DYNAVAX TECHNOLOGIES CORPORATION 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 theSecurities 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 endedDecember 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 theUnited States andEuropean 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 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 theU.S. We have worldwide commercial rights to HEPLISAV-B and we market it inthe United States . There are three other vaccines approved for the prevention of hepatitis B in theU.S. : Engerix-B and Twinrix® from GlaxoSmithKline plc and Recombivax-HB® from Merck & Co. In addition, we received Marketing Authorization approval of HEPLISAV-B inFebruary 2021 from theEuropean Commission following a positive recommendation inDecember 2020 from theEuropean 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. InMay 2021 , we entered into a commercialization agreement with Bavarian Nordic for the marketing and distribution of HEPLISAV-B inGermany . All of our HEPLISAV-B sales are to certain wholesalers and specialty distributors in theU.S. whose principal customers include independent hospitals and clinics, integrated delivery networks, public health clinics and prisons, the Departments of Defense andVeterans Affairs and retail pharmacies. For the three and six months endedJune 30, 2021 , HEPLISAV-B product revenue, net was$13.7 million and$22.0 million , respectively. 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 six months endedJune 30, 2021 , CpG 1018 product revenue, net was$39.0 million and$113.6 million , respectively. InMay 2021 , we entered into the first Amendment (the "Amendment") to the Agreement withCoalition for Epidemic Preparedness Innovations ("CEPI"). The Amendment provides for the manufacture and reservation of an additional specified quantity of CpG 1018. In exchange for reserving an additional specified quantity of CpG 1018, CEPI has agreed to provide additional advance payments of up to$77.4 million , for a total of CEPI's funding of up to$176.4 million . InJune 2021 , we entered into an agreement withZhejiang Clover Biopharmaceuticals, Inc. andClover Hong Kong Inc. (collectively, "Clover"), for the commercial supply of CpG 1018 adjuvant, for use with Clover's COVID-19 vaccine candidate, SCB-2019 (the "Clover Supply Agreement"). Under the Clover Supply Agreement, Clover has committed to purchase specified quantities of CpG 1018 adjuvant, at pre-negotiated prices pursuant to the CEPI Agreement, for use in Clover's commercialization of vaccines containing SCB-2019 and CpG 1018 adjuvant ("Clover Product"). The Clover Supply Agreement also provides terms for Clover to order additional quantities of CpG 1018 adjuvant beyond the quantities reserved by CEPI. InJuly 2021 , we entered into an agreement (the "Bio E Supply Agreement") withBiological E. Limited ("Bio E"), for the commercial supply of CpG 1018, 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, at pre-negotiated prices pursuant to the CEPI Agreement, for use in Bio E's commercialization of its CORBEVAX vaccine ("Bio E Product") with specified delivery dates in 2021 29
--------------------------------------------------------------------------------
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.
InMay 2021 , we issued$200.0 million aggregate principal amount of 2.50% convertible senior notes due 2026 (the "Convertible Notes") in a private placement. The purchasers partially exercised their option to purchase additional Convertible Notes and we issued an additional$25.5 million of the Convertible Notes inMay 2021 . Total proceeds from the issuance of the Convertible Notes, net of debt issuance and offering costs of$5.7 million , were$219.8 million . We used$190.2 million of the net proceeds to repay, in full, our outstanding debt and other obligations under the Loan Agreement and$27.2 million of the net proceeds to pay the costs of the capped call transactions described below. In connection with the issuance of the Convertible Notes, we entered into capped call transactions with one of the initial purchasers and other financial institutions, totaling$27.2 million (the "Capped Calls"). The Capped Calls have an initial strike price and an initial cap price of$10.47 per share and$15.80 per share, respectively, subject to certain adjustments. The Capped Calls are expected to offset the potential dilution to our common stock as a result of any conversion of the Convertible Notes, subject to a cap based on the cap price. InMay 2021 , we repaid the term loans and paid-in-kind interest (collectively "Term Loans Principal") under the Loan Agreement withCRG Servicing LLC ("Loan Agreement"), in full, using the net proceeds from the Convertible Notes issuance described above. In connection with the early repayment of the Term Loans Principal, during the three months endedJune 30, 2021 , we recorded$5.2 million loss on debt extinguishment related to the amount we paid to terminate the Term Loans Principal in excess of its carrying value at the time of the repayment. Our final payment of$190.2 million toCRG Servicing LLC satisfied all of our obligations under the Loan Agreement. With the full repayment of the Term Loans Principal, all security interests, covenants, liens and encumbrances under the Loan Agreement were permanently released.
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 theU.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 throughoutthe 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 inMarch 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 theU.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 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. Our field-based personnel have reduced in-person customer interactions in healthcare settings and are primarily using 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 are conducting a greater proportion of their work from their homes and are facing additional demands on their time during the COVID-19 pandemic. We expect that 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, could reduce the effectiveness of our sales personnel, our customers' procurement activities and those of our collaborators, which could negatively affect our overall product sales. 30
-------------------------------------------------------------------------------- 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 inAugust 2018 , concluded inNovember 2020 and final results were presented inApril 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 was also able to continue, because the dialysis treatment has been classified under "essential travel" exemptions. Final immunogenicity results of our dialysis study were presented inApril 2021 and we expect the safety follow up to be completed during the fourth quarter of 2021. However, if the COVID-19 pandemic continues to persist for an extended period of time, we could experience significant disruptions to these or other studies, which could adversely affect our business and growth prospects. 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 withU.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 six months endedJune 30, 2021 , as compared with those disclosed in our Annual Report on Form 10-K for the year endedDecember 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 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. InMay 2021 , in connection with the issuance of the Convertible Notes, we entered into 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. 31
--------------------------------------------------------------------------------
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 Six Months Ended (Decrease) from
June 30, 2020 to 2021 June 30, 2020 to 2021
Revenues: 2021 2020 $ % 2021 2020 $ %
HEPLISAV-B $ 13,688 $ 2,405 $ 11,283 469 % $ 21,991 $ 12,919 $ 9,072 70 %
CpG 1018 38,989 - 38,989 - 113,571 - 113,571 -
Total product revenue, net $ 52,677 $ 2,405 $ 50,272 2,090 % $ 135,562 $ 12,919 $ 122,643 949 %
Other revenue 90 263 (173 ) (66 )% 540 668 (128 ) (19 )%
Total revenues $ 52,767 $ 2,668 $ 50,099 1,878 % $ 136,102 $ 13,587 $ 122,515 902 %
HEPLISAV-B revenue for the three and six months ended June 30, 2021 increased,
compared to the same periods of 2020, due to higher sales volume. Adult vaccine
utilization rates improved in the three months ended June 30, 2021 compared to
the same period of last year during the early stages of the COVID-19 pandemic.
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 six months ended June 30, 2021 , we continued
to manufacture and ship CpG 1018 adjuvant pursuant to our supply and
collaboration agreements. We expect the increase in CpG 1018 product revenue to
continue in the near term as we ramp up production and sell CpG 1018 adjuvant
pursuant to our commercial/collaboration agreements.
Other revenue included grant revenue and collaboration revenue related to
services performed under a collaboration agreement with
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 for our
collaboration partners. Our HEPLISAV-B PFS finished goods inventory previously
included components for which a portion of the manufacturing 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 Six Months Ended (Decrease) from
June 30, 2020 to 2021 June 30, 2020 to 2021
Cost of Sales -
Product 2021 2020 $ % 2021 2020 $ %
HEPLISAV-B $ 4,624 $ 967 $ 3,657 378 % $ 7,369 $ 3,321 $ 4,048 122 %
CpG 1018 $ 10,221 $ - $ 10,221 - $ 32,101 $ - $ 32,101 -
Total cost of sales -
product $ 14,845 $ 967 $ 13,878 1,435 % $ 39,470 $ 3,321 $ 36,149 1,088 %
32
--------------------------------------------------------------------------------
For the three and six months ended
InSeptember 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 six months endedJune 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 Six Months Ended (Decrease) from
June 30, 2020 to 2021 June 30, 2020 to 2021
Research and
Development: 2021 2020 $ % 2021 2020 $ %
Compensation and
related
personnel costs
4,108 2,942 1,166 40 % 7,530 6,877 653 9 %
Facility costs (9 ) 142 (151 ) (106 )% 253 236 17 7 %
Non-cash stock-based
compensation 937 774 163 21 % 1,809 (799 ) 2,608 326 % Total research and development
$ 7,167 $ 5,884 $ 1,283 22 %
For the three and six months endedJune 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 six months endedJune 30, 2020 included reversal of expenses related to cancellation of certain equity grants.
For the three and six months ended
Facility costs, which primarily comprise of allocated occupancy and related
expenses, for the three months ended
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.
33--------------------------------------------------------------------------------
The following is a summary of our selling, general and administrative expenses (in thousands, except for percentages):
Increase Increase
Three Months Ended (Decrease) from Six Months Ended (Decrease) from
June 30, 2020 to 2021 June 30, 2020 to 2021
Selling, General and
Administrative: 2021 2020 $ % 2021 2020 $ %
Compensation and
related
personnel costs $ 9,172 $ 7,422 $ 1,750 24 % $ 18,376 $ 15,722 $ 2,654 17 %
Outside services 5,699 5,584 115 2 % 12,287 12,209 78 1 %
Legal costs 508 582 (74 ) (13 )% 994 1,316 (322 ) (24 )%
Facility costs 2,759 2,875 (116 ) (4 )% 5,760 5,700 60 1 %Non-cash stock-based
compensation 3,445 2,491 954 38 % 6,589 4,933 1,656 34 % Total selling, general and administrative$ 21,583 $ 18,954 $ 2,629 14 %$ 44,006 $ 39,880 $ 4,126 10 % For the three and six months endedJune 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 six months endedJune 30, 2021 included an accrual of benefits for a former executive in connection with their retirement. For the three and six months endedJune 30, 2021 , non-cash stock-based compensation increased, as compared to the same periods in 2020, due to higher headcount. In addition, non-cash stock-based compensation included reversal of expenses related to cancellation of certain equity grants in the three months endedMarch 31, 2020 . 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 inAugust 2019 . Other includes gains and losses on foreign currency transactions and disposal of property and equipment. The following is a summary of our other income (expense) (in thousands, except for percentages): Increase Increase Three Months Ended (Decrease) from Six Months Ended (Decrease) from June 30, 2020 to 2021 June 30, 2020 to 2021 2021 2020 $ % 2021 2020 $ % Interest income$ 48 $ 331 $ (283 ) (85 )%$ 95 $ 921 $ (826 ) (90 )% Interest expense$ (3,109 ) $ (4,732 ) $ (1,623 ) (34 )%$ (7,821 ) $ (9,463 ) $ (1,642 ) (17 )% Sublease income$ 1,670 $ 1,927 $ (257 )
(13 )%
- $ (5,232 ) $ - $ 5,232 -
Change in fair value of
warrant liability$ 2,097 $ (25,655 ) $ 27,752 (108 )%$ (23,455 ) $ (17,045 ) $ (6,410 ) 38 % Other$ (173 ) $ (111 ) $ (62 ) 56 %$ 384 $ 211 $ 173 82 % Interest income for the three and six months endedJune 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 six months endedJune 30, 2021 decreased, as compared to the same periods in 2020, due to the repayment of our long-term debt inMay 2021 , replaced by the issuance of Convertible Notes inMay 2021 . In connection with the repayment of our long-term debt, we recorded a one-time loss on debt extinguishment of$5.2 million during the three months endedJune 30, 2021 . The change in the fair value of warrant liability is primarily due to the decrease in our stock price during the three months endedJune 30, 2021 and the increase in our stock price during the six months endedJune 30, 2021 . The change in other is primarily due to foreign currency transactions and related fluctuations in the value of the Euro compared to theU.S. dollar.
Liquidity and Capital Resources
As of
34
--------------------------------------------------------------------------------
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 June 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.
Pursuant to the CEPI agreement, advanced payments received from CEPI to reserve
a specified quantity of CpG 1018 totaling $107.0 million , net of the amount
payable to CEPI of $2.6 million , were recorded as long-term deferred revenue in
our condensed consolidated balance sheets.
Pursuant to the supply agreement with Clover, we recognized deferred revenue
pursuant to an initial invoice for a portion of Clover's binding commitment to
purchase CpG 1018 adjuvant, outside of the CEPI Agreement. As of June 30, 2021 ,
deferred revenue related to Clover's supply agreement totaling $72.9 million was
recorded in our condensed consolidated balance sheets.
Pursuant to the supply agreement with Valneva Scotland Limited ("Valneva"), we
received advanced payments to purchase specified quantities of CpG 1018 adjuvant
which were recorded as deferred revenue. As of June 30, 2021 , deferred revenue
related to the supply agreement totaling $55.4 million was recorded in our
condensed consolidated balance sheets.
For the six months ended June 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 June 30, 2021 , we had $120.5 million remaining under the 2020
ATM Agreement.
During the six months ended June 30, 2021 , we generated $148.8 million of cash
from our operations primarily due to our net income of $5.4 million , of which
$37.9 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, non-cash interest expense and accretion and
amortization on marketable securities. By comparison, during the six months
ended June 30, 2020 , we used $48.7 million of cash for our operations primarily
due to our net loss of $64.2 million , of which $30.3 million consisted of
non-cash items which included change in fair value of warrant liability,
stock-based compensation, amortization of intangible assets, depreciation and
amortization, non-cash interest expense, amortization of right-of-use assets and
accretion and amortization on marketable securities. Cash provided by our
operations during the first half of 2021 increased by $197.5 million . For the
six months ended June 30, 2021 , we received an advance payment from CEPI in the
amount of $109.5 million which was recorded as long-term deferred revenue. 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 six months ended June 30, 2021 and 2020, net cash used in investing
activities was $86.4 million and $38.8 million , respectively. Cash used in
investing activities during the first six months of 2021 and 2020 included $83.6
million and $28.8 million of net purchases of marketable securities,
respectively. During the first six months of 2020, we paid $7.0 million of
sublicense payment to Merck.
During the six months ended June 30, 2021 and 2020, net cash provided by
financing activities was $35.6 million and $108.0 million , respectively. Cash
provided by financing activities for the first six 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, $3.4 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 six
months of 2020 included net proceeds of $75.4 million and $32.3 million from the
issuance of common stock under our underwritten public offering in May 2020 and
our, now terminated, 2017 ATM Agreement, respectively.
Prior to January 1, 2021 , we incurred net losses in each year since our
inception. For the three and six months ended June 30, 2021 , we recorded net
income of $4.5 million and $5.4 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.
35
--------------------------------------------------------------------------------
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 disruptions to and volatility in the credit and
financial markets in the United States and worldwide resulting from the ongoing
COVID-19 pandemic. 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
As ofJune 30, 2021 , the aggregate principal amount of our Convertible Notes was$225.5 million , excluding debt discount of$5.5 million . The Convertible Notes mature onMay 15, 2026 , unless converted, redeemed or repurchased in accordance with their terms prior to such date.
In
There were no other material changes to the contractual obligations previously
disclosed in our Annual Report on Form 10-K for the year ended
Off-balance Sheet Arrangements
We do not have any off-balance sheet arrangements, as defined by rules enacted by theSecurities and Exchange Commission , and accordingly, no such arrangements are likely to have a current or future effect on our financial position. 36
--------------------------------------------------------------------------------
© Edgar Online, source
