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 March 31, 2022


☐	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 May 2, 2022, the registrant had outstanding 126,312,469 shares of common stock.

INDEX

DYNAVAX TECHNOLOGIES CORPORATION


		Page No.
PART I FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)	6
	Condensed Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021	6
	Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2022 and 2021	7
	Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three Months Ended March 31, 2022 and 2021	7
	Condensed Consolidated Statements of Stockholders’ Equity for the Three Months Ended March 31, 2022 and 2021	8
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2022 and 2021	9
	Notes to Condensed Consolidated Financial Statements	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	37
Item 4.	Controls and Procedures	37
PART II OTHER INFORMATION
Item 1.	Legal Proceedings	38
Item 1A.	Risk Factors	38
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	61
Item 3.	Defaults upon Senior Securities	61
Item 4.	Mine Safety Disclosures	61
Item 5.	Other Information	61
Item 6.	Exhibits	62
SIGNATURES		64

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, CpG 1018 adjuvant or any future product, our anticipated market opportunity and level of sales of HEPLISAV-B and CpG 1018 adjuvant, 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 current or potential vaccine or vaccine candidate for COVID-19 that stem from any of our collaborations, our ability to manufacture sufficient supply of CpG 1018 to meet potential future demand in connection with new vaccines, including COVID-19 vaccines, our ability to develop and expand our clinical research pipeline, our ability 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 ongoing COVID-19 global pandemic. We have entered into collaborative relationships to develop vaccines utilizing our CpG 1018 adjuvant, including collaborations to develop vaccines for COVID-19. 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 or otherwise are inadequate, we may be unable to realize recurring commercial benefit from the development of any vaccines 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 certain of 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 our 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 most years 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 may 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. or Europe, 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 products or 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 may have uncertain outcomes.

•

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 revenue from such product candidates.

•

HEPLISAV-B and most of our earlier stage programs rely on oligonucleotide toll-like receptor (“TLR”) agonists. In the event of serious adverse event data relating to TLR agonists, we may be required 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 Düsseldorf, Germany, and our existing suppliers 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, our existing suppliers, 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. These relationships may not succeed on expected timelines, or 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.

•

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.

•

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)


	March 31,			December 31,
	2022			2021
	(unaudited)			(Note 1)
Assets
Current assets:
Cash and cash equivalents	$	179,421		$	436,189
Marketable securities available-for-sale		323,795			109,761
Accounts receivables, net		133,968			116,216
Other receivables		2,968			15,600
Inventories, net		79,038			61,335
Prepaid manufacturing		138,330			159,655
Prepaid expenses and other current assets		82,995			73,764
Total current assets		940,515			972,520
Property and equipment, net		36,407			35,020
Operating lease right-of-use assets		26,310			25,964
Goodwill		2,082			2,125
Restricted cash		214			219
Other assets		3,447			3,398
Total assets	$	1,008,975		$	1,039,246
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	20,194		$	2,600
Accrued research and development		6,359			4,688
CEPI accrual		107,370			128,848
Accrued liabilities		16,108			49,796
Warrant liability		-			18,016
Deferred revenue		313,203			349,864
Other current liabilities		2,969			2,590
Total current liabilities		466,203			556,402
Convertible Notes, net of debt discount of $4,741 and $5,010 at March 31, 2022 and December 31, 2021, respectively		220,759			220,490
Long-term portion of lease liabilities		34,253			34,316
Other long-term liabilities		276			5,664
Total liabilities		721,491			816,872
Commitments and contingencies (Note 5)
Stockholders’ equity:
Common stock: $0.001 par value; 278,000 shares authorized at March 31, 2022 and December 31, 2021; 126,297 shares and 122,945 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively		126			123
Additional paid-in capital		1,476,013			1,441,868
Accumulated other comprehensive loss		(4,163	)		(2,266	)
Accumulated deficit		(1,184,492	)		(1,217,351	)
Total stockholders’ equity		287,484			222,374
Total liabilities and stockholders’ equity	$	1,008,975		$	1,039,246

See accompanying notes.

Dynavax Technologies Corporation

Condensed Consolidated Statements of Operations

(In thousands, except per share amounts)

(Unaudited)


	Three Months Ended March 31,
	2022			2021
Revenues:
Product revenue, net	$	112,327		$	82,885
Other revenue		1,665			450
Total revenues		113,992			83,335
Operating expenses:
Cost of sales - product		39,962			24,625
Research and development		11,095			7,758
Selling, general and administrative		32,172			22,423
Total operating expenses		83,229			54,806
Income from operations		30,763			28,529
Other income (expense):
Interest income		261			47
Interest expense		(1,680	)		(4,712	)
Sublease income		1,609			2,022
Change in fair value of warrant liability (Note 10)		1,801			(25,552	)
Other		105			557
Net income		32,859			891
Net income per share attributable to common stockholders
Basic	$	0.26		$	0.01
Diluted	$	0.22		$	0.01
Weighted-average shares used in computing net income per share attributable to common stockholders:
Basic		124,555			112,035
Diluted		149,425			113,469

Condensed Consolidated Statements of Comprehensive Loss

(In thousands)

(Unaudited)


	Three Months Ended March 31,
	2022			2021
Net income	$	32,859		$	891
Other comprehensive loss, net of tax:
Change in unrealized gain (loss) on marketable securities available- for-sale		(1,272	)		(9	)
Foreign currency translation adjustments		(625	)		(1,390	)
Total other comprehensive loss		(1,897	)		(1,399	)
Total comprehensive income	$	30,962		$	(508	)

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 March 31, 2022	Shares		Par Amount		Shares		Par Amount		Capital		(Loss) Income			Deficit			Equity
Balances at December 31, 2021		122,945	$	123		-	$	-	$	1,441,868	$	(2,266	)	$	(1,217,351	)	$	222,374
Issuance of common stock upon exercise of stock options and/or release of restricted stock awards, net		1,391		1		-		-		1,121		-			-			1,122
Issuance of common stock upon exercise of warrants		1,879		2		-		-		24,668		-			-			24,670
Issuance of common stock under Employee Stock Purchase Plan		82		-		-		-		710		-			-			710
Stock compensation expense		-		-		-		-		7,646		-			-			7,646
Total other comprehensive loss		-		-		-		-		-		(1,897	)		-			(1,897	)
Net income		-		-		-		-		-		-			32,859			32,859
Balances at March 31, 2022		126,297	$	126		-	$	-	$	1,476,013	$	(4,163	)	$	(1,184,492	)	$	287,484


	Common Stock				Preferred Stock				Additional Paid-In		Accumulated Other Comprehensive			Accumulated			Total Stockholders'
Three Months Ended March 31, 2021	Shares		Par Amount		Shares		Par Amount		Capital		(Loss) Income			Deficit			Equity
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 warrants		750		1		-		-		7,927		-			-			7,928
Issuance of common stock upon exercise of stock options and/or release of restricted stock awards, net		640								387								387
Issuance of common stock under Employee Stock Purchase Plan		104		-		-		-		383		-			-			383
Issuance of common stock, net of issuance costs, in conjunction with an At Market Sales Agreement (see Note 10)		2,879		3		-		-		28,153		-			-			28,156
Stock compensation expense		-		-		-		-		4,723		-			-			4,723
Total other comprehensive income		-		-		-		-		-		(1,399	)		-			(1,399	)
Net income		-		-		-		-		-		-			891			891
Balances at March 31, 2021		114,563	$	114		4	$	-	$	1,393,947	$	(1,126	)	$	(1,293,173	)	$	99,762

See accompanying notes.

Dynavax Technologies Corporation

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)


	Three Months Ended March 31,
	2022			2021
Operating activities
Net income	$	32,859		$	891
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation and amortization		985			1,106
Amortization of right-of-use assets and loss on disposal of property and equipment		743			653
(Accretion of discounts) amortization of premium on marketable securities		(181	)		221
Change in fair value of warrant liability		(1,801	)		25,552
Stock compensation expense		7,646			4,723
Non-cash interest expense		1,680			414
Changes in operating assets and liabilities:
Accounts and other receivables, net		(5,120	)		(61,333	)
Inventories, net		(17,703	)		(5,157	)
Prepaid manufacturing		21,325			(3,219	)
Prepaid expenses and other current assets		(9,231	)		(171	)
Other assets		(49	)		(95	)
Accounts payable		16,938			(295	)
CEPI accrual		(21,478	)		-
Lease liabilities		(806	)		(751	)
Deferred revenue		(36,661	)		78,340
Accrued liabilities and other liabilities		(39,589	)		(2,847	)
Net cash (used in) provided by operating activities		(50,443	)		38,032
Investing activities
Purchases of marketable securities		(250,375	)		(72,016	)
Proceeds from maturities and redemptions of marketable securities		35,250			51,130
Purchases of property and equipment, net		(1,358	)		(1,747	)
Net cash used in investing activities		(216,483	)		(22,633	)
Financing activities
Proceeds from issuance of common stock, net		-