The following Management's Discussion and Analysis of Financial Condition and
Results of Operations contains forward-looking statements that involve a number
of risks and uncertainties. Our actual results could differ materially from
those indicated by forward-looking statements as a result of various factors,
including but not limited to, the period for which we estimate our cash
resources are sufficient, the availability of additional funds, as well as those
set forth under "Risk Factors" and those that may be identified from time to
time in our reports and registration statements filed with the Securities and
Exchange Commission.

The following discussion and analysis is intended to provide an investor with a
narrative of our financial results and an evaluation of our financial condition
and results of operations. This discussion should be read in conjunction with
the unaudited Condensed Consolidated Financial Statements and related Notes
included in Item 1 of this Quarterly Report on Form 10-Q and the Consolidated
Financial Statements and the related Notes and Management's Discussion and
Analysis of Financial Condition and Results of Operations contained in our
Annual Report on Form 10-K for the year ended December 31, 2020.

Overview



We are a commercial stage biopharmaceutical company focused on developing and
commercializing novel vaccines. Our first marketed product, HEPLISAV-B®
(Hepatitis B Vaccine (Recombinant), Adjuvanted) is approved in the United States
and European Union for prevention of infection caused by all known subtypes of
hepatitis B virus in adults age 18 years and older. We also manufacture and sell
CpG 1018, the adjuvant used in HEPLISAV-B. We are working to develop CpG 1018 as
a premier vaccine adjuvant through research collaborations and partnerships.
Current collaborations are focused on adjuvanted vaccines for COVID-19,
pertussis, plague and universal influenza.

In Phase 3 trials, HEPLISAV-B demonstrated faster and higher rates of protection
with two doses in one month compared to another currently approved hepatitis B
vaccine which requires three doses over six months, with a similar safety
profile. HEPLISAV-B is the only two-dose hepatitis B vaccine for adults approved
in the U.S.

We have worldwide commercial rights to HEPLISAV-B and we market it in the United
States. There are three other vaccines approved for the prevention of hepatitis
B in the U.S.: Engerix-B and Twinrix® from GlaxoSmithKline plc and
Recombivax-HB® from Merck & Co. In addition, we received Marketing Authorization
approval of HEPLISAV-B in February 2021 from the European Commission following a
positive recommendation in December 2020 from the European Medicines Agency
("EMA") Committee for Medicinal Products ("CHMP") for Human Use for prevention
of infection caused by all known subtypes of hepatitis B virus in adults age 18
years and older. In May 2021, we entered into a commercialization agreement with
Bavarian Nordic for the marketing and distribution of HEPLISAV-B in Germany.

All of our HEPLISAV-B sales are to certain wholesalers and specialty
distributors in the U.S. whose principal customers include independent hospitals
and clinics, integrated delivery networks, public health clinics and prisons,
the Departments of Defense and Veterans Affairs and retail pharmacies. For the
three and nine months ended September 30, 2021, HEPLISAV-B product revenue, net
was $22.7 million and $44.7 million, respectively.

In January 2021, we entered into an agreement (the "CEPI Agreement") with
Coalition for Epidemic Preparedness Innovations ("CEPI") for the manufacture and
reservation of a specified quantity of CpG 1018 adjuvant. The agreement enables
CEPI to direct the supply of CpG 1018 adjuvant to CEPI partner(s). In exchange
for reserving CpG 1018 adjuvant, CEPI has agreed to provide advance payments in
the form of an interest-free, unsecured, forgivable loan of up to $99.0 million.
In May 2021, we entered into the first amendment (the "Amendment") to the CEPI
Agreement. The Amendment provides for the manufacture and reservation of an
additional specified quantity of CpG 1018 adjuvant. In exchange for reserving an
additional specified quantity of CpG 1018 adjuvant, CEPI has agreed to provide
additional advance payments of up to $77.4 million, for total funding of up to
$176.4 million.

In July 2021, we entered into an agreement (the "Bio E Supply Agreement") with
Biological E. Limited ("Bio E"), for the commercial supply of CpG 1018 adjuvant,
for use with Bio E's subunit COVID-19 vaccine candidate, CORBEVAX™. Under the
Bio E Supply Agreement, Bio E has committed to purchase specified quantities of
CpG 1018 adjuvant, at pre-negotiated prices pursuant to the CEPI Agreement, for
use in Bio E's commercialization of its CORBEVAX vaccine with specified delivery
dates in 2021 and the first quarter of 2022. The Bio E Supply Agreement also
provides terms for Bio E to order additional quantities of CpG 1018 adjuvant
beyond the quantities reserved by CEPI.

In February 2021, we entered into a Supply Agreement ("Medigen Supply
Agreement") with Medigen Vaccine Biologics ("Medigen") to manufacture and supply
specified quantities of CpG 1018 adjuvant for use in the development and
commercialization of Medigen's COVID-19 vaccine, adjuvanted with our CpG 1018
adjuvant, MVC-COV1901, for delivery in the first and second quarters of 2021. In
August 2021, we entered into a second supply agreement ("Medigen Supply
Agreement No. 2") to manufacture



                                       33

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and supply additional specified quantities of CpG 1018 adjuvant for delivery in
the third and fourth quarter of 2021. In August 2021, Medigen launched
MVC-COV1901. Medigen received Taiwan Emergency Use Authorization and approval
for inclusion in Taiwan's COVID-19 vaccine immunization program in July 2021. In
October 2021, MVC-COV1901, was recommended by an independent vaccine
prioritization advisory group to be included in the World Health Organization
("WHO") Solidarity Trial Vaccines ("STv"). The recommendation came after the
approval from WHO Ethics Review Committee and relevant regulatory authorities
and ethics committees of Colombia, Mali and Philippines.

In the third quarter of 2020, we announced a commercial supply agreement (the
"Valneva Supply Agreement") with Valneva Scotland Limited ("Valneva") to cover
the supply of CpG 1018 adjuvant for its SARS-COV-2 vaccine candidate, VLA2001,
in support of its supply agreement with the United Kingdom Government and
subject to the terms of such agreement. In September 2021, Valneva received a
termination notice from the United Kingdom Government in relation to such supply
agreement. However, Valneva continues the clinical development of VLA2001 and
the pivotal Phase 3 trial for VLA2001, COV-COMPARE, remains ongoing at Public
Health England. In October 2021, Valneva reported that VLA2001 met both
co-primary endpoints in the COV-COMPARE trial, and that VLA2001 was
well-tolerated, demonstrating a statistically significant better tolerability
profile compared to active comparator vaccine, AstraZeneca's AZD1222
(ChAdOx1-S).

In October 2021, we entered into a letter agreement (the "Valneva Amendment"),
amending the Valneva Supply Agreement. Under the Valneva Amendment, we and
Valneva agreed to the cancellation of the two then outstanding purchase orders
for CpG 1018 adjuvant under the Valneva Supply Agreement that had not been
fulfilled as of the date of the Valneva Amendment and that we are entitled to
retain the advance payments made by Valneva under such cancelled purchase orders
which total approximately $36.4 million.

In June 2021, we entered into an agreement (the "Clover Supply Agreement") with
Zhejiang Clover Biopharmaceuticals, Inc. and Clover Hong Kong Inc.
(collectively, "Clover"), for the commercial supply of CpG 1018 adjuvant, for
use with its protein-based COVID-19 vaccine candidate, adjuvanted with our CpG
1018 adjuvant, SCB-2019. In September 2021, Clover reported that SCB-2019
achieved the primary and secondary efficacy endpoints, and with favorable safety
profile, in a global Phase 2/3 clinical trial.

In September 2021, we entered into an agreement with the U.S. Department of
Defense ("DOD") for the development of an improved recombinant plague vaccine
adjuvanted with CpG 1018, whereby the DOD will provide funding of up to
approximately $22.0 million over two and a half years. Under the agreement, we
agreed to conduct a Phase 2 clinical trial combining our CpG 1018 adjuvant with
the DOD's rF1V vaccine. We anticipate the Phase 2 trial will commence in 2022.

In the third quarter of 2020, we commenced selling our CpG 1018 adjuvant to certain of our collaboration partners for their use in development and/or commercialization of COVID-19 vaccines. For the three and nine months ended September 30, 2021, CpG 1018 product revenue, net, was $84.3 million and $197.9 million, respectively.





COVID-19 Update

The ongoing COVID-19 global pandemic has presented a substantial public health
and economic challenge around the world and is affecting our employees,
patients, communities and business operations, as well as the U.S. economy and
financial markets. The full extent to which the COVID-19 pandemic will directly
or indirectly impact our business, results of operations and financial condition
will depend on future developments that are highly uncertain and cannot be
accurately predicted, including new information that may emerge concerning
COVID-19 virus or current or newly discovered variants, the actions taken to
contain it or treat its impact and the economic impact on local, regional,
national and international markets. We continue to assess the potential impact
of the COVID-19 pandemic on our business and operations.

To date, we and our distribution partners have been able to continue to supply
HEPLISAV-B throughout the United States, and currently do not anticipate any
interruptions in supply. Due to the ongoing COVID-19 global pandemic, most
medical centers began restricting access to their facilities and focused on
providing care to only the most severely affected patients, beginning in March
2020. As states began phasing out restrictions in the middle of 2020, medical
centers have been operating under limited capacity or with strict social
distancing rules. This has resulted in significantly reduced utilization of
adult vaccines since the end of the first quarter of 2020, including HEPLISAV-B.
This reduced utilization has significantly impacted sales of HEPLISAV-B and is
likely to continue to impact us until restrictions affecting us are lifted and
the U.S. returns to more normal conditions. While we have seen utilization rates
for adult vaccines generally, and HEPLISAV-B in particular, begin to increase
again, their utilization still remains well below pre-COVID rates.

We are continuing to closely monitor the impact of the COVID-19 pandemic on our
business and are taking proactive efforts to help protect the health and safety
of our workforce, patients and healthcare professionals, and to continue our
business operations and



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advance our goal of bringing important new vaccines to patients as rapidly as
possible. We have implemented measures to help protect the health and safety of
our workforce, including a mandatory work-from-home policy for employees who can
perform their jobs offsite and continue to actively evaluate a return to the
office at an appropriate time. In the conduct of our business activities, we are
also taking actions to help protect the safety of patients and healthcare
professionals. In the early stages of the pandemic, our field-based personnel
reduced in-person customer interactions in healthcare settings and primarily
used electronic communication, such as emails, phone calls and video
conferences. Many health care and contracting professionals at hospitals and
other medical institutions with whom our field-based personnel interact began
conducting a greater proportion of their work from their homes and are facing
additional demands on their time during the COVID-19 pandemic. While the
different quality of electronic interactions as compared with in-person
interactions, as well as the reduced quantity of interactions during the
COVID-19 pandemic, impacted the effectiveness of our sales personnel, we have
gradually moved back to in-person interactions. With the rise of the delta
variant, and related precautions, however, our customers' procurement activities
and those of our collaborators continue to be impacted which could negatively
affect our overall product sales.

Our HEPLISAV-B post-marketing follow-up has been completed. We conducted an
observational comparative study of HEPLISAV-B to Engerix-B to assess occurrence
of acute myocardial infarction, or AMI. This study was initiated in August 2018,
concluded in November 2020 and final results were presented in April 2021. The
results provided evidence that there is no increased risk of AMI associated with
vaccination with HEPLISAV-B compared to Engerix-B. We expect data from the
autoimmune portion of our observational study to be available in the first
quarter of 2022. Our HEPLISAV-B dialysis study has also been completed. Final
immunogenicity results of our dialysis study along with interim safety results
were published in June 2021. Safety follow up was completed in September 2021
with no observed safety concerns.

The extent of the impact of the COVID-19 pandemic on our ability to generate
sales and revenues, our regulatory efforts, our corporate development objectives
and the value of and market for our common stock, will depend on future
developments that are highly uncertain and cannot be predicted with confidence
at this time. Because of the above and other factors, our results of operations
may vary substantially from year to year and from quarter to quarter and, as a
result, we believe that period-to-period comparisons of our operating results
may not be meaningful and should not be relied upon as being indicative of our
future performance. For additional information on the various current and future
potential risks posed by the COVID-19 pandemic, please read Item 1A. Risk
Factors, included herein.

We have been actively pursuing opportunities to collaborate with other
organizations on the development of a COVID-19 vaccine, by leveraging our
toll-like receptor 9 ("TLR9") agonist adjuvant, CpG 1018, which is the adjuvant
used in our HEPLISAV-B product. Since the first half of 2021, we announced
multiple collaborations focused on COVID-19 and we continue to work to identify
other programs where CpG 1018 can be utilized to enhance the immune response to
a coronavirus vaccine or other vaccines. We and our contract manufacturers are
developing plans to help scale-up activities to support pandemic-level of
production of our CpG 1018 adjuvant, as necessary to support these and any
future collaborations. There can be no assurance we will be successful in our
efforts to help develop or supply an adjuvanted COVID-19 vaccine or other
vaccines.

Critical Accounting Policies and the Use of Estimates



The accompanying discussion and analysis of our financial condition and results
of operations are based upon our condensed consolidated financial statements and
the related disclosures, which have been prepared in accordance with U.S.
generally accepted accounting principles. The preparation of these financial
statements requires us to make estimates, assumptions and judgments that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the balance sheet dates and the reported amounts of
revenues and expenses for the periods presented. On an ongoing basis, we
evaluate our estimates, assumptions and judgments described below that have the
greatest potential impact on our condensed consolidated financial statements,
including those related to revenue recognition, research and development
activities, stock-based compensation, inventories and leases. We base our
estimates on historical experience and on various other assumptions that we
believe to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Accounting assumptions and
estimates are inherently uncertain and actual results may differ materially from
these estimates under different assumptions or conditions.

We believe that there have been no significant changes in our critical accounting policies during the nine months ended September 30, 2021, as compared with those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2020 other than those described below:

Convertible Notes



We evaluate all conversion, repurchase and redemption features contained in a
debt instrument to determine if there are any embedded features that require
bifurcation as a derivative. We accounted for the issuance of the 2.50%
convertible senior notes due



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2026 ("Convertible Notes") as a long-term liability equal to the proceeds
received from issuance, including the embedded conversion feature, net of the
unamortized debt issuance and offering costs on the condensed consolidated
balance sheets. The conversion feature is not required to be accounted for
separately as an embedded derivative. We amortize debt issuance and offering
costs over the contractual term of the Convertible Notes, using the effective
interest method, as interest expense on the condensed consolidated statements of
operations.

Capped Calls

We evaluate financial instruments under ASC 815. In May 2021, in connection with
the issuance of the Convertible Notes, we entered into capped call transactions
with one of the initial purchasers of the Convertible Notes and other financial
institutions (the "Capped Calls"). The Capped Calls cover the same number of
shares of common stock that initially underlie the Convertible Notes (subject to
anti-dilution and certain other adjustments). The Capped Calls meet the
definition of derivative under ASC 815. In addition, the Capped Calls meet the
conditions in ASC 815 to be classified in stockholders' equity and are not
subsequently remeasured as long as the conditions for the equity classification
continue to be met.

Results of Operations

Revenues

Revenues consist of amounts earned from product sales and other revenues. Product revenue, net, includes sales of HEPLISAV-B and CpG 1018 adjuvant.



Revenue from HEPLISAV-B product sales is recorded at the net sales price, which
includes estimates of product returns, chargebacks, discounts, rebates and other
fees. We sell our CpG 1018 adjuvant to our collaboration partners for use in
their development and/or potential commercialization of COVID-19 vaccines.
Overall, product revenue, net, reflects our best estimates of the amount of
consideration to which we are entitled based on the terms of the contract.

Actual amounts of consideration ultimately received may differ from our estimates. If actual results in the future vary from our estimates, we will adjust these estimates, which would affect net product revenue and earnings in the period such variances become known.



The following is a summary of our revenues (in thousands, except for
percentages):



                                                         Increase                                             Increase
                         Three Months Ended          (Decrease) from          Nine Months Ended           (Decrease) from
                            September 30,              2020 to 2021             September 30,               2020 to 2021
Revenues:                 2021          2020          $            %          2021          2020           $            %
HEPLISAV-B             $   22,707     $ 11,599     $ 11,108          96 %   $  44,698     $ 24,518     $  20,180           82 %
CpG 1018                   84,289        1,677       82,612       4,926 %

197,860 1,677 196,183 11,698 % Total product revenue, net

$  106,996     $ 13,276     $ 93,720         706 %

$ 242,558 $ 26,195 $ 216,363 826 % Other revenue

               1,274          138        1,136         823 %

1,814 806 1,008 125 % Total revenues $ 108,270 $ 13,414 $ 94,856 707 % $ 244,372 $ 27,001 $ 217,371 805 %

HEPLISAV-B revenue for the three and nine months ended September 30, 2021 increased, compared to the same periods of 2020, due to gains in market share and improvements in utilization of adult vaccines.



In September 2020, we began selling our CpG 1018 adjuvant to our collaboration
partners for their use in development and/or potential commercialization of
COVID-19 vaccines. In the three and nine months ended September 30, 2021, we
continued to manufacture and ship CpG 1018 adjuvant pursuant to our supply and
collaboration agreements.

Other revenue included grant revenue and collaboration revenue related to
services performed under a collaboration agreement with Serum Institute of India
Pvt. Ltd. Other revenue for the three and nine months ended September 30, 2021
increased, compared to the same periods of 2020, primarily due to the
recognition of $1.2 million as revenue in connection with the termination of a
certain grant agreement.

Cost of Sales - Product

Cost of sales - product consists primarily of raw materials, certain fill,
finish and overhead costs and any inventory adjustment charges for pre-filled
syringes ("PFS") of HEPLISAV-B and inventory costs to produce CpG 1018 adjuvant
for our collaboration partners. Our HEPLISAV-B PFS finished goods inventory
previously included components for which a portion of the manufacturing



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costs were expensed to research and development prior to the approval of the PFS
presentation by the United States Food and Drug Administration ("FDA") in March
2018. Substantially all the inventory that was previously expensed to research
and development has been sold to customers.

The following is a summary of our cost of sales - product (in thousands, except
for percentages):



                                                    Increase                                            Increase
                    Three Months Ended          (Decrease) from          Nine Months Ended           (Decrease) from
                       September 30,              2020 to 2021             September 30,              2020 to 2021
Cost of Sales -
Product              2021          2020          $            %           2021         2020          $            %

HEPLISAV-B $ 10,544 $ 3,225 $ 7,319 227 % $ 17,913 $ 6,546 $ 11,367 174 % CpG 1018

               49,546         806       48,740       6,047 %       81,647         806       80,841       10,030 %
Total cost of
sales - product   $    60,090     $ 4,031     $ 56,059       1,391 %   $   99,560     $ 7,352     $ 92,208        1,254 %


For the three and nine months ended September 30, 2021, HEPLISAV-B cost of
sales-product increased, as compared to the same periods in 2020, primarily due
to higher sales volume and higher unit costs as we produce and then sell
inventory that reflects the full cost of manufacturing. In addition, included in
HEPLISAV-B cost of sales - product for each of the three and nine months ended
September 30, 2021 was an excess capacity charge in connection with an expansion
project at our manufacturing facility in Düsseldorf of $3.2 million.

In September 2020, we began selling our CpG 1018 adjuvant to our collaboration
partners for their use in development and/or commercialization of COVID-19
vaccines. In the three and nine months ended September 30, 2021, we continued to
manufacture and ship CpG 1018 adjuvant pursuant to our supply and collaboration
agreements.

Research and Development Expense

Research and development expense consists, primarily, of compensation and related personnel costs (which include benefits, recruitment, travel and supply costs), outside services, allocated facility costs and non-cash stock-based compensation. Outside services consist of costs associated with clinical development, process development, preclinical discovery and development, regulatory filings and research, including fees and expenses incurred by contract research organizations, clinical study sites, and other service providers.

The following is a summary of our research and development expense (in thousands, except for percentages):





                                                         Increase                                             Increase
                         Three Months Ended          (Decrease) from           Nine Months Ended          (Decrease) from
                            September 30,              2020 to 2021              September 30,              2020 to 2021
Research and
Development:              2021          2020           $           %           2021          2020          $            %
Compensation and
related
  personnel costs      $    2,314      $ 2,189     $     125          6 %    $   7,647     $  6,412     $  1,235          19 %
Outside services            3,074        5,381        (2,307 )      (43 )%      10,604       12,258       (1,654 )       (13 )%
Facility costs                  -          173          (173 )     (100 )%         253          409         (156 )       (38 )%
Non-cash stock-based
  compensation                798          778            20          3 %        2,607          (21 )      2,628       12514 %
Total research and
development            $    6,186      $ 8,521     $  (2,335 )      (27 )%   $  21,111     $ 19,058     $  2,053          11 %


For the nine months ended September 30, 2021, compensation and related personnel
costs and non-cash stock-based compensation increased, as compared to the same
periods in 2020, primarily due to higher headcount to support vaccine clinical
and development activities. In addition, non-cash stock-based compensation for
the nine months ended September 30, 2020 included reversal of expenses related
to cancellation of certain equity grants.

For the three and nine months ended September 30, 2021, the decrease in outside
services, as compared to the same periods in 2020, was primarily due to winding
down of our immuno-oncology study. In addition, outside services for the three
and nine months ended September 30, 2020 included the cost of CpG 1018 adjuvant
used in clinical trials.



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Selling, General and Administrative Expense



Selling, general and administrative expense consists primarily of compensation
and related costs for our commercial support personnel, medical education
professionals and personnel in executive and other administrative functions,
including legal, finance and information technology; costs for outside services
such as sales and marketing, post-marketing studies of HEPLISAV-B, accounting,
commercial development, consulting, business development, investor relations and
insurance; legal costs that include corporate and patent-related expenses;
allocated facility costs and non-cash stock-based compensation.

The following is a summary of our selling, general and administrative expenses (in thousands, except for percentages):





                                                         Increase                                              Increase
                         Three Months Ended           (Decrease) from           Nine Months Ended           (Decrease) from
                            September 30,              2020 to 2021               September 30,              2020 to 2021
Selling, General and
Administrative:           2021          2020           $            %           2021          2020           $            %
Compensation and
related

personnel costs $ 11,389 $ 7,817 $ 3,572 46 %

$ 29,765 $ 23,539 $ 6,226 26 % Outside services

            8,020        7,700            320          4 %       20,307       19,909            398          2 %
Legal costs                   487          722           (235 )      (33 )%       1,481        2,038           (557 )      (27 )%
Facility costs              3,100        2,795            305         11 %        8,860        8,495            365          4 %

Non-cash stock-based


  compensation              3,930        2,504          1,426         57 %

10,519 7,437 3,082 41 % Total selling, general and

administrative $ 26,926 $ 21,538 $ 5,388 25 %

$ 70,932 $ 61,418 $ 9,514 15 %




For the three and nine months ended September 30, 2021, compensation and related
personnel costs increased, as compared to the same periods in 2020, primarily,
due to higher headcount. In addition, compensation and related personnel costs
for the nine months September 30, 2021 included benefits for a former executive
in connection with their retirement.

For the three and nine months ended September 30, 2021, outside services
increased, as compared to the same periods in 2020, primarily due to an overall
increase in commercial and marketing efforts. This increase was offset by the
decrease in the amount we paid to Symphony Dynamo, Inc. and Symphony Dynamo
Holdings LLC ("Holdings"). In connection with the sale of our immuno-oncology
compound, SD-101, we paid $0.5 million to Holdings in September 2021 as compared
to $2.5 million in September 2020.

For the three and nine months ended September 30, 2021, non-cash stock-based
compensation increased, as compared to the same periods in 2020, primarily due
to higher headcount and higher equity grant valuation. In addition, non-cash
stock-based compensation included reversal of expenses related to cancellation
of certain equity grants in the three months ended March 31, 2020.

Gain on Sale of Assets



In July 2020, we sold assets related to our immuno-oncology compound, SD-101,
which included intellectual property, clinical and non-clinical data, regulatory
filings, clinical supply inventory and certain contracts to Surefire Medical
Inc. d/b/a TriSalus Life Sciences ("TriSalus"). Pursuant to the Asset Purchase
Agreement, we received $5 million upon closing of the transaction and $4 million
in December 2020 as reimbursement for certain clinical trial expenses. In
addition, we could receive up to an additional $250 million upon the achievement
of certain development, regulatory, and commercial milestones and low
double-digit royalties based on potential future net sales of product containing
SD-101 compound. In the third quarter of 2020, we recognized a gain on sale of
SD-101 assets of $6.9 million, net of transaction costs.

In September 2021, we received payment of $1 million from TriSalus for their
meeting a pre-commercialization milestone. In the three and nine months ended
September 30 2021, we recognized a gain on sale of SD-101 assets of $1 million
in our condensed consolidated statements of operations.

Other Income (Expense)



Interest income is reported net of amortization of premiums and discounts on
marketable securities and includes realized gains on investments. Interest
expense includes the stated interest and accretion of discount and end of term
fee related to our terminated long-term debt agreement and Convertible Notes.
Sublease income is recognized in connection with our sublease of office and
laboratory space. Loss on debt extinguishment reflects the amount we paid to
terminate our long-term debt in excess of its carrying value at the time of the
extinguishment. Change in fair value of warrant liability reflects the changes
in fair value of warrants issued in connection with equity financing in August
2019. Other includes gains and losses on foreign currency transactions and
disposal of property and equipment.



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The following is a summary of our other income (expense) (in thousands, except
for percentages):



                                                                Increase                                               Increase
                                Three Months Ended          (Decrease) from            Nine Months Ended           (Decrease) from
                                   September 30,              2020 to 2021               September 30,               2020 to 2021
                                 2021          2020           $           %           2021          2020            $            %
Interest income               $       39     $    269     $    (230 )      (86 )%   $     134     $   1,190     $  (1,056 )        (89 )%
Interest expense              $   (1,676 )   $ (4,794 )   $  (3,118 )      (65 )%   $  (9,497 )   $ (14,257 )   $  (4,760 )        (33 )%
Sublease income               $    2,022     $  1,926     $      96

5 % $ 5,714 $ 5,779 $ (65 ) (1 )% Loss on debt extinguishment $ - $ - $ -


 -      $  (5,232 )   $       -     $   5,232            -
Change in fair value of
  warrant liability           $  (45,121 )   $ 21,245     $ (66,366 )     (312 )%   $ (68,576 )   $   4,200     $ (72,776 )     (1,733 )%
Other                         $      238     $   (420 )   $     658       (157 )%   $     622     $    (209 )   $     831         (398 )%




Interest income for the three and nine months ended September 30, 2021
decreased, as compared to the same periods in 2020, primarily due to lower
yields on our marketable securities portfolio. Interest expense for the three
and nine months ended September 30, 2021 decreased, as compared to the same
periods in 2020, due to the repayment of our long-term debt in May 2021,
replaced by the issuance of Convertible Notes in May 2021 at a lower effective
interest rate. In connection with the repayment of our long-term debt, we
recorded a one-time loss on debt extinguishment of $5.2 million in the second
quarter of 2021. The change in the fair value of warrant liability is primarily
due to the increase in our stock price during the three and nine months ended
September 30, 2021. The change in other is primarily due to foreign currency
transactions and related fluctuations in the value of the Euro compared to the
U.S. dollar.

Liquidity and Capital Resources



As of September 30, 2021, we had $414.2 million in cash, cash equivalents and
marketable securities. Since our inception, we have relied primarily on the
proceeds from public and private sales of our equity securities, borrowings,
government grants and revenues from product sales and collaboration agreements
to fund our operations. Our funds are currently invested in money market funds,
U.S. treasuries, U.S. government agency securities and corporate debt
securities. We currently anticipate that our cash, cash equivalents and
short-term marketable securities as of September 30, 2021, and anticipated
revenues from HEPLISAV-B and CpG 1018 will be sufficient to fund our operations
for at least the next 12 months from the date of this filing.

Advanced payments received from CEPI to reserve a specified quantity of CpG 1018
are initially accounted for as long-term deferred revenue. When we deliver CpG
1018 adjuvant to CEPI partner(s) or when we receive payment from CEPI
partner(s), we reclassify the advanced payments from long-term deferred revenue
to accrued liabilities. As of September 30, 2021, advance payments totaling
$68.0 million and $58.9 million were recorded as long-term deferred revenue and
accrued liabilities, respectively, in our condensed consolidated balance sheets.

As of September 30, 2021, the aggregate principal amount of our Convertible
Notes was $225.5 million, excluding debt discount of $5.3 million. The
Convertible Notes bear interest at a rate of 2.50% per year, payable
semiannually in arrears on May 15 and November 15 of each year, beginning on
November 15, 2021. The Convertible Notes mature on May 15, 2026, unless
converted, redeemed or repurchased in accordance with their terms prior to such
date.

For the nine months ended September 30, 2021, we received net cash proceeds of
$28.2 million resulting from sales of 2,878,567 shares of our common stock
pursuant to a 2020 At Market Sales Agreement with Cowen and Company, LLC ("2020
ATM Agreement"). All of these shares were sold during the three months ended
March 31, 2021. As of September 30, 2021, we had $120.5 million remaining under
the 2020 ATM Agreement.

During the nine months ended September 30, 2021, we generated $215.0 million of
cash from our operations primarily due to our net loss of $23.1 million, of
which $92.0 million consisted of non-cash items which included change in fair
value of warrant liability, stock-based compensation, depreciation and
amortization, amortization of right-of-use assets, provision for write-down of
inventories, non-cash interest expense and accretion and amortization on
marketable securities. By comparison, during the nine months ended September 30,
2020, we used $76.5 million of cash for our operations primarily due to our net
loss of $59.8 million, of which $15.5 million consisted of non-cash items which
included stock-based compensation, change in fair value of warrant liability,
depreciation and amortization, amortization of intangible assets, non-cash
interest expense, amortization of right-of-use assets and accretion and
amortization on marketable securities. Cash provided by our operations during
the nine months ended September 30, 2021 increased by $291.5 million compared to
the same period in 2020. For the nine months ended September 30, 2021, we
received advance payments from collaboration partners totaling $371.9 million to
manufacture and supply CpG 1018 adjuvant for delivery in future dates. We
classified such payments as deferred revenue until we satisfy our performance
obligation to transfer control of CpG



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1018 adjuvant to collaboration partners. Net cash provided by operating activities is also impacted by changes in our operating assets and liabilities due to timing of cash receipts and expenditures.



During the nine months ended September 30, 2021 and 2020, net cash used in
investing activities was $40.7 million and $40.9 million, respectively. Cash
used in investing activities during the first nine months of 2021 and 2020
included $35.3 million and $33.4 million of net purchases of marketable
securities, respectively. During the first nine months of 2020, we paid $7.0
million of sublicense payment to Merck. In addition, for the nine months ended
September 30, 2021 and 2020, we received $1 million and $2.9 million,
respectively, from sale of SD-101 assets, net of transaction costs. Cash used in
net purchases of property plant and equipment increased by $3.1 million during
the first nine months of 2021 compared to the same period in 2020. The increase
was, primarily, due to the ongoing facility expansion in the first nine months
of 2021.

During the nine months ended September 30, 2021 and 2020, net cash provided by
financing activities was $41.0 million and $109.4 million, respectively. Cash
provided by financing activities for the first nine months of 2021 included net
proceeds of $219.8 million from the issuance of our Convertible Notes, $28.2
million from our 2020 ATM Agreement, $6.2 million from options exercised and
employee stock purchase plan, $4.3 million from warrants exercised, offset by
$190.2 million repayment of our long-term debt and $27.2 million purchases of
capped call options. Cash provided by financing activities for the first nine
months of 2020 included net proceeds of $75.4 million from our underwritten
public offering in May 2020, $32.3 million from our, now terminated, 2017 At
Market Sales Agreement with Cowen and Company, LLC and $0.8 million from our
2020 ATM Agreement.

Prior to January 1, 2021, we incurred net losses in each year since our
inception. For the three and nine months ended September 30, 2021, we recorded
net loss of $28.4 million and $23.1 million, respectively. We cannot be certain
that sales of our products, and the revenue from our other activities are
sustainable. Further, we expect to continue to incur substantial expenses as we
continue to invest in commercialization of HEPLISAV-B, development of our CpG
1018 adjuvant and clinical trials and other development. If we cannot generate a
sufficient amount of revenue from product sales, we will need to finance our
operations through strategic alliance and licensing arrangements and/or future
public or private debt and equity financings. Raising additional funds through
the issuance of equity or debt securities could result in dilution to our
existing stockholders, increased fixed payment obligations, or both. In
addition, these securities may have rights senior to those of our common stock
and could include covenants that would restrict our operations.

Our ability to raise additional capital in the equity and debt markets, should
we choose to do so, is dependent on a number of factors, including, but not
limited to, the market demand for our common stock, which itself is subject to a
number of development and business risks and uncertainties, our creditworthiness
and the uncertainty that we would be able to raise such additional capital at a
price or on terms that are favorable to us. In addition, our ability to raise
additional funds may be adversely impacted by deteriorating global economic
conditions and the recent or future disruptions to and volatility in the credit
and financial markets in the United States and worldwide resulting from the
ongoing COVID-19 pandemic or otherwise. Adequate financing may not be available
to us on acceptable terms, or at all. If adequate funds are not available when
needed, we may need to significantly reduce our operations while we seek
strategic alternatives, which could have an adverse impact on our ability to
achieve our intended business objectives.

Contractual Obligations

As of September 30, 2021, our material non-cancelable purchase and other commitments, for the supply of HEPLISAV-B, CpG 1018 adjuvant and for clinical research, totaled $149.3 million.



Advanced payments received from CEPI to reserve a specified quantity of CpG 1018
are initially accounted for as long-term deferred revenue. When we deliver CpG
1018 adjuvant to CEPI partner(s) or when we receive payment from CEPI
partner(s), we reclassify the advanced payments from long-term deferred revenue
to accrued liabilities. As of September 30, 2021, advance payments totaling
$68.0 million and $58.9 million were recorded as long-term deferred revenue and
accrued liabilities, respectively, in our condensed consolidated balance sheets.

As of September 30, 2021, the aggregate principal amount of our Convertible
Notes was $225.5 million, excluding debt discount of $5.3 million. The
Convertible Notes bear interest at a rate of 2.50% per year, payable
semiannually in arrears on May 15 and November 15 of each year, beginning on
November 15, 2021. The Convertible Notes mature on May 15, 2026, unless
converted, redeemed or repurchased in accordance with their terms prior to such
date.

In May 2021, we repaid the principal on the term loans (the "Term Loans") under
the term loan agreement ("Loan Agreement") with CRG Servicing LLC in full. With
the full repayment of the Term Loans, all security interests, covenants, liens
and encumbrances under the Loan Agreement were permanently released.



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In November 2013, we entered into a Commercial Manufacturing and Supply
Agreement with Baxter Pharmaceutical Solutions LLC ("Baxter") that was amended
in September 2021 (as amended, the "Baxter Agreement"). Baxter provides
formulation, fill and finish services and produces pre-filled syringes ("PFS")
of HEPLISAV-B for commercial use. Pursuant to the Baxter Agreement, we are
obligated to purchase an annual minimum number of batches of PFS for each of the
next five calendar years, and there are certain limits on the number of batches
that Baxter is required to produce. As of September 30, 2021, our aggregate
minimum commitment under the Baxter Agreement was $47.3 million which is
included in the material non-cancelable purchase and other commitments in the
first paragraph.

There were no other material changes to the contractual obligations previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2020.

Off-balance Sheet Arrangements



We do not have any off-balance sheet arrangements, as defined by rules enacted
by the Securities and Exchange Commission, and accordingly, no such arrangements
are likely to have a current or future effect on our financial position.



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