			(815	)
Net loss		-		-		-			-		-			-			(28,430	)		(28,430	)
Balances at September 30, 2021		119,787	$	120		-		$	-	$	1,386,114		$	(1,528	)	$	(1,317,130	)	$	67,576

Nine Months Ended September 30, 2021
Balances at December 31, 2020		110,190	$	110		4		$	-	$	1,352,374		$	273		$	(1,294,064	)	$	58,693
Issuance of common stock upon exercise of stock options and restricted stock awards, net		1,415		2		-			-		5,315			-			-			5,317
Issuance of common stock upon exercise of warrants		946		1		-			-		11,552			-			-			11,553
Conversion of preferred stock		4,140		4		(4	)		-		(4	)		-			-			-
Issuance of common stock under Employee Stock Purchase Plan		217		-		-			-		841			-			-			841
Issuance of common stock, net of issuance costs, in conjunction with an At Market Sales Agreement (see Note 11)		2,879		3		-			-		28,153			-			-			28,156
Issuance of capped call options		-		-		-			-		(27,240	)		-			-			(27,240	)
Stock compensation expense		-		-		-			-		15,123			-			-			15,123
Total other comprehensive loss		-		-		-			-		-			(1,801