Dynavax Technologies Corporation Price & Performance (DVAX)

Before we begin, I advise you that we will be making forward looking statements today based on our current expectations and beliefs, including but not limited to potential market sizes, market segmentation, effective marketing efforts, future expected market share and related growth rates, and related ICIP recommendation impact on each. Financial guidance and trends including revenue and profit profitability, cash flow and sufficiency of current capitalization, timing and results of FDA submissions, clinical trial starts and data readouts and potential future uses of or demand for our CPG-ten 19 adjuvant. These statements involve risks and uncertainties and our actual results may differ materially. These risks are summarized in today's press release and detailed in the Risk Factors section on our SEC filings, including today's annual Annual Report on Form 10 ks. Our forward looking statements speak as of today and we undertake no obligation to update Our earnings press release and this call will include discussions certain non GAAP information. You can find our earnings press release including relevant non GAAP reconciliation on the Investors section of our corporate website at dynavax.com Dynavax. With that, I will now turn the call over to Ryan. Thanks, Paul. And thank you all for joining us this afternoon.

In 2024, we delivered across our strategic priorities, including achieving record fourth quarter and annual HEPLISAV B product revenue. Advancing our pipeline programs, achieving profitability and returning capital to shareholders through our share repurchase plan. This performance sets us up for even greater success in 2025 which we expect to be a banner year for Dynabas Dynavax. For HEPLISAV B, we expect to drive continued top line growth. With net product sales between $3.00 $5,000,000 to $325,000,000 fueled by the expanding adult hepatitis B vaccine market in The U. S, along with expected market share gains by HEPLISAV B. We also expect 2025 to be a transformational year for our development pipeline. With multiple programs advancing to important milestones and new programs emerging throughout the year.

Our Shingles program is our most advanced clinical program and we see a significant opportunity for a differentiated and best in class shingles vaccine.

In both The U. S. And ex U. S. Markets which is currently a multi billion dollar annual market dominated by a single product, We know the profile required for a competitive vaccine to be successful and disruptive in this market. We'll require similar efficacy to the standards of care and significantly improved tolerability compared to the existing product. We are executing on a development development plan to establish this product profile for our Z1018 program. As a reminder, already completed a dose ranging Phase one study where we saw comparable vaccine response rates to Shingrix while demonstrating high CD4 T cell response and meaningfully lower rates of moderate to severe local and systemic post injection reactions. For our ongoing Phase onetwo study, we expect to report our top line readout in the third quarter. Which we based on one month data following the last vaccine dose in the study. We expect this study to establish proof of concept for this program and to select the dose and regimen taken to our Phase two extension study patients over 70 years old. Along with further studies. We expect these data will support our dialogue with regulators and potential strategic partners ahead of a global Phase three launch.

We also expect to begin our next clinical trial for our plate vaccine program. Which is partnered with U. S. Department of Defense. Rob will speak more about our clinical pipeline in a few minutes. We are proud of the company we are building around our core assets, HEPLISAV B and CPG-seven eighteen. Which have together helped protect millions of people around the world. While establishing Dynavax as a leading vaccine company. Driven by continued top line revenue growth and operational discipline, our strong financial position has enabled us to also return capital to shareholders as part of our balanced capital allocation strategy.

We'll also continue to pursue external opportunities to generate sustainable long term value for our shareholders. This will be an exciting and important year ahead for Dynavax. And I look forward to providing you with updates on our progress I'd like to turn the call over to Don.

Thank you, Ryan.

At Dynavax, we are proud to be the leader in The U. S. Dynavax B adult vaccine market. Since its launch in twenty eighteen, HEPLISAV B has disrupted the market due to what we believe is a differentiated and best in class profile. Through our strong commercial execution, we have increased HEPLISAV's total market share to 44% by the end of twenty twenty four. Securing its position as the market leader. This rapid advancement in a few short years demonstrate our ability to compete effectively against established legacy products. [indiscernible] The ACE IP universal recommendation has transformed the adult hepatitis B vaccine market. Creating one of the largest addressable patient populations for vaccines in The U. S. The market continues to adopt these expanded guidelines with overall hepatitis B vaccine dose growth increasing by nearly 10% year over year 2024. TevaCyb's strong performance in this expanding market has resulted in record net revenues of $71,000,000 for the fourth quarter and $268,000,000 for the full year of 2024. These results reflect significant growth compared to prior year. Growth of HEPLISAV B is supported by two key segments: retail pharmacy and integrated delivery networks We continue to prioritize our sales and marketing efforts in these critical areas.

Although market share was essentially flat year over year in these segments, together they drove an impressive 25% annual growth in HEPLISAV B dose We are encouraged by the ongoing adoption of HEPLISAV B and look forward to continuing our momentum in 2025 and beyond. As we look to the future, we are excited by market development that are improving access to and increasing the focus on hepatitis B vaccination in The U. S. These developments are reflected in our 2025 guidance and further strengthen our outlook on the long term market opportunity and market share for HEPLISAV B, First, starting in January of this year, Medicare patients gained access to hepatitis B vaccines at retail pharmacies through roster billings under Medicare Part B which mirrors the approach for influenza and pneumococcal vaccines. Until now, TwinRx was the only hepatitis B containing vaccine reimbursed for Medicare patients in the retail setting. Giving it majority market share among that population. Now with equal access and leveraging our commercial strength of retail, we are excited about how this new Medicare policy could support HEPLISAV B's retail growth and market share in 2025. Second, beginning in 2025, adult hepatitis B vaccination will be included in the Healthcare Effectiveness Data and information set, [indiscernible] HEDIS is the largest and most widely used set quality performance indicators in U. S. Healthcare and IDNs typically align their operations to perform well on these measures.

The inclusion of hepatitis B vaccination as the heatest measure signals its growing priority placing alongside other high adult high volume adult vaccines We believe this change is likely to enhance focus, and utilization in IDNs and large clinics.

While also increasing market share. As the measure focuses on series completion, which we believe aligns well with HEPLISAVI's two dose regimen. These positive market dynamics combined with our strong commercial execution and performance in Retail and IDS segments give us confidence of the long term revenue opportunity for HEPLISAV B. We are encouraged by the growth of the HEPLISAV B market opportunity. Which expanded by approximately $90,000,000 to $650,000,000 in 2024.

This progress tracks with our long term outlook for HEPLO market opportunity in The U. S. Which we expect to peak to over $900,000,000 by 02/1930, with Headless IV capturing at least 60% market share. This long term guidance reflects our expectation of double digit annual growth in product net sales through 02/1930. We expect the HEPLISAV B market opportunity remain durable beyond 02/1930, driven by ongoing vaccination of the eligible adult population, observed revaccination practices by healthcare providers, and continued market share gains. In summary, we remain confident in the outlook for Hemflaf V We expect HEPLISAV B to further solidify its position as the clear market leader in the expanding hepatitis B vaccine market. We are incredibly proud of our commercial team's success and excited about the momentum we're building today and into the future.

I will now turn the call over to Rob to take you through our clinical pipeline. Thank you, Don. I'll begin with our shingles As Ryan mentioned, we previously reported results from our Phase one clinical trial designed to evaluate our investigational shingles vaccine Z1018 compared to Shingrix in one hundred and fifty participants.

We studied different regimens of ZYN18 including a low and high dose of CPG-ten eighteen adjuvant, and we select One month following the second vaccine dose, antibody and CD4 positive T cell vaccine response rates were similar in the high CPG-ten eighty adjuvant dose groups to Shingrix. In the high dose C1018 groups, the antibody vaccine rate was ninety six percent to one hundred percent compared with one hundred percent for Shingrix.

CD4 positive T cell vaccine response rates were eighty eight percent to ninety two percent in the Z1018 groups compared to ninety six percent in the Shingrix group.

The quality of CD4 positive T cells was also similar between the Z-ten eighteen and Shingrix groups. The proportion of subjects with GE specific activated CD4 expressed three or four activation markers with 79 to eighty two percent in the Z1018 groups and eighty two percent in the Shingrix group.

Z1018 showed favorable tolerability compared to Shingrix without observed safety concerns. The rate of solicited moderate and severe local post injection reactions was eight percent for Z1018 and thirty seven percent for Shingrix. While moderate and severe systemic post injection reactions were twenty six percent for Z-ten eighteen and forty three percent The ongoing Phase onetwo trial is designed to select the antigen dose and regimen to take into future studies and we're evaluating four forty one adults aged 50 to 69 years.

Immunogenicity and safety results at one month after the second dose are expected in the third quarter. With the understanding that there's no accepted correlative protection for shingles vaccines, CD4 positive T cells are thought to be an important but not only factor in preventing reactive In this descriptive study, we seek to demonstrate to demonstrate a CD4 positive T cell frequency that is similar to Shingrix. Demonstrating a similar distribution and quality of T cell responses, durable T cell responses and similar antibody responses will also be important If observed, this constellation of findings would suggest to us a high probability of demonstrating comparable efficacy in a Phase III trial. Following the one month data, we expect to select a dose regimen to advance into a Phase two extension study evaluating adults 70 years of age and older while we await the six month follow-up data from the 69 year old groups. Regarding the Plag vaccine program, Dynavax and the Department of Defense recently executed a new agreement for approximately $30,000,000 through the first half of twenty twenty seven to support additional clinical and manufacturing activities. We plan to initiate a Phase two clinical trial in the third quarter of twenty twenty five.

Given that the program is focused on preventing the spread of mnemonic plague in a biological attack, our goal in the Phase two study is to maximize a rapid antibody response through dose ranging of the CPG1018t adjuvant and optimizing the dosing regimen. Now turning to our program to develop a fourth dose, HEPLISAV B vaccine regimen for adults on hemodialysis.

We previously reported that the FDA issued a complete response letter for SBLA that's on file. We continue to work with FDA to incorporate data from the observational retro cohort study in the SPLA filing with a goal of resubmitting this year. We look forward to providing future updates on this program. I'll now turn the call over to Kelly to review our financial results.

Thank you, Rob. Before I get started, a reminder to please refer to our press release and Form 10 ks filed earlier today for more detailed financial information. Financial highlights for the fourth quarter and full year include HEPLISAV B net sales of $71,000,000 for the fourth quarter, up 39% year over year. And a record $268,000,000 for the full year, up 26% year over year, reflecting the impressive growth in the total addressable market opportunity. Additionally, HEPLISAV B gross margin was 82% for the full year 2024. An increase compared to 76% in 2023 and achieving our guidance of approximately 80% for 2024 and looking forward, we expect HEPLISAV B gross margin to continue at around eighty twenty twenty five. Turning to expenses, R and D expenses were $19,000,000 in the fourth quarter up 32% year over year and $62,000,000 for the full year 2024, up 12% year over year. Looking forward for R and D expenses, as we continue to progress our clinical stage pipeline through key milestones in 2025, we expect R and D expenses to increase by high teens percent compared to 2024 SG and A expenses were $42,000,000 for the fourth quarter, which is flat year over year and they were $170,000,000 for the full year 2024, up 11% year over year.

Looking forward for SG and A expenses, we expect these expenses to be roughly flat in 2025 as we believe this represents the appropriate resourcing to drive the overall growth of our current business and maximize the HEPLISAV B opportunity Moving to the bottom line, we achieved our previously stated guidance for full year profitability with net income of $27,000,000 including net income in the fourth quarter of $7,000,000 Lastly, on the P and L, we are introducing a non GAAP measure of adjusted EBITDA excluding non cash stock based compensation that we intend to report on for 2025, Non GAAP adjusted EBITDA excluding stock based compensation was $13,000,000 for the fourth quarter an increase of over 200% year over year. And $52,000,000 for the full year 2024, up over 300% compared to prior year. Please see our press release issued earlier today for a reconciliation of GAAP to non GAAP results and accompanying disclosure. Transitioning to the balance sheet. Exited the year with cash equivalents and marketable securities of $714,000,000 compared to $742,000,000 at the end of twenty twenty three. The decrease in our cash position includes the deployment of $100,000,000 towards our first accelerated share repurchase program, which was finalized earlier this month.

As a reminder, in November 2024, we announced the authorization of up to $200,000,000 in share buybacks which approximated just under 15% of our market cap and approximately 37% of our net cash at the time of announcement. We expect to complete the remaining $100,000,000 of authorized share repurchases by the end of twenty twenty five We're encouraged by our robust performance in the fourth quarter and full year. We achieved all of our financial guidance goals, including HEPLISAV B net sales and full year profitability further strengthening our financial position and enabling us to drive long term growth while returning capital to shareholders as part of our balanced capital allocation strategy. Turning to our financial guidance for full year 2025. We expect HEPLISAV B net product revenue to be in the range of $3.00 $5,000,000 to $325,000,000 which represents 17% year over year growth at the midpoint We also expect adjusted EBITDA excluding stock based compensation be at least $75,000,000 demonstrating our ability to grow adjusted EBITDA at more than two times the rate of product revenue further strengthening our ability to deliver on our strategic priorities in 2025. In closing, we're excited to report another strong year consisting of record revenue for HEPLISAV B improved product gross margin, and advancing pipeline with key milestones this year and a strong financial profile with balanced with a balanced capital allocation strategy.

We're very proud of this progress We're also excited about our growth prospects as outlined on the call today. Thank you everyone. Operator, we would now like to open the Q and A portion of today's call.

Our first question or comment comes from the line of Matt Phipps from William Blair.

Hello.

Sorry, hope you can hear me. Thanks for taking my question. Curious as you go into 2025 and kind of looking at the year over year growth and market share, I know you guys have given 02/1930 guidance but what is the kind of entrance to get into more accounts and continue to drive market share growth? So what do you think is barriers that you need to overcome? Is it just got in the fast adopters and now you have to try to find these kind of other accounts or is there something else to help kind of drive continued market share gains between now and 02/1930?

Hey Matt, thanks for the question. Don, why don't you take that one? But one thing I want to highlight is we recognize that our Market has broken up to two key segments between ID and retail. So probably commentary on both would be helpful. Yes. Hey, Matt. How are you doing? So great question. We think about market share, I alluded to it on the on the call. There's two major market events that are going to help support continued growth market share. Access in the Medicare patient population in retail is critical. To be able to continue the gains in retail that is incredibly important And also having the HEDIS measure, which again is going to focus on series completion, which obviously is going to favor hevelasab in its two dose completion So those are two events that will continue to support market share gains. And then it's a continuation to continue to working with customers and various outlets to drive the market share. So we're very confident and continue to to grow the share in both those critical segments. And again, those are the two segments that will have disproportionate growth in the marketplace as we maintain high share and gross share it will obviously pick up the overall total market share in line with what we are guiding to by 02/1930. [indiscernible] the shingles program, maybe you mentioned this a little bit but just kind of going over again what you think is the non inferiority level that you need to show?

I think you've said it before like 75% or greater of Shingrix. And is that on just CD4 response rate or again looking at that kind of three or four positive activation signal T cells. Yes. So I'll let Rob handle the details here Matt. But I think what's important to note is the trials that we're running now or dose signing trials, we selected an attachment those are CPG-ten eighteen dose in the current trial. Is designed to test the adjuvant with and without ALM as well as varying doses of the antigen And so I just want to make sure it's clear that the trial is not powered or designed for statistical analysis of these various immunogenicity markers. And as you noted in Rob's prior comments, generically, there's a number of markers and a constellation of data that we're going to have to evaluate, not a simple objective measure of CD4 T cell placements alone.

Rob, you maybe can comment on prior some of the prior information we've given around the level of expectation for CD4 Yes. The 75% really is about 75% of the medium quantity for T cell quantity as well as full change. Full change helps to some extent correct for any differences at baseline. So we're really looking at that and that in itself gives us a good sense of the probability of success going forward. But as Ryan said, we also think what's important is the quality of T cell responses and we've seen this before with ten eighteen, our COVID partners. We still had in our Phase one study where our quality is CD4. T cells with HER4 activation markers is very similar to to Shingrix. So we think that's going to be important too. Durability of T cell responses so what do T cell responses look like? What do antibody responses? Look like at one month, but also at six months as well? So we'll be looking at this this whole constellation to get the best sense we can of what going forward in the Phase III efficacy study would look like.

Okay. Thanks, Rob. And one last question. Thank you for Rob again. When we look at the safety both from your previous Phase one the Shingrix label and also the Curvo Phase two, Just wondering if there's any differences in kind of collection methods or definitions for some of these Just wondering what we should be comparing to looking across some of those datasets?

We don't really have access to their data collection instruments. However, FDA does that FDA does insist on these e diaries that subjects fill out during trials. They're pretty standard They're not always standard in that the same events aren't always included in every trial, but across the main ones like fever and junction site pain, swelling for local, like fatigue and fever, Those things are uniformly collected and pretty much in the same way. So but understand also in these early there's certainly not power to be looking at this kind of data. We have great data from the COVID vaccines in combination with ALM as well as HEPLISAV on what tolerability looks like for ten eighteen.

Great. Thanks for taking my questions. Thanks Matt.

Thank you. Our next question or comment comes from the line of Roy Buchanan from Citizens Mr. Buchanan, your line is open.

Hey, thanks for taking the questions. I guess a couple on Shingrix and just following up on the durability, the data coming in 3Q, much are you going to be able to tell from the one month post second dose results in terms of durability? And do you have any I guess longer follow-up data from the Phase one that you reported in 2023 that gives you confidence in the durability? Roy, I'll comment and Rob clean it up.

We don't have long term data from the prior initial Phase one that was the sort of dose ranging on the adjuvant.

But we have designed this Phase one to in particular look at six month and twelve month follow-up data.

And so we we will look at the initial response one month post second dose I don't think we were able to determine durability from that initial readout. But importantly, as we advance the program, you heard in my comments, that we will be moving forward from there into a extension study in the 70 year old population, 70 plus year old population.

And that study readout along with the six month data will provide us another sense of the strength of the product profile. [indiscernible] Yes. So I think in terms of durability, we've certainly seen durability data for ten eighteen from HEPLISAV as well as from our partners with COVID vaccines that use ten eighteen and alum. As Ryan said, we only looked at one month's data, but the mantra in vaccines is the higher the better. The higher at peak, the longer for both antibodies in CD4 T cells. But that's not always true. And there can be differential antibody or CD4 decay particularly in the first six months. So I think we'll be able to pick pick up any changes or similarities during that period of time.

Okay, perfect. Thank you. And then on the extension study in the older adults And just what's the logic of that? I know they did a trial in that population for Shingrix and maybe that's the reason, but is you're looking to differentiate? Is this a regulatory request Can you just elaborate a little bit? Thanks. It's two things. One, sorry, Ryan. Go ahead, Rob. Yes. So it's really two things. One is to be certain the immunogenicity in that older age group looks similar to the younger age group. And And this is the highest risk for shingles increases with increasing age. So the place we really want to work very well is in this 70 years and older age group. It's that but then also it's get collecting safety data on this age group because you can't go into a Phase three study with no safety data on this age group when they're going to be a critical population enrolled in a Phase three study.

Okay, great. And then last one for me. Maybe just on the buyback You guys did an accelerated first bit of the hundred million dollars I know you're by the end of the year. But what's your appetite for maybe and I would say more by if you get to mid year and you've completed the extra 100,000,000 the 200,000,000 How are you guys thinking about additional buybacks potentially earlier than the 2025? Thanks.

Yes, sure. Thanks, Roy. Thanks for the question. I mean, we definitely agree that buybacks are a great tool to return capital to shareholders when when the IRR is out it has the opportunity to outperform primary objective is to drive long term value for all shareholders, First and foremost, looking for opportunities to maximize HEPLISAV, Also, we have the opportunity to drive real progress in our clinical stage pipeline including shingles at the end of the year.

And continue to look for opportunities to leverage our fully integrated organization that has significant capability to bring to bear for potentially other assets that could fit nicely in with our skill set. To the extent that we get through the the remainder of the authorized program which we have committed to and we're very serious about. We absolutely will consider whether or not it makes sense to add additional buybacks. As you mentioned, we are actively still ongoing with the current program. So at this point in time, it doesn't make sense to to extend the program, but certainly it's something on the list of of opportunities for us as we learn more and get towards the second half of the year. Okay. Thank you.

Thank you.

Our next question or comment comes from the line of Jonathan Miller from Evercore ISI. Mr. Miller, your line is open.

Hi, guys. Thanks for taking my question. I guess building on that last question, obviously, there's been an investor pressure to return more capital But looking at your capital allocation strategy slide, it seems like you'd rather be doing development both internal and external. But how confident are you at this point that there are good deals to do in your target areas from a BD perspective? And then sort of relatedly, giving you confidence that you'll be able to achieve those BD goals in a reasonable timeframe given how long you've been looking at this Yes. Hey, John, I'll take that one.

So obviously, we continue to evaluate the landscape in which I think is important to recognize an ever changing landscape. It's not static, but it's still. So we've been very active in looking at ideas. We set a very high bar. For this. We recognize the company has a certain risk profile. Recognize we have certain capabilities and we want to leverage those.

So we do believe through our efforts that there are reasonable targets for us to consider and there's additional developments will continue to evolve over the course of the year And so our confidence that there are high value transactions for us that fit Heinevax is pretty high.

And I think beyond that, I really can't comment because this is complex. And so we're not going to be able to comment beyond the fact that we have a clear strategy we're confident in our ability to execute it.

We look forward to seeing how we progress against those objectives.

All right. Maybe on shingles then, I'll just ask since we've had a couple of questions on durability and efficacy. But what level of Safety differentiation do you view as commercially relevant and maybe Yes. To a stronger extent, what level of differentiation would drive the sort of market share gains that you're hoping to see for like an HBV dominant market share? Well, we're going to as we progress and have more more robust and reliable data, we'll have to test the the product profiles with traditional market research to make sure we are operating with the right assumptions.

I think the kinds of differences we saw in our prior Phase one are meaningful.

And if you and I think an important point here is commercial execution is critical, whether it's hep B or shingles, It's not the product profile is a tool. But your commercial prowess and the ability to engage with customers are equally as important. [indiscernible] we believe an improved safety profile is critical for us to be able to have something that allows us to address customers in a way that leverages our strengths. With our customer engagement. The specific levels, I'm not able to comment on right now, but I would say that the levels we saw in our prior Phase one we would suggest are significant and were part of the reason we were confident in continuing to advance the program. Makes sense.

On hep B then maybe just finally, you've identified a couple of opportunity areas to grow market share in '25, which is obviously great to hear. But as we start thinking about that long tail that you're talking about post 02/1930 and beyond, How do the how durable is your markets are going to be next [indiscernible] commercial competitors that have portfolios of products in can do bundling and discounting and long term contracting. How durable are your current market share opportunities as we look to that sale?

Hey, John, this is Don. I think if very durable. It goes beyond the contract. It goes around partnership. So we've established ourselves extensively within retail, for example, with partnerships and engagements over the last several years.

We're working with these partners with a shared goal. They're looking to expand their utilization with hep B vaccine, specifically HEPLISAV B. And we've been there from day one. And so we enable them to have success. And so that's going to continue obviously moving forward. So we feel very good about that. And then to the long tail around where there's a lot of customers that we don't call on, Those patients engage and go out to retail as well. So we feel like we're going to capture [indiscernible] to the retail channel that are originating in the sole practitioner small clinics that originate in The U. S. So that strategy within retail and that's why we believe this segment will be the segment grows substantially over the next several years and we're well positioned to maintain and grow share as well as market size within retail. I think an important add on here just to have a full picture is this will be a durable product that's done laid out for all the reasons. But it will require us to maintain an effort in the marketplace. So this is not a situation and that should not be viewed as a situation where we establish market share and we don't have to cultivate that market continuously.

So we I think Kelly was clear about expectations around flattening of SG and A. And so we do believe we're right sized but you should expect that we have to maintain a commercial effort to maintain the strength of this brand. Great. Thank you very much.

Thank you. Our next question Our next question or comment comes from the line of Phil Nadeau from TD Cowen.

Good afternoon. Thanks for taking our questions and congrats on the progress. A couple of commercial then one back on the SchiGel's program. So on the commercial, in terms of seasonality in HEPLISAV business, can you discuss what your seeing now this winter in 2025, it does seem like seasonality was there in Q4, but maybe a bit less What does the beginning of 2025 look like?

Hey, Phil. Thanks for the question. Yes, yes, in Q4, we saw the would say traditional seasonality as it relates to the holiday season the two weeks where there's less healthcare utilization. So that was typical in and that's what we saw in Q4. Specifically around Q1, Q1 is off to a stronger start. Relative to Q1 last year and we're very excited about the start thus far within retail in particular, we've noticed that the customers are focusing on non respiratory vaccines much faster and sooner this year than last year. And so we're seeing a lot of momentum and we're very excited about what we've seen thus far and it really supports Our guide in the range that we put out there today with what we're seeing here in Q1.

Got it. So last year there was another sequential decrease from Q4 to Q1. It sounds like you're suggesting that may not be the case this year. Is that fair or is it still likely to be sequential decline? [indiscernible] different than last year. I think it won't be as profound as you saw last year from Q4 to Q1.

Given the fast start. So we'll have to wait to see how obviously the quarter plays out. But again, like I said before, early read is that Q1 is progressing very strong and much faster than in years past.

Got it. In terms of the Medicare reimbursement. Can you go into a bit more detail guess, exactly what's changed and what impact do you think that could have on HEPLISAV share in that channel?

Yes. So basically, hepatitis B vaccines were under Part B in Medicare.

And so so pharmacists could not reimburse under Part B. Only Part D is in David.

And so what has happened is hepatitis B has been recognized similar to flu and pneumococcal vaccines under Part B under roster billing. And so that allows pharmacists and pharmacies to reverse the vaccine at the retail setting. And so it basically opens up the Medicare patient population [indiscernible] hep B vaccine, whereas the four it was only 60 plus cohorts, about a third of the market, and obviously Medicare is a big piece of that. So essentially it's allowed HEPLISAV B to be on equal footing from an access perspective. So we absolutely believe it will as I said before, support not only market share gains, but also market growth for HEPLISAV B here in 2025 and beyond.

Great. That's really helpful. And then last on the shingles program, it's sort of a follow on to Matt's question. You mentioned the CD4 positive T cells and the antibody responses important, but then also the durability of the responses. I mean, it seems like there's at least four or five different elements of the responses you're going to be looking at. Can you give us some sense of kind of is there a hierarchy of which of those is more important? Like how are you going to aggregate all the data, integrate it and decide to make a gono go decision. [indiscernible] give you the high level answer. We haven't been shy about the fact that we believe C4 is critically important. So that hasn't changed. I think it's been to reality as it's an element of the overall constellation of information that has to be considered when assessing immunogenicity there is no correlate So, this is one of the challenges of vaccine development immunogenicity to approximate efficacy. And CD4s, we believe, are critically important. However, the elements of the immune response have to be considered. Rob, anything to add?

No, I think you said it pretty well, Ryan. I think CD4 seemed to be critical People who lack CD4s are the people at highest risk for shingles. When they get it, it's the most severe disease. But antibodies also seem to play a role. Quality of T cells matters and antibodies matter too. So we will be looking at all of them, but CE-four response at itself will probably be, let's say, a little more important than everything else Got it. Thanks for taking our questions. Thank you, Phil. Thanks, Phil.

Thank you.

Next question or comment comes from the line of Paul Choi from Goldman Sachs. Mr. Choi, your line is open.

Hi, everyone. This is Kalia calling in for Paul. Thank you so much for taking our question.

I guess, like a couple of quick ones from me. Just on your guidance, I know someone brought this up already, but given the flu season this year being worse than last year and last year with the pressure and the fewer opportunities to vaccinate, it was Restore Vaccines. You said that there's a been a stronger start to Q1 this year. And I was just wondering what was driving that? Was it is it more like access that's driving that stronger start than last year because it seems like cases are there's more cases than there were last year. And then how much of that is baked into your guidance? And then secondly, just on OpEx, I know you mentioned the high teens growth in 2025. Just wondering how to think about that from a timing perspective, is that something you ramp up towards the second half of the year? Or is it kind of right happening right now? Thank you so much.

Let me take that first part of the question.

So the flu season, the extended flu season are the second peak if we have it that's going to be a little outside of flu vaccination protocol. So, we're pretty late into a flu season here. The comment style we're making about the fast start, we're going to get relatively limited guidance. We're still in the middle of the quarter. On Q1, it was really highlighting the retail pharmacy's focus on non rush initiatives and we're seeing retail pharmacy makes a pivot internally to non respiratory little bit earlier than we saw last year. That's really the way the commentary is. And so yes, we recognize the flu season as they extended. It's That's too subtle of a detail for us to work specifically through the Heliospeci guidance at this point. But overall, the faster start this year in retail is supportive of continued growth in in the year and our market share. Kelly, you want to handle the OpEx?

Sure. So the guide on research and development expenses specifically was the expectation that we expect R and D expenses to increase by 19% as you noted. Yes, I mean to be honest, this is really driven by activity based and there are two things going on. In the clinics this year sort of full steam ahead, one the DoD split play program that Phase two contract has kicked off late last year. So we'll have a full year or we'll expect a full year expenses there.

Again, just a reminder from prior disclosures that contract is $30,000,000 and we'll go to the first half of twenty twenty seven.

And then secondly, we expect through the first three quarters to have expenses to support our ongoing efforts for Phase onetwo shingles study.

Got it. That's all super helpful context. Thank you so much. Thank you. Next question or comment comes from the line of Ed White from H. C. Wainwright. Thank you for taking my questions. So just going back to shingles, [indiscernible] one six month data are positive.

Let's just focus on the Phase three global study. Can you just give us your expectations for that study as far as size goes? And maybe timing for that study? [indiscernible] some work to do on that with the regulators. Obviously, we need to see this data, meet with the regulators, and develop the overall plan. There's a couple of different options we're considering on how to run that and we want to evaluate all the data that we received from our current Phase onetwo as well as our BD in [indiscernible] To optimize that plan. So it's a little premature for us to provide too many details on that study. I think it's for a point of reference, there is the Shingrix development plan that you can reference as far as what it takes to to drive a placebo control shingle study but we don't have we're not prepared to comment specifically on that trial design or timeline. Okay. Thanks, Ryan.

And just on [indiscernible] as we all know, there's no approved vaccine in The U. S. Wanted to get your thoughts on What Yes. The reality is that it's a depends on how the threat is assessed by the government. There's very specific processes for the government to assess threats for biological measures or countermeasures. And so you see different options. And right now, the arrangement with the DoD which was funding the work here, We would assume that the minimum is focused on the DoD or troops, which is a much lower opportunity than a that is deemed to be a concern for the entire population. Frankly too premature for us to understand how that would be seen. And I think frankly that also The overall global climate has an impact on that. So for now, goal is to do the work create a optimized product profile and then we'll have to see how the opportunity unfolds as we progress further. Okay. Thank you.

Thank you. Thank you. Our next question or comment is a follow-up from Mr. Roy Buchanan from Citizens.

Your line is open, sir.

Thanks for taking the follow-up. Ed actually got got most of it. But I guess what's your it's a bit in the future, but your willingness to pay for the Phase 3s for shingles assuming that they're likely to be large and it's some extent.

Right. Thanks, Roy. That's actually very helpful. Just to make sure it's very clear. We have a very clear stated strategy for business development for this program.

Focusing on ex U. S. Markets The ex U. S. Markets for shingles, we believe, will be quite significant and a large value driver for the program. Which provides a great opportunity for us to leverage it from a BD perspective to reduce the overall financial risk of advancing into Phase three. We also think it's a very valuable point to validate our interpretation of the data. And the opportunity.

So we plan to leverage the Phase onetwo data one month, six months and the seven year old data as part of an ongoing BD strategy to support risk reduction for Dynavax and Dynavax shareholders around entering into the Phase 2b or Phase 2b3 or Phase three study.

So So I think right now our willingness is high especially if we have the right immunogenicity profile because we believe there's room to compete in Dynavax is well positioned to compete in gen and capture a very significant portion of the market share. Ultimately, The best scenario would be for us to have an ex USBD partner both to commercialize as well as absorb the cost and risk of the Phase three trial. [indiscernible] Thank you. I'm sure no additional questions in the queue at this time. I'd like to turn the conference back to Mr. Ryan Spencer for any closing remarks. Thank you, operator. Thank you all for joining us today. We appreciate your interest in DynaVax.

We're excited about our recent accomplishments the strength of our position We look forward to updating you on our progress focused on protecting the world against infectious diseases. Operator, you may end the call.

Ladies and gentlemen, thank you for joining us today. This concludes the conference call. You may now disconnect. [indiscernible]