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What changed in DYNAVAX TECHNOLOGIES CORP's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of DYNAVAX TECHNOLOGIES CORP's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+357 added−358 removedSource: 10-K (2024-02-22) vs 10-K (2023-02-23)

Top changes in DYNAVAX TECHNOLOGIES CORP's 2023 10-K

357 paragraphs added · 358 removed · 246 edited across 6 sections

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

156 edited+63 added−57 removed232 unchanged
Biggest changeWe have in the past, and may in the future, adjust delivery dates, allow cancellations or give concessions on outstanding receivables in certain circumstances to better enable our customers to meet their obligations, which can impact the timing or amount of our revenue recognition, cash collections and transfer of control. 27 For example, in August and October 2022, we entered into an amendment to the Clover Supply Agreement, which, among other things, modified the scope of the Clover Supply Agreement to reduce certain quantities of CpG 1018 adjuvant deliverable under the agreement and/or reduce amounts receivable, which we originally intended to deliver in accordance with a purchase order previously issued by Clover, and apply prepayments Clover previously made to us as payment for portions of pending outstanding purchase orders.
Biggest changeWe have in the past, and may in the future, adjust delivery dates, allow cancellations or give concessions on outstanding receivables in certain circumstances to better enable our customers to meet their obligations, which can impact the timing or amount of our revenue recognition, cash collections and transfer of control.
Relevant U.S. laws include: 41 • the federal Anti-Kickback Statute, which prohibits persons from, among other things, knowingly and willfully soliciting, receiving, offering or paying remuneration, directly or indirectly, in exchange for or to induce either the referral of an individual for, or the purchase, order or recommendation of, any good or service for which payment may be made under federal health care programs, such as the Medicare and Medicaid programs; • federal false claims laws, including the False Claims Act and Civil Monetary Penalties Law, which prohibit individuals or entities from, among other things, knowingly presenting, or causing to be presented, claims for payment to the government or its agents that are false or fraudulent; • the Federal Food, Drug and Cosmetic Act and governing regulations which, among other things, prohibit off-label promotion of prescription drugs; • the federal Physician Payments Sunshine Act created under the Patient Protection and Affordable Care Act of 2010, as amended by the Health Care and Education and Reconciliation Act of 2010 (collectively, “ACA”) which requires certain manufacturers of drugs, devices, biologics and medical supplies to report annually to the Centers for Medicare & Medicaid Services, information related to payments and other transfers of value to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), other health care professionals (such as physician assistants and nurse practitioners), and teaching hospitals, and ownership and investment interests held by such physicians and their immediate family members; • the federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), which created, among other things, new federal criminal statutes that prohibit knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, or knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statement, in connection with the delivery of, or payment for, healthcare benefits, items or services; • HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, and their implementing regulations, which imposes certain requirements on “covered entities,” including certain healthcare providers, health plans, and healthcare clearinghouses, and their respective “business associates” that create, receive, maintain or transmit individually identifiable health information for or on behalf of a covered entity as well as their covered subcontractors relating to the privacy, security, and transmission of individually identifiable health information; • the Foreign Corrupt Practices Act, which prohibits the payment of bribes to foreign government officials and requires that a company’s books and records accurately reflect our transactions; and • foreign and state law equivalents of each of the federal laws described above, such as anti-kickback and false claims laws which may apply to items or services reimbursed by state health insurance programs or any third-party payor, including commercial insurers; state laws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the applicable compliance guidance promulgated by the federal government; state laws that require drug manufacturers to report information on the pricing of certain drugs; state and local laws that require the registration of pharmaceutical sales representatives; and state and foreign laws governing the privacy and security of health information, many of which differ from each other in significant ways and often are not preempted by HIPAA.
Relevant U.S. laws include: • the federal Anti-Kickback Statute, which prohibits persons from, among other things, knowingly and willfully soliciting, receiving, offering or paying remuneration, directly or indirectly, in exchange for or to induce either the referral of an individual for, or the purchase, order or recommendation of, any good or service for which payment may be made under federal health care programs, such as the Medicare and Medicaid programs; • federal false claims laws, including the False Claims Act and Civil Monetary Penalties Law, which prohibit individuals or entities from, among other things, knowingly presenting, or causing to be presented, claims for payment to the government or its agents that are false or fraudulent; • the Federal Food, Drug and Cosmetic Act and governing regulations which, among other things, prohibit off-label promotion of prescription drugs; • the federal Physician Payments Sunshine Act created under the Patient Protection and Affordable Care Act of 2010, as amended by the Health Care and Education and Reconciliation Act of 2010 (collectively, “ACA”) which requires certain manufacturers of drugs, devices, biologics and medical supplies to report annually to the Centers for Medicare & Medicaid Services, information related to payments and other transfers of value to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), other health care professionals (such as physician assistants and nurse practitioners), and teaching hospitals, and ownership and investment interests held by such physicians and their immediate family members; • the federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), which created, among other things, new federal criminal statutes that prohibit knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, or knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statement, in connection with the delivery of, or payment for, healthcare benefits, items or services; • HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, and their implementing regulations, which imposes certain requirements on “covered entities,” including certain healthcare providers, health plans, and healthcare clearinghouses, and their respective “business associates” that create, receive, maintain or transmit individually identifiable health information for or on behalf of a covered entity as well as their covered subcontractors relating to the privacy, security, and transmission of individually identifiable health information; • the Foreign Corrupt Practices Act, which prohibits the payment of bribes to foreign government officials and requires that a company’s books and records accurately reflect our transactions; and • foreign and state law equivalents of each of the federal laws described above, such as anti-kickback and false claims laws which may apply to items or services reimbursed by state health insurance programs or any third-party payor, including commercial insurers; state laws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the applicable compliance guidance promulgated by the federal government; state laws that require drug manufacturers to report information on the pricing of certain drugs; state and local laws that require the registration of pharmaceutical sales representatives; and state and foreign laws governing the privacy and security of health information, many of which differ from each other in significant ways and often are not preempted by HIPAA.
The process of establishing and maintaining collaborative relationships is difficult and time-consuming, and even if we establish such relationships, they may involve significant uncertainty, including: • our partners may seek to renegotiate or terminate their relationships with us due to unsatisfactory clinical results, manufacturing issues, a change in business strategy, a change of control or other reasons; • our perceived shortage of capital resources may impact the willingness of companies to collaborate with us; • our contracts for collaborative arrangements are terminable at will on written notice and may otherwise expire or terminate and we may not have alternative funding available; • our partners may choose to pursue alternative technologies, including those of our competitors; • we may have disputes with a partner that could lead to litigation or arbitration; • we have limited control over the decisions of our partners and they may change the priority of our programs in a manner that would result in termination of the agreement or add significant delay in the partnered program; • our ability to generate future payments and royalties from our partners depends upon the abilities of our partners to establish the safety and efficacy of product candidates, obtain regulatory approvals and successfully manufacture and commercialize the products developed from product candidates; • we or our partners may fail to properly initiate, maintain or defend our intellectual property rights, where applicable, or a party may use our proprietary information in such a way as to invite litigation that could jeopardize or potentially invalidate our proprietary information or expose us to potential liability; • our partners may not devote sufficient capital or resources towards our product candidates; and • our partners may not comply with applicable government regulatory requirements.
The process of establishing and maintaining collaborative relationships is difficult and time-consuming, and even if we establish such relationships, they may involve significant uncertainty, including: • our partners may seek to renegotiate or terminate their relationships with us due to unsatisfactory clinical results, manufacturing issues, a change in business strategy, a change of control or other reasons; • our perceived shortage of capital resources may impact the willingness of companies to collaborate with us; • our contracts for collaborative arrangements are often terminable at will on written notice and may otherwise expire or terminate and we may not have alternative funding available; • our partners may choose to pursue alternative technologies, including those of our competitors; • we may have disputes with a partner that could lead to litigation or arbitration; • we have limited control over the decisions of our partners and they may change the priority of our programs in a manner that would result in termination of the agreement or add significant delay in the partnered program; • our ability to generate future payments and royalties from our partners depends upon the abilities of our partners to establish the safety and efficacy of product candidates, obtain regulatory approvals and successfully manufacture and commercialize the products developed from product candidates; • we or our partners may fail to properly initiate, maintain or defend our intellectual property rights, where applicable, or a party may use our proprietary information in such a way as to invite litigation that could jeopardize or potentially invalidate our intellectual property or other proprietary rights or expose us to potential liability; • our partners may not devote sufficient capital or resources towards our product candidates; and • our partners may not comply with applicable government regulatory requirements.
The FDA or other foreign regulatory agencies or we ourselves could delay, suspend or halt our clinical trials of a product candidate for numerous reasons, including with respect to our product candidates and those of our partners in combination agent studies: • deficiencies in the trial design; • deficiencies in the conduct of the clinical trial including failure to conduct the clinical trial in accordance with regulatory requirements or clinical protocols; • deficiencies in the clinical trial operations or trial sites resulting in the imposition of a clinical hold; • a product candidate may have unforeseen adverse side effects, including fatalities, or a determination may be made that a clinical trial presents unacceptable health risks; • the time required to determine whether a product candidate is effective may be longer than expected; • fatalities or other adverse events arising during a clinical trial that may not be related to clinical trial treatments; • a product candidate or combination study may appear to be no more effective than current therapies; • the quality or stability of a product candidate may fail to conform to acceptable standards; • the inability to produce or obtain sufficient quantities of a product candidate to complete the trials; 38 • our inability to reach agreement on acceptable terms with prospective CROs and trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites; • our inability to obtain IRB or Ethics Committee approval to conduct a clinical trial at a prospective site; • the inability to obtain regulatory approval to conduct a clinical trial; • lack of adequate funding to continue a clinical trial, including the occurrence of unforeseen costs due to enrollment delays, requirements to conduct additional trials and studies and increased expenses associated with the services of our CROs and other third parties; • the inability to recruit and enroll individuals to participate in clinical trials for reasons including competition from other clinical trial programs for the same or similar indications; or • the inability to retain participants who have initiated a clinical trial but may withdraw due to side effects from the product, lack of efficacy or personal issues, or who are otherwise unavailable for further follow-up.
The FDA or other foreign regulatory authorities or we ourselves could delay, suspend or halt our clinical trials of a product candidate for numerous reasons, including with respect to our product candidates and those of our partners in combination agent studies: • deficiencies in the trial design; • deficiencies in the conduct of the clinical trial including failure to conduct the clinical trial in accordance with regulatory requirements or clinical protocols; • deficiencies in the clinical trial operations or trial sites resulting in the imposition of a clinical hold; • a product candidate may have unforeseen adverse side effects, including fatalities, or a determination may be made that a clinical trial presents unacceptable health risks; • the time required to determine whether a product candidate is effective may be longer than expected; • fatalities or other adverse events arising during a clinical trial that may not be related to clinical trial treatments; • a product candidate or combination study may appear to be no more effective than current therapies; • the quality or stability of a product candidate may fail to conform to acceptable standards; • the inability to produce or obtain sufficient quantities of a product candidate to complete the trials; 38 • our inability to reach agreement on acceptable terms with prospective CROs and trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites; • our inability to obtain IRB or Ethics Committee approval to conduct a clinical trial at a prospective site; • the inability to obtain regulatory approval to conduct a clinical trial; • lack of adequate funding to continue a clinical trial, including the occurrence of unforeseen costs due to enrollment delays, requirements to conduct additional trials and studies and increased expenses associated with the services of our CROs and other third parties; • the inability to recruit and enroll individuals to participate in clinical trials for reasons including competition from other clinical trial programs for the same or similar indications; or • the inability to retain participants who have initiated a clinical trial but may withdraw due to side effects from the product, lack of efficacy or personal issues, or who are otherwise unavailable for further follow-up.
Violations of any of the laws described above or any other applicable governmental regulations and other similar foreign laws may subject us, our employees or our agents to significant criminal, civil and administrative penalties, including fines, civil monetary penalties, exclusion from participation in government health care programs (including, in the U.S., 42 Medicare and Medicaid), disgorgement, imprisonment, additional reporting requirements and oversight if we become subject to a corporate integrity agreement or similar agreement to resolve allegations of non-compliance with these laws and the restriction or restructuring of our operations, any of which could adversely affect our ability to operate our business and our financial results.
Violations of any of the laws described above or any other applicable governmental regulations and other similar foreign laws may subject us, our employees or our agents to significant criminal, civil and administrative penalties, including fines, civil monetary penalties, exclusion from participation in government health care programs (including, in the U.S., Medicare and Medicaid), disgorgement, imprisonment, additional reporting requirements and oversight if we become subject to a corporate integrity agreement or similar agreement to resolve allegations of non-compliance with these laws and the restriction or restructuring of our operations, any of which could adversely affect our ability to operate our business and our financial results.
Each of our clinical trials requires the investment of substantial planning, expense and time and the timing of the commencement, continuation and completion of these clinical trials may be subject to significant delays relating to various causes, including scheduling conflicts with participating clinicians and clinical institutions, difficulties in identifying and enrolling participants who meet trial eligibility criteria, failure of participants to complete the clinical trial, delay or failure to obtain Institutional Review Board (“IRB”), Ethics Committee or regulatory approval to conduct a clinical trial at a prospective site, unexpected adverse events and shortages of available vaccine or component supply.
Each of our clinical trials requires the investment of substantial planning, expense and time and the timing of the commencement, continuation and completion of these clinical trials may be subject to significant delays relating to various 34 causes, including scheduling conflicts with participating clinicians and clinical institutions, difficulties in identifying and enrolling participants who meet trial eligibility criteria, failure of participants to complete the clinical trial, delay or failure to obtain Institutional Review Board (“IRB”), Ethics Committee or regulatory approval to conduct a clinical trial at a prospective site, unexpected adverse events and shortages of available vaccine or component supply.
Such threats could include, but not be limited to social-engineering attacks (including through phishing attacks), online and offline fraud, malicious code (such as viruses and worms), malware (including as a result of advanced persistent threat intrusions), denial-of-service attacks, access attacks (such as credential stuffing), personnel misconduct or error, ransomware attacks, supply-chain attacks, software bugs, server malfunctions, software or hardware failures, loss of data or other information technology assets, adware, telecommunications failures, earthquakes, fires, floods, and other similar threats.
Such threats could include, but not be limited to social-engineering attacks (including through phishing attacks), online and offline fraud, malicious code (such as viruses and worms), malware (including as a result of advanced persistent threat intrusions), denial-of-service attacks, access attacks (such as credential stuffing or credential harvesting), personnel misconduct or error, ransomware attacks, supply-chain attacks, software bugs, server malfunctions, software or hardware failures, loss of data or other information technology assets, adware, telecommunications failures, earthquakes, fires, floods, and other similar threats.
The potential liability and associated consequences we could suffer as a result of any such cyber events could be catastrophic and result in irreparable harm including (a) the loss of trade secrets or other intellectual property, or (b) the public exposure of personally identifiable information (including sensitive personal information) of our employees, 53 collaborators, clinical trial patients, and others, (c) extortion and other monetary damages due to malware or business email compromise, (d) significant interruptions in our operations, or (e) other significant damages.
The potential liability and associated consequences we could suffer as a result of any such cyber events could be catastrophic and result in irreparable harm including (a) the loss of trade secrets or other intellectual property, or (b) the public exposure of personally identifiable information (including sensitive personal information) of our employees, collaborators, clinical trial patients, and others, (c) extortion and other monetary damages due to malware or business email compromise, (d) significant interruptions in our operations, or (e) other significant damages.
Our contract manufacturer is the only approved provider that we have, and there can be no assurance that we or they can successfully manufacture sufficient quantities of pre-filled syringes in compliance with good manufacturing practice ("GMP") in order to meet market demand, whether because of our supplier’s own operations, operations of its sub-suppliers, issues with downstream supply chains or otherwise.
Our contract manufacturer is the only approved provider that we have, and there can be no assurance that we or they can successfully manufacture sufficient quantities of pre-filled syringes in compliance with good manufacturing practice ("GMP") in order to meet market demand, whether because of problems with our supplier’s own operations, operations of its sub-suppliers, issues with downstream supply chains or otherwise.
Our standard practice is to require each of our collaborators, commercial partners, employees, consultants and advisors to enter into an agreement before beginning their employment, consulting or advisory relationship with us that in general provides that the individuals must keep confidential and not disclose to other parties any of our confidential information developed or learned by the individuals during the course of their relationship with us except in limited circumstances.
Our standard practice is to require each of our collaborators, commercial partners, employees, consultants, contractors and advisors to enter into an agreement before beginning their employment, consulting or advisory relationship with us that in general provides that the individuals must keep confidential and not disclose to other parties any of our confidential information developed or learned by the individuals during the course of their relationship with us except in limited circumstances.
Similarly, supply-chain attacks have increased in frequency and severity, and we cannot guarantee that third parties and infrastructure in our supply chain or our third-party partners’ supply chains have not been compromised or that they do not contain exploitable flaws or bugs that could result in a breach of or disruption to our information technology systems (including our products or the third-party information technology systems that support us and our goods).
Similarly, supply-chain attacks have increased in frequency and severity, and we cannot guarantee that third parties and infrastructure in our supply chain or our third-party partners’ supply chains have not been compromised or that they do not contain exploitable flaws or bugs that could result in a breach of or disruption to our 54 information technology systems (including our products or the third-party information technology systems that support us and our goods).
We will likely 28 compete with several of these companies in the hepatitis space, Tdap space, shingles space and other spaces occupied by any other product candidates we ultimately choose to advance through our pipeline in the future. Products in our clinical pipeline, if approved, will also face competition from competitors who have competing clinical programs or already approved products.
We will likely compete with several of these companies in the hepatitis space, shingles space, Tdap space and other spaces occupied by any other product candidates we ultimately choose to advance through our pipeline in the future. Products in our clinical pipeline, if approved, will also face competition from competitors who have competing clinical programs or already approved products.
The risks described below are not the only ones facing us. If any of the events described in the following risk factors occurs, our business, operating results and financial condition could be seriously harmed. This Annual Report on Form 10-K also contains forward-looking statements that involve risks and uncertainties.
The risks described below are not 26 the only ones facing us. If any of the events described in the following risk factors occurs, our business, operating results and financial condition could be seriously harmed. This Annual Report on Form 10-K also contains forward-looking statements that involve risks and uncertainties.
The authorities may also disqualify a clinical trial from consideration in support of approval of a potential product if they deem the guidelines have not been met. The FDA or foreign regulatory agencies may determine our clinical trials or other data regarding safety, efficacy or consistency of manufacture or compliance with GMP regulations are insufficient for regulatory approval.
The authorities may also disqualify a clinical trial from consideration in support of approval of a potential product if they deem the guidelines have not been met. The FDA or foreign regulatory authorities may determine our clinical trials or other data regarding safety, efficacy or consistency of manufacture or compliance with GMP regulations are insufficient for regulatory approval.
In the U.S., pharmaceutical and biotechnology companies have been the target of numerous government prosecutions and investigations alleging violations of law, including claims asserting impermissible off-label promotion of pharmaceutical products, payments intended to influence the referral of federal or state health care business, submission of false claims for government reimbursement, or submission of incorrect pricing information.
In the U.S., pharmaceutical and biotechnology companies have been the target of numerous government prosecutions and investigations alleging violations of law, including claims asserting impermissible off-label promotion of pharmaceutical 42 products, payments intended to influence the referral of federal or state health care business, submission of false claims for government reimbursement, or submission of incorrect pricing information.
If we, or our partners, are not successful in setting our marketing, pricing and reimbursement strategies, recruiting and maintaining effective sales and marketing personnel or building and maintaining the infrastructure to support commercial operations in the U.S. and elsewhere, we will have difficulty successfully commercializing HEPLISAV-B, which would adversely affect our business and financial condition.
If we, or our partners, are not successful in setting our marketing, pricing and reimbursement strategies, recruiting and maintaining effective sales and marketing personnel or building and maintaining the infrastructure to support commercial operations in the U.S., Germany and elsewhere, we will have difficulty successfully commercializing HEPLISAV-B, which would adversely affect our business and financial condition.
We are already advancing a multi-program clinical pipeline leveraging CpG 1018 adjuvant to develop improved vaccines in indications with unmet medical needs including Phase 1 clinical trials in Tdap and shingles, and a Phase 2 clinical trial in plague in collaboration with and fully funded by the U.S. Department of Defense (“DoD”).
We are already advancing a multi-program clinical pipeline leveraging CpG 1018 adjuvant to develop improved vaccines in indications with unmet medical needs including Phase 1 clinical trials in shingles and Tdap, and a Phase 2 clinical trial for plague in collaboration with and fully funded by the U.S. Department of Defense (“DoD”).
If any collaborator fails to fulfill its responsibilities in a timely manner, or at all, our research, clinical development, manufacturing or commercialization efforts pursuant to that collaboration could be delayed or terminated, or it may be necessary for us to assume responsibility for expenses or activities that would otherwise have been the responsibility of our collaborator.
If any collaborator fails to fulfill its responsibilities in a timely manner, or at all, our 35 research, clinical development, manufacturing or commercialization efforts pursuant to that collaboration could be delayed or terminated, or it may be necessary for us to assume responsibility for expenses or activities that would otherwise have been the responsibility of our collaborator.
If we are not able to meet and maintain regulatory compliance for HEPLISAV-B or any future product, we may lose marketing approval and be required to withdraw our product. Withdrawal of our product would have a material adverse effect on our business. HEPLISAV-B and all of our clinical programs rely on oligonucleotide TLR agonists.
If we are not able to meet and maintain regulatory compliance for HEPLISAV-B or any future product, if authorized, we may lose marketing approval and be required to withdraw our product. Withdrawal of our product would have a material adverse effect on our business. HEPLISAV-B and all of our clinical programs rely on oligonucleotide TLR agonists.
Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private payors. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability or commercialize our products. In connection with our work with the U.S.
Any reduction in reimbursement from Medicare or other government programs 44 may result in a similar reduction in payments from private payors. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability or commercialize our products. In connection with our work with the U.S.
Department of Defense, we have become a defense contractor, and are therefore subject to additional administrative burdens and control requirements in connection with the maintenance of that relationship. In September 2021, we entered into an agreement with the DoD relating to the conduct of a clinical trial in connection with the development of an improved plague vaccine.
Department of Defense ("DoD"), we have become a defense contractor, and are therefore subject to additional administrative burdens and control requirements in connection with the maintenance of that relationship. In September 2021, we entered into an agreement with the DoD relating to the conduct of a clinical trial and studies in connection with the development of an improved plague vaccine.
In connection with establishing their initial hedges of the Capped Calls, we have been advised that the option counterparties and/or their respective affiliates entered into various derivative transactions with respect to our common stock 51 concurrently with or shortly after the pricing of the Convertible Notes and/or purchased shares of our common stock concurrently with or shortly after the pricing of the Convertible Notes.
In connection with establishing their initial hedges of the Capped Calls, we have been advised that the option counterparties and/or their respective affiliates entered into various derivative transactions with respect to our common stock concurrently with or shortly after the pricing of the Convertible Notes and/or purchased shares of our common stock concurrently with or shortly after the pricing of the Convertible Notes.
Failure of one or more product candidates to successfully advance through to approval and licensure could result in the loss off unrecoverable costs expended and impact our ability to generate future revenue from such products, either of which, or both of which, could have an adverse impact on our business.
Failure of one or more product candidates to successfully advance through to approval and licensure could result in the loss of unrecoverable costs expended and impact our ability to generate future revenue from such products, either of which, or both of which, could have an adverse impact on our business.
If we or our collaborators are unable to adequately obtain, protect or 46 enforce our proprietary rights relating to CpG 1018 adjuvant, we may be unable to realize recurring commercial benefit from the development of a vaccine containing CpG 1018 adjuvant, and we or our collaborators may not have the ability to prevent others from developing or commercializing a vaccine containing the adjuvant.
If we or our collaborators are unable to adequately obtain, protect or enforce our proprietary rights relating to CpG 1018 adjuvant, we may be unable to realize recurring commercial benefit from the development of a vaccine containing CpG 1018 adjuvant, and we or our collaborators may not have the ability to prevent others from developing or commercializing a vaccine containing the adjuvant.
If we do not succeed in attracting new personnel and retaining and motivating existing personnel, our operations may suffer and we may be unable to properly manage our business, obtain financing as needed, enter into collaborative arrangements, advance or sell our product candidates or generate revenues.
If we do not succeed in attracting new personnel and retaining and motivating existing 29 personnel, our operations may suffer and we may be unable to properly manage our business, obtain financing as needed, enter into collaborative arrangements, advance or sell our product candidates or generate revenues.
Capacity reservation fees are generally not recoverable if we do not use the capacity we have reserved as a result of lower than expected demand, or otherwise. Similarly, prepayments of purchase orders may not be recoverable if we do not ultimately require the entire volume subject to 36 the applicable purchase order.
Capacity reservation fees are generally not recoverable if we do not use the capacity we have reserved as a result of lower than expected demand, or otherwise. Similarly, prepayments of purchase orders may not be recoverable if we do not ultimately require the entire volume subject to the applicable purchase order.
In addition, upon conversion of the Convertible Notes, unless we elect to deliver solely shares of our common stock to settle such conversion (other than paying cash in lieu of delivering any fractional share), we will be required to make cash payments in respect of the Convertible Notes being converted.
In addition, upon conversion of the 51 Convertible Notes, unless we elect to deliver solely shares of our common stock to settle such conversion (other than paying cash in lieu of delivering any fractional share), we will be required to make cash payments in respect of the Convertible Notes being converted.
Our expenses have increased substantially as we established and maintain our HEPLISAV-B commercial infrastructure, including investments in internal infrastructure to support our field sales force and investments in manufacturing and supply chain commitments to maintain commercial supply of HEPLISAV-B. Further, we expect to increase research and development costs as we invest in our pipeline.
Our expenses have increased substantially as we maintain our HEPLISAV-B commercial infrastructure, including investments in internal infrastructure to support our field sales force and investments in manufacturing and supply chain commitments to maintain commercial supply of HEPLISAV-B. Further, we expect to increase research and development costs as we invest in our pipeline.
To the extent that we enter into co-promotion 26 or other arrangements, any revenues we receive will depend upon the efforts of third parties, which may not be successful and are only partially in our control.
To the extent that we enter into co-promotion or other arrangements, any revenues we receive will depend upon the efforts of third parties, which may not be successful and are only partially in our control.
For example, outbreaks of epidemic or pandemic diseases, such as the ongoing COVID-19 pandemic, or the fear of such events, have and could again in the future cause restrictions on supply chains, restrict access to workplaces and affect employee health and availability.
For example, outbreaks of epidemic or pandemic diseases, such as COVID-19, or the fear of such events, have and could again in the future cause restrictions on supply chains, restrict access to workplaces and affect employee health and availability.
We may be unable to transfer personal data from Europe and other jurisdictions to the United States or other countries due to data localization requirements or limitations on cross-border data flows. Europe and other jurisdictions have enacted laws requiring data to be localized or limiting the transfer of personal data to other countries.
We may be unable to transfer personal data from Europe and other jurisdictions to the United States 40 or other countries due to data localization requirements or limitations on cross-border data flows. Europe and other jurisdictions have enacted laws requiring data to be localized or limiting the transfer of personal data to other countries.
The degree of market acceptance of HEPLISAV-B and any of our future approved products will depend upon a number of factors, including: • the indication for which the product is approved and its approved labeling; • the presence of other competing approved products; • the potential advantages of the product over existing and future treatment methods; • the relative convenience and ease of administration of the product; • the strength of our sales, marketing and distribution support; • the price and cost-effectiveness of the product; and • third-party coverage and adequate reimbursement and the willingness of patients to pay out-of-pocket in the absence of sufficient reimbursement by third-party payors.
The degree of market acceptance of HEPLISAV-B and any of our future approved products will depend upon a number of factors, including: • the indication for which the product is approved and its approved labeling; • the presence of other competing approved products; • the potential advantages of the product over existing and future treatment methods; • the relative convenience and ease of administration of the product; • the strength of our sales, marketing and distribution efforts; • the price and cost-effectiveness of the product; and • third-party coverage and adequate reimbursement and the willingness of patients to pay out-of-pocket in the absence of sufficient reimbursement by third-party payors.
In countries outside of the U.S., we may not be able to comply with ongoing and comparable foreign regulations, and our manufacturing process may be subject to delays, disruptions or quality control/quality assurance problems.
In countries outside of the U.S., we may not be able to comply with comparable foreign regulations, and our manufacturing process may be subject to delays, disruptions or quality control/quality assurance problems.
Our failure to repurchase Convertible Notes at a time when the repurchase is required by the indenture governing the Convertible 50 Notes or to pay any cash payable on future conversions of the Convertible Notes as required by the indenture governing the Convertible Notes would constitute a default under the indenture governing the Convertible Notes.
Our failure to repurchase Convertible Notes at a time when the repurchase is required by the indenture governing the Convertible Notes or to pay any cash payable on future conversions of the Convertible Notes as required by the indenture governing the Convertible Notes would constitute a default under the indenture governing the Convertible Notes.
The Capped Calls may affect the value of the Convertible Notes and our common stock. In connection with the issuance of the Convertible Notes, we have entered into capped call transactions with the option counterparties totaling $27.2 million (the "Capped Calls").
The Capped Calls may affect the value of the Convertible Notes and our common stock. 52 In connection with the issuance of the Convertible Notes, we have entered into capped call transactions with the option counterparties totaling $27.2 million (the "Capped Calls").
If any of these events occur, our manufacturing and supply chain, distribution, sales and marketing efforts and other business operations could be subject to business shutdowns or disruptions and financial results could be adversely affected.
If any of these events occur, our manufacturing and supply chain, 53 distribution, sales and marketing efforts and other business operations could be subject to business shutdowns or disruptions and financial results could be adversely affected.
We have and may in the future need to establish collaborative relationships to obtain domestic and/or international sales, marketing, research, development and distribution capabilities for our product candidates and our discovery research programs.
We have and may in the future need to establish collaborative relationships to obtain domestic and/or international sales, marketing, research, development and distribution capabilities for our products or product candidates and our discovery research programs.
Further, we expect to continue to incur substantial expenses as we continue to invest in the commercialization and development of HEPLISAV-B and our CpG 1018 adjuvant, clinical trials for our pipeline candidates, and other development.
We expect to continue to incur substantial expenses as we continue to invest in the commercialization and development of HEPLISAV-B and our CpG 1018 adjuvant, clinical trials for our pipeline candidates, and other development.
In the event that we determine to pursue commercialization of HEPLISAV-B outside the United States and the European Union, our opportunity will depend upon our receiving regulatory approval, which can be costly and time consuming, and there is a risk that one or more regulatory bodies may require that we conduct additional clinical trials and/or take other measures which will take time and require that we incur significant additional expense.
In the event that we determine to pursue commercialization of HEPLISAV-B outside the United States, the European Union and Great Britain, our opportunity will depend upon our receiving regulatory approval, which can be costly and time consuming, and there is a risk that one or more regulatory bodies may require that we conduct additional clinical trials and/or take other measures which will take time and require that we incur significant additional expense.
As we manage our production capabilities for HEPLISAV-B and CpG 1018 adjuvant to support recent market share gains and other initiatives, we have been, and in the future will be, required to make significant financial commitments at our contract manufacturing organizations (“CMOs”), including minimum purchase commitments and prepayments of purchase orders to facilitate the procurement of raw materials and the incurrence of various manufacturing costs.
As we manage our production capabilities for HEPLISAV-B and CpG 1018 adjuvant to support recent market share gains and other initiatives, we have been, and in the future could be, required to make significant financial commitments at our contract manufacturing organizations (“CMOs”), including minimum purchase commitments and prepayments of purchase orders to facilitate the procurement of raw materials and the incurrence of various manufacturing costs.
As our commercial business begins to expand in connection with commercial sales of HEPLISAV-B and CpG 1018 adjuvant, the contracts we enter into with our customers will generally carry delivery obligations that require us to deliver product in certain quantities and meet certain quality thresholds, among other things, all within specified timeframes.
As our commercial business begins to expand in connection with commercial sales of HEPLISAV-B or CpG 1018 adjuvant, as applicable, the contracts we enter into with our customers will generally carry delivery obligations that require us to deliver product in certain quantities and meet certain quality thresholds, among other things, all within specified timeframes.
The results of post-marketing studies may also result in additional warnings or precautions for the HEPLISAV-B label or labels of any future products, or expose additional safety concerns that may result in product liability and withdrawal of a product or products from the market, any of which would have a material adverse effect on our business, results of operations, financial condition and prospects.
The results of post-marketing studies may also result in additional warnings or precautions for the HEPLISAV-B label or labels of any future products, if authorized, or expose additional safety concerns that may result in product liability and withdrawal of a product or products from the market, any of which would have a material adverse effect on our business, results of operations, financial condition and prospects.
Even if we obtain regulatory approval for our product candidates, such as the U.S. and European Union approvals of HEPLISAV-B and are able to commercialize them as we have with HEPLISAV-B, our products may not gain market acceptance among physicians, patients, healthcare payors and the medical community.
Even if we obtain regulatory approval for our product candidates, such as our U.S., European Union and Great Britain approvals of HEPLISAV-B, and are able to commercialize them as we have with HEPLISAV-B, our products may not gain market acceptance among physicians, patients, healthcare payors and the medical community.
Additionally, on March 11, 2021, President Biden signed the American Rescue Plan Act of 2021 into law, which eliminates the statutory Medicaid drug rebate cap, currently set at 100% of a drug’s average manufacturer price, for single source and innovator multiple source drugs, beginning January 1, 2024.
Additionally, on March 11, 2021, President Biden signed the American Rescue Plan Act of 2021 into law, which eliminates the statutory Medicaid drug rebate cap, currently set at 100% of a drug’s average manufacturer price, for single source and innovator multiple source drugs, effective January 1, 2024.
Failure to successfully manage our international operations could result in significant unanticipated costs and delays in regulatory approval or commercialization of our products or product candidates. We may seek to introduce HEPLISAV-B, or any other product candidates we may develop, to various additional markets in or outside of the U.S. and the European Union.
Failure to successfully manage our international operations could result in significant unanticipated costs and delays in regulatory approval or commercialization of our products or product candidates. We may seek to introduce HEPLISAV-B, or any other product candidates we may develop, to various additional markets in or outside of the U.S., the European Union and Great Britain.
For example, the Budget Control Act of 2011 resulted in aggregate reductions in Medicare payments to providers of up to two percent per fiscal year, starting in 2013 and, due to subsequent legislative amendments to the statute, will remain in effect until 2031 unless additional Congressional action is taken.
For example, the Budget Control Act of 2011 resulted in aggregate reductions in Medicare payments to providers of up to two percent per fiscal year, starting in 2013 and, due to subsequent legislative amendments to the statute, will remain in effect until 2032 unless additional Congressional action is taken.
If we were unable to maintain our existing suppliers for CpG 1018 adjuvant, we would have to establish an alternate qualified manufacturing capability ourselves, which would result in significant additional operating costs and delays in manufacturing HEPLISAV-B, or CpG 1018 adjuvant, and developing and commercializing our, and potentially our collaborators’, product candidates.
If we are unable to maintain our existing suppliers for CpG 1018 adjuvant, we would have to establish an alternate qualified manufacturing capability ourselves, which would result in significant additional operating costs and delays in manufacturing HEPLISAV-B, or CpG 1018 adjuvant, and developing and commercializing our, and potentially our collaborators’, product candidates.
While the results of the study, announced in April 2021, provided that there was no increased risk of AMI associated with vaccination with HEPLISAV-B compared to Engerix-B, we may be required to conduct further studies on HEPLISAV-B or our other product candidates in the future.
While the results of the study, announced in April 2021, indicated that there was no increased risk of AMI associated with vaccination with HEPLISAV-B compared to Engerix-B, we may be required to conduct further studies on HEPLISAV-B or our other product candidates in the future.
It is possible we may have similar write-offs in the future. We may develop, seek regulatory approval for and market HEPLISAV-B or any other product candidates outside of the U.S. and the European Union, requiring a significant additional commitment of resources.
It is possible we may have similar write-offs in the future. We may develop, seek regulatory approval for and market HEPLISAV-B or any other product candidates outside of the U.S., the European Union and Great Britain, requiring a significant additional commitment of resources.
Our business operations are subject to interruption by natural disasters and other catastrophic events beyond our control, including, but not limited to, earthquakes, hurricanes, fires, droughts, tornadoes, electrical blackouts, public health crises and pandemics, war, terrorism, and geo-political unrest and uncertainties.
Our business operations are subject to interruption by natural disasters and other catastrophic events beyond our control, including, but not limited to, earthquakes, hurricanes, fires, droughts, tornadoes, electrical blackouts, public health crises and pandemics, war, terrorism, bank failures and geo-political unrest and uncertainties.
Failure to obtain a collaborative relationship for those product candidates and programs or HEPLISAV-B in markets outside the U.S. requiring extensive sales efforts, may significantly impair the potential for those products and programs and we may be required to raise additional capital to continue them.
Failure to obtain a collaborative relationship for those products or product candidates and programs in markets outside the U.S. requiring extensive sales efforts may significantly impair the potential for those products and programs and we may be required to raise additional capital to continue them.
The results of clinical trials conducted to support regulatory approval in one or more jurisdictions, and any failure or delay in obtaining regulatory approval in one or more jurisdictions, may have a negative effect on the regulatory approval process in other jurisdictions, including our existing regulatory approval in the United States and the European Union.
The results of clinical trials conducted to support regulatory approval in one or more jurisdictions, and any failure or delay in obtaining regulatory approval in one or more jurisdictions, may have a negative effect on the regulatory approval process in other jurisdictions, including our existing regulatory approval in the United States, the European Union and Great Britain.
The market price of our common stock is subject to substantial volatility depending upon many factors, many of which are beyond our control, including: • impact of the COVID-19 pandemic on our HEPLISAV-B vaccine, CpG 1018 adjuvant, or other product revenue; • progress or results of any of our clinical trials or regulatory or manufacturing efforts, in particular any announcements regarding the progress or results of our planned trials and BLA filing and communications, from the FDA or other regulatory agencies; • our ability to receive timely regulatory approval for our product candidates; • our ability to establish and maintain collaborations for the development and commercialization of our product candidates; • our ability to raise additional capital to fund our operations, to the extent needed; • technological innovations, new commercial products or drug discovery efforts and preclinical and clinical activities by us or our competitors; • changes in our intellectual property portfolio or developments or disputes concerning the proprietary rights of our products or product candidates; • our ability to obtain component materials and successfully enter into manufacturing relationships for our products or product candidates or establish manufacturing capacity on our own; • our ability to establish and maintain licensing agreements for intellectual property necessary for the development of our product candidates; • changes in government regulations, general economic conditions or industry announcements; • changes in the structure of healthcare payment systems; • issuance of new or changed securities analysts’ reports or recommendations; • actual or anticipated fluctuations in our quarterly financial and operating results; • the volume of trading in our common stock; • investor perceptions or negative announcements by our customers, competitors or suppliers regarding their own performance; and • industry conditions and general financial, economic and political instability.
The market price of our common stock is subject to substantial volatility depending upon many factors, many of which are beyond our control, including: • impact of COVID-19 or other respiratory or seasonal vaccination initiatives on our HEPLISAV-B vaccine, CpG 1018 adjuvant, or other product revenue; • progress or results of any of our clinical trials or regulatory or manufacturing efforts, in particular any announcements regarding the progress or results of our planned trials and BLA filing and communications, from the FDA or other regulatory authorities; • our ability to receive timely regulatory approval for our product candidates; • our ability to establish and maintain collaborations for the development and commercialization of our product candidates; • our ability to raise additional capital to fund our operations, to the extent needed; • technological innovations, new commercial products or drug discovery efforts and preclinical and clinical activities by us or our competitors; • changes in our intellectual property portfolio or developments or disputes concerning the proprietary rights of our products or product candidates; • our ability to obtain component materials and successfully enter into manufacturing relationships for our products or product candidates or establish manufacturing capacity on our own; • our ability to establish and maintain licensing agreements for intellectual property necessary for the development of our product candidates; • changes in government regulations, general economic conditions or industry announcements; • changes in the structure of healthcare payment systems; • issuance of new or changed securities analysts’ reports or recommendations; • actual or anticipated fluctuations in our quarterly financial and operating results; • the volume of trading in our common stock; 50 • investor perceptions or negative announcements by our customers, competitors or suppliers regarding their own performance; and • industry conditions and general financial, economic and political instability.
There are also modified schedules of conventional hepatitis B vaccines for limited age ranges that are approved in the European Union and United States. Competition in European markets could affect our success or the success of our distributor in that market as well.
There are also modified schedules of conventional hepatitis B vaccines for limited age ranges that are approved in the United States, the European Union and Great Britain. Competition in European markets could affect our success or the success of our distributor in that market as well.
In the event of serious adverse event data relating to TLR agonists, we may be required to reduce the scope of, or discontinue, our operations, or reevaluate the viability of strategic alternatives. Our programs, including HEPLISAV-B, incorporate TLR9 agonist CpG oligonucleotides.
In the event of serious adverse events relating to TLR agonists, we may be required to reduce the scope of, or discontinue, our operations, or reevaluate the viability of strategic alternatives. Our programs, including HEPLISAV-B, incorporate TLR9 agonist CpG oligonucleotides.
Our ability to use our net operating loss carryforwards and other tax attributes may be limited. We have incurred significant net operating losses ("NOLs") during our history, and despite recent profitability, may not be able to achieve sustained profitability over the long term.
Our ability to use our net operating loss carryforwards and other tax attributes may be limited. We have incurred significant net operating losses ("NOLs") during our history, and despite prior profitability, may not be able to achieve sustained profitability over the long term.
To the extent we collaborate or partner, as we have done for HEPLISAV-B distribution in Germany, the product’s financial value will be shared with another party and we will need to establish and maintain a successful collaboration arrangement, and we may not be able to enter into these arrangements on acceptable terms or in a timely manner in order to establish HEPLISAV-B in the market.
To the extent we collaborate or partner, as we have done for HEPLISAV-B distribution in Germany, the product’s financial value will be shared with another party and we will need to establish and maintain a successful collaboration arrangement, and we may not be able to enter into these arrangements on acceptable terms or in a timely manner in order to establish HEPLISAV-B in these new markets.
In addition, the manufacturing processes, labelling, packaging, distribution, adverse event reporting, storage, advertising, promotion and recordkeeping for HEPLISAV-B are subject to extensive and ongoing regulatory requirements in the United States and the European Union.
In addition, the manufacturing processes, labelling, packaging, distribution, adverse event reporting, storage, advertising, promotion and recordkeeping for HEPLISAV-B are subject to extensive and ongoing regulatory requirements in the United States, the European Union and Great Britain.
These requirements include submissions of safety and other post-marketing information and reports, registration, as well as continued compliance with current good manufacturing practices, good clinical practices (“GCP”), International Conference on Harmonization guidelines, and good laboratory practices.
These requirements include submissions of safety and other post-marketing information and reports, registration, as well as continued compliance with current good manufacturing practices (“cGMP”), good clinical practices (“GCP”), International Conference on Harmonization guidelines, and good laboratory practices ( “GLP” ) .
For example, while many countries such as the U.S. permit method of use patents or patent claims relating to the use of drug products, in some countries the law relating to patentability of such use claims is evolving, or may prohibit certain activities, and may be unfavorably interpreted to prevent us from successfully prosecuting some or all of our pending patent applications relating to the use of CpG 1018 adjuvant.
For example, while many countries such as the U.S. permit method of use patents or patent claims relating to the use of drug products, in some countries the law relating to patentability of such use claims is evolving, or may prohibit certain activities, and may be unfavorably interpreted to prevent us from successfully prosecuting some or all of our pending patent applications.
With respect to HEPLISAV-B and our other product candidates in development, we and our third-party manufacturers and suppliers are required to comply with applicable GMP regulations and other international regulatory requirements. The regulations require that our products and product candidates be manufactured and records maintained in a prescribed manner with respect to manufacturing, testing and quality control/quality assurance activities.
With respect to HEPLISAV-B and our other product candidates in development, we and our third-party manufacturers and suppliers are required to comply with applicable cGMP regulations and other international regulatory requirements. The regulations require that our products and product candidates be manufactured and records maintained in a prescribed manner 33 with respect to manufacturing, testing and quality control/quality assurance activities.
Under our universal shelf registration statement, we may sell any combination of common stock, preferred stock, debt securities and warrants in one or more offerings, including pursuant to our sales agreement with Cowen & Company, LLC, under which we can offer and sell our common stock from time to time up to aggregate sales proceeds of $150 million.
Under our universal shelf registration statement, we may sell any combination of common stock, preferred stock, debt securities and warrants in one or more offerings, including pursuant to our sales agreement with Cowen & Company, LLC, under which we can offer and sell our common stock from time to time up to aggregate sales proceeds of $120.0 million.
For example, during the peak of the COVID-19 pandemic there was a significantly reduced utilization of all adult vaccines (other than COVID-19 vaccines), including a reduced utilization of HEPLISAV-B. Although we maintain inventories of HEPLISAV-B and its components, our ability and those of our contractors and distributors to produce and distribute HEPLISAV-B could be adversely affected.
Furthermore, during the peak of the COVID-19 pandemic there was a significantly reduced utilization of all adult vaccines (other than COVID-19 vaccines), including a reduced utilization of HEPLISAV-B. Although we maintain inventories of HEPLISAV-B and its components, our ability and those of our contractors and distributors to produce and distribute HEPLISAV-B could be adversely affected.
Our registration and commercial timelines depend on further discussions with regulatory agencies and requirements and any requests that they may make for additional data or completion of additional clinical trials.
Our registration and commercial timelines depend on further discussions with regulatory authorities and requirements and any requests that they may make for additional data or completion of additional clinical trials.
In addition to the risks with employing and maintaining our own commercial capabilities and with contracting, other factors that may inhibit our efforts to successfully commercialize HEPLISAV-B include: • whether we are able to recruit and retain adequate numbers of effective sales and marketing personnel; • whether we are able to access key health care providers to discuss HEPLISAV-B; • whether we can compete successfully as a relatively new entrant in established distribution channels for vaccine products; and • whether we will maintain sufficient financial resources to cover the costs and expenses associated with creating and sustaining a capable sales and marketing organization and related commercial infrastructure.
In addition to the risks with employing and maintaining our own commercial capabilities and with contracting, other factors that may inhibit our efforts to successfully commercialize HEPLISAV-B include: • whether we are able to continue recruiting and retaining adequate numbers of effective sales and marketing personnel; • whether we are able to access key health care providers to discuss HEPLISAV-B; • whether we can continue to compete successfully as a relatively new entrant in established distribution channels for vaccine products; and • whether we will maintain sufficient financial resources to cover the costs and expenses associated with sustaining a capable sales and marketing organization and related commercial infrastructure.
The FDA or other regulatory agencies could limit the labeling indication for which our product candidates may be marketed or could otherwise limit marketing efforts for our products.
The FDA or other regulatory authorities could limit the labeling indication for which our product candidates may be marketed or could otherwise limit marketing efforts for our products.
HTA of medicinal products is becoming an increasingly common part of the pricing and reimbursement procedures in some EU Member States, including those representing the larger markets. The HTA process is the procedure to assess therapeutic, economic and societal impact of a given medicinal product in the national healthcare systems of the individual country.
This Health Technology Assessment ("HTA") of medicinal products is becoming an increasingly common part of the pricing and reimbursement procedures in some EU Member States, including those representing the larger markets. The HTA process is the procedure to assess therapeutic, economic and societal impact of a given medicinal product in the national healthcare systems of the individual country.
If we are unable to successfully manage our international operations, we may incur significant unanticipated costs and delays in regulatory approval or commercialization of our products or product candidates, which would impair our ability to generate revenues. 37 We rely on clinical research organizations (“CROs”) and clinical sites and investigators for our clinical trials.
If we are unable to successfully manage our international operations, we may incur significant unanticipated costs and delays in regulatory approval or commercialization of our products or product candidates, which would impair our ability to generate revenues. 37 We rely on CROs and clinical sites and investigators for our clinical trials.
Since this is our first marketed product, the timing of uptake and distribution efforts are unpredictable and there is a risk that we may not achieve and sustain commercial success for HEPLISAV-B. We have established sales, marketing and distribution capabilities and commercialized HEPLISAV-B in the U.S and Germany.
Since this is our first marketed product, the timing of uptake and distribution efforts are unpredictable and there is a risk that we may not achieve and sustain commercial success for HEPLISAV-B. We have established sales, marketing and distribution capabilities and commercialized HEPLISAV-B in the United States and Germany.
From January 1 through December 31, 2022, the conditions allowing holders to convert all or any portion of their Convertible Notes were not met. In the event the conditional conversion feature of the Convertible Notes is triggered, holders of Convertible Notes will be entitled to convert their Convertible Notes at any time during specified periods at their option.
From October 1 through December 31, 2023, the conditions allowing holders to convert all or any portion of their Convertible Notes were not met. In the event the conditional conversion feature of the Convertible Notes is triggered, holders of Convertible Notes will be entitled to convert their Convertible Notes at any time during specified periods at their option.
Developing, seeking regulatory approval for and marketing our product candidates outside of the U.S. and the European Union in new jurisdictions where we don't currently have approval could impose substantial costs, impose burdens on our personnel, and divert management’s attention from domestic operations.
Developing, seeking regulatory approval for and marketing our product candidates in or outside of the U.S., the European Union and Great Britain in jurisdictions where we don't currently have approval could impose substantial costs, impose burdens on our personnel, and divert management’s attention from domestic operations.
Similar post-marketing obligations and commitments exist in the European Union. For example, we are required to submit periodic safety update reports to the EMA and to keep an up-to-date risk management plan that takes into account new information that may lead to a significant change in the risk/benefit profile of HEPLISAV-B.
Similar post-marketing obligations and commitments exist in the European Union and Great Britain. For example, we are required to submit periodic safety update reports to the European Medicines Agency ("EMA") and the MHRA and to keep an up-to-date risk management plan that takes into account new information that may lead to a significant change in the risk/benefit profile of HEPLISAV-B.
Risks Related to our Business and Capital Requirements HEPLISAV-B has been approved and launched in the United States and the European Union, including Germany, and there is significant competition in these marketplaces.
Risks Related to our Business and Capital Requirements HEPLISAV-B has been approved in the United States, the European Union and Great Britain and launched in the United States and Germany, and there is significant competition in these marketplaces.
Other European Union member states allow companies to fix their own prices for medicines, but monitor and control company profits. Any delay in being able to market our products in the European Union or elsewhere will adversely affect our business and financial condition.
Other European Union Member States allow companies to fix their own prices for medicines, but monitor and control company profits. Any delay in being able to market our products in the European Union, Great Britain or elsewhere may adversely affect our business and financial condition.
Similarly, our revenue or operating expenses in one period may be disproportionately higher or lower relative to the others due to, among other factors, these revenue fluctuations or increases in expenses as we invest in our pipeline.
Moreover, our revenue or operating expenses in one period may be disproportionately higher or lower relative to the others due to, among other factors, revenue fluctuations or increases in expenses as we invest in our pipeline.
Conversion of the Convertible Notes may dilute the ownership interest of our stockholders or may otherwise depress the price of our common stock. From January 1 through December 31, 2022, the conditions allowing holders to convert all or any portion of their Convertible Notes have not been met.
Conversion of the Convertible Notes may dilute the ownership interest of our stockholders or may otherwise depress the price of our common stock. From October 1 through December 31, 2023, the conditions allowing holders to convert all or any portion of their Convertible Notes have not been met.
Our future financial performance and our ability to successfully commercialize our HEPLISAV-B vaccine and CpG 1018 adjuvant, and to compete effectively will depend, in part, on our ability to manage any future growth effectively.
Our future financial performance and our ability to successfully commercialize our HEPLISAV-B vaccine and CpG 1018 adjuvant or any new products, and to compete effectively will depend, in part, on our ability to manage any future growth effectively.
There are some countries that currently do not allow such method of use patents or patent claims, or that significantly limit the types of uses, claims or subject matter that are patentable.
There are some countries that currently do not allow such method of use patents or patent claims, or that significantly limit the types of uses, claims or subject matter that are patentable. Patents are of national or regional effect.
We may be particularly affected by this uncertainty since several of our product candidates or our collaborators’ vaccine candidates may initially address market opportunities outside the U.S., where we may only be able to obtain limited patent protection, if any at all.
The biopharmaceutical patent environment outside the U.S. is also uncertain. We may be particularly affected by this uncertainty since several of our product candidates or our collaborators’ vaccine candidates may initially address market opportunities outside the U.S., where we may only be able to obtain limited patent protection, if any at all.
We expect that legislators, policymakers and healthcare insurance funds in the EU Member States will continue to propose and implement cost-containing measures, such as lower maximum prices, lower or lack of reimbursement coverage and incentives to use cheaper, usually generic, products as an alternative to branded products, and/or branded products available through parallel import to keep healthcare costs down.
We expect that legislators, policymakers and healthcare insurance funds in European countries will continue to propose and implement cost-containing measures, such as lower maximum prices, lower or lack of reimbursement coverage and incentives to use cheaper, usually generic, products as an alternative to branded products, and/or branded products available through parallel import to keep healthcare costs down.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeP ROPERTIES As of December 31, 2022, the following are the material properties that we occupy: Property Description Location Square Footage Owned or Leased Lease Expiration Date Corporate headquarters office Emeryville, CA 8,053 Leased July 31, 2025 Manufacturing and office space Düsseldorf, Germany 60,558 Leased December 31, 2031 Laboratory and office space Emeryville, CA 75,662 Leased (*) March 31, 2031 (*) The entire 75,662 square feet have been subleased to a third party.
Biggest changeP ROPERTIES As of December 31, 2023, the following are the material properties that we occupy: Property Description Location Square Footage Owned or Leased Lease Expiration Date Corporate headquarters office Emeryville, CA 8,053 Leased July 31, 2025 Manufacturing and office space Düsseldorf, Germany 60,558 Leased December 31, 2031 Laboratory and office space Emeryville, CA 75,662 Leased (*) March 31, 2031 (*) The entire 75,662 square feet have been subleased to a third party.
Both our lease and sublease with the third party will continue until March 31, 2031. We believe that our facilities are adequate to meet our requirements for the near term. 54
Both our lease and sublease with the third party will continue until March 31, 2031. We believe that our facilities are adequate to meet our requirements for the near term.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeMINE S AFETY DISCLOSURE Not applicable. 55 PA RT II
Biggest changeMINE S AFETY DISCLOSURE Not applicable. 57 PA RT II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeAs of February 21, 2023, there were approximately 41 holders of record of our common stock, one of which was Cede & Co., a nominee for Depository Trust Company (“DTC”).
Biggest changeAs of February 20, 2024, there were approximately 39 holders of record of our common stock, one of which was Cede & Co., a nominee for Depository Trust Company (“DTC”).
This Section is not “soliciting material,” is not deemed “filed” with the Securities and Exchange Commission and is not to be incorporated by reference in any filing of Dynavax Technologies Corporation under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing. 56 Recent Sales of Unregistered Securities None.
This Section is not “soliciting material,” is not deemed “filed” with the Securities and Exchange Commission and is not to be incorporated by reference in any filing of Dynavax Technologies Corporation under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing. 58 Recent Sales of Unregistered Securities None.
Stock Performance Graph The chart below compares total stockholder return on an investment of $100 in cash on December 31, 2017, for our common stock, the Nasdaq Stock Market (U.S. companies), and the Nasdaq Biotechnology Index. All values assume reinvestment of the full amount of all dividends.
Stock Performance Graph The chart below compares total stockholder return on an investment of $100 in cash on December 31, 2018, for our common stock, the Nasdaq Stock Market (U.S. companies), and the Nasdaq Biotechnology Index. All values assume reinvestment of the full amount of all dividends.
Issuer Purchases of Equity Securities None. ITEM 6. [RE SERVED] 57
Issuer Purchases of Equity Securities None. ITEM 6. [RE SERVED] 59

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe following is a summary of our selling, general and administrative expenses (in thousands, except for percentages): Increase (Decrease) from Year Ended December 31, 2021 to 2022 Selling, General and Administrative: 2022 2021 $ % Compensation and related personnel costs $ 52,865 $ 43,135 $ 9,730 23 % Outside services 41,049 27,981 13,068 47 % Legal costs 2,223 1,906 317 17 % Facility costs 12,153 12,240 (87 ) (1 )% Non-cash stock-based compensation 23,118 14,894 8,224 55 % Total selling, general and administrative $ 131,408 $ 100,156 $ 31,252 31 % Selling, general and administrative expenses increased by $31.3 million for the year ended December 31, 2022 compared to 2021.
Biggest changeThe following is a summary of our selling, general and administrative expenses (in thousands, except for percentages): Increase (Decrease) from Year Ended December 31, 2022 to 2023 Selling, General and Administrative: 2023 2022 $ % Compensation and related personnel costs $ 63,937 $ 52,865 $ 11,072 21 % Outside services 47,374 41,049 6,325 15 % Legal costs 3,981 2,223 1,758 79 % Facility costs 8,585 12,153 (3,568 ) (29 )% Non-cash stock-based compensation 29,069 23,118 5,951 26 % Total selling, general and administrative $ 152,946 $ 131,408 $ 21,538 16 % Selling, general and administrative expenses increased by $21.5 million for the year ended December 31, 2023 compared to the year ended December 31, 2022. • Compensation and related personnel costs and non-cash stock-based compensation costs increased due to continued headcount and personnel investments in our general and administrative and field sales functions to support business growth and increased travel. 66 • Outside services increased due to more targeted commercial and marketing efforts to increase market share and maximize the opportunities presented by the ACIP's universal recommendation. • Legal costs increased due to ongoing general legal activities supporting our continued growth and intellectual property activities supporting our clinical-stage pipeline. • Facility costs decreased due to lower rent expense, as one of our leases expired in 2022, and lower depreciation expense related to furniture and fixtures fully depreciated in 2022. • Non-cash stock-based compensation expense increased primarily due to increased headcount of our field sales team.
Other In May 2021, we issued $225.5 million aggregate principal amount of 2.50% convertible senior notes due 2026 (the “Convertible Notes”) in a private placement. Total proceeds from the issuance of the Convertible Notes, net of debt issuance and offering costs of $5.7 million, were $219.8 million.
Other In May 2021, we issued $225.5 million aggregate principal amount of 2.50% convertible senior notes due in 2026 (the “Convertible Notes”) in a private placement. Total proceeds from the issuance of the Convertible Notes, net of debt issuance and offering costs of $5.7 million, were $219.8 million.
Long-term demand for CpG 1018 vaccine adjuvant supporting COVID-19 vaccines will be highly dependent on each customer’s ability to commercialize in respective territories and geographies where their respective COVID-19 vaccine is approved for use. Other revenue primarily includes revenue from our agreement with the DoD.
Long-term demand for CpG 1018 adjuvant supporting COVID-19 vaccines will be highly dependent on each customer’s ability to commercialize in respective territories and geographies where their respective COVID-19 vaccine is approved for use. Other revenue primarily includes revenue from our agreement with the DoD.
In February 2021, we received Marketing Authorization approval of HEPLISAV-B from the European Commission for prevention of infection caused by all known subtypes of hepatitis B virus in adults aged 18 years and older.
In February 2021, we received Marketing Authorization of HEPLISAV-B from the European Commission for prevention of infection caused by all known subtypes of hepatitis B virus in adults aged 18 years and older.
Discussions of 2020 items and year-to-year comparisons between 2021 and 2020 that are not included in this Form 10-K can be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2021 .
Discussions of 2021 items and year-to-year comparisons between 2022 and 2021 that are not included in this Form 10-K can be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2022.
HEPLISAV-B is the only two-dose hepatitis B vaccine for adults approved in the U.S. and the European Union. We have worldwide commercial rights to HEPLISAV-B and we market it in the United States and the European Union.
HEPLISAV-B is the only two-dose hepatitis B vaccine for adults approved in the U.S., the European Union and Great Britain. We have worldwide commercial rights to HEPLISAV-B and we market it in the United States and the European Union.
In June 2021, we entered into an agreement (the “Clover Supply Agreement”) with Zhejiang Clover Biopharmaceuticals, Inc. and Clover Biopharmaceuticals (Hong Kong) Co., Limited (collectively, “Clover”), for the commercial supply of CpG 1018 adjuvant, for use with its protein-based COVID-19 vaccine candidate, SCB-2019.
In June 2021, we entered into an agreement (together with subsequent amendments, the “Clover Supply Agreement”) with Zhejiang Clover Biopharmaceuticals, Inc. and Clover Biopharmaceuticals (Hong Kong) Co., Limited (collectively, “Clover”) for the commercial supply of CpG 1018 adjuvant, for use with its protein-based COVID-19 vaccine candidate, SCB-2019.
Our first marketed product, HEPLISAV-B® (Hepatitis B Vaccine (Recombinant), Adjuvanted) is approved in the United States and the European Union for prevention of infection caused by all known subtypes of hepatitis B virus in adults age 18 years and older. In May 2022, we commenced commercial shipments of HEPLISAV-B in Germany.
Our first marketed product, HEPLISAV-B® [Hepatitis B Vaccine (Recombinant), Adjuvanted], is approved in the United States, the European Union and Great Britain for the prevention of infection caused by all known subtypes of hepatitis B virus in adults aged 18 years and older. In May 2022, we commenced commercial shipments of HEPLISAV-B in Germany.
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, as amended, for use in Bio E’s commercialization of its CORBEVAX vaccine.
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 previously 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.
We currently anticipate that our cash and cash equivalents, and short-term marketable securities as of December 31, 2022, and anticipated revenues from HEPLISAV-B will be sufficient to fund our operations for at least the next 12 months from the date of this filing.
We currently anticipate that our cash and cash equivalents, and short-term marketable securities as of December 31, 2023, and anticipated revenues from HEPLISAV-B will be sufficient to fund our operations for at least the next 12 months from the date of this filing and in the longer term.
Results of Operations This section of this Form 10-K generally discusses 2022 and 2021 items and year-to-year comparisons between 2022 and 2021.
Results of Operations This section of this Form 10-K generally discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022.
Under the 58 Clover Supply Agreement, Clover has committed to purchase specified quantities of CpG 1018 adjuvant, at pre-negotiated prices pursuant to the CEPI Agreement, as amended, for use in Clover’s commercialization of vaccines containing SCB-2019 and CpG 1018 adjuvant (“Clover Product”).
Under the Clover Supply Agreement, Clover 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”).
We used $190.2 million of the net proceeds to repay, in full, our outstanding debt and other obligations under our previous loan agreement with CRG Servicing LLC ("Loan Agreement") and $27.2 million of the net proceeds to pay the costs of the Capped Calls (defined below).
We used $190.2 million of the net proceeds to repay, in full, our outstanding debt and other obligations under our previous loan agreement with CRG Servicing LLC ("Loan Agreement") and $27.2 million of the net proceeds to pay the costs of capped call transactions (the "Capped Calls").
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.
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. Adequate financing may not be available to us on acceptable terms, or at all.
Specifically, a s our CpG 1018 adjuvant customers have purchased a significant quantity of CpG 1018 adjuvant as part of their initial COVID-19 vaccine development stockpile, we currently expect minimal to no CpG 1018 adjuvant revenue for 2023 associated with these arrangements.
Specifically, a s our CpG 1018 adjuvant customers have purchased a significant quantity of CpG 1018 adjuvant as part of their initial COVID-19 vaccine development inventory, we currently expect minimal to no CpG 1018 adjuvant revenue in 2024 associated with these arrangements.
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”).
In connection with the issuance of the Convertible Notes, we entered into the Capped Calls with one of the initial purchasers and other financial institutions, totaling $27.2 million.
The discussion should be read in conjunction with the Consolidated Financial Statements and the related notes thereto set forth in “Item 8—Financial Statements and Supplementary Data.” Overview We are a commercial stage biopharmaceutical company focused on developing and commercializing innovative vaccines.
The discussion should be read in conjunction with the Consolidated Financial Statements and the related notes thereto set forth in “Item 8—Financial Statements and Supplementary Data.” Overview We are a commercial stage biopharmaceutical company developing and commercializing innovative vaccines to help protect the world against infectious diseases.
In addition, the increase in cost of sales-product was also driven by certain one-time charges totaling approximately $45.4 million, comprising an inventory write-off of $34.3 million in connection with cancelled orders and the reduction in demand associated with the Clover Supply Agreement, as amended, and $11.1 million in charges related to certain non-refundable pre-payments made to one of our CMOs regarding certain raw materials costs that are not likely to be manufactured into finish goods inventory.
In addition, CpG 1018 adjuvant cost of sales-product for the year ended December 31, 2022, includes certain one-time charges totaling approximately $45.4 million, comprising an inventory write-off of $34.3 million in connection with cancelled orders and the reduction in demand associated with the Clover Supply Agreement, as amended, and $11.1 million in charges related to certain non-refundable pre-payments made to one of our CMOs regarding certain raw materials costs that are not likely to be manufactured into finished goods inventory.
In line with our revenue expectations, we currently expect minimal to no CpG 1018 adjuvant cost of sales-product associated with our CpG 1018 adjuvant customer arrangements in 2023, as compared to 2022. 64 Research and Development Research and development expenses are tracked on a program-by-program basis and consist primarily of costs incurred for the continued research and development of HEPLISAV-B and CpG 1018 adjuvant, clinical product candidates and preclinical studies, which include but are not limited to, compensation and related personnel costs (which include benefits, recruitment and travel costs), expenses incurred under agreements with contract research organizations, contract manufacturing organizations and service providers that assist in conducting clinical studies and costs associated with our preclinical activities, development activities and regulatory operations.
Research and Development Expenses Research and development expenses are tracked on a program-by-program basis and consist primarily of costs incurred for the continued research and development of HEPLISAV-B and CpG 1018 adjuvant, clinical product candidates and preclinical studies, which include but are not limited to, compensation and related personnel costs (which include benefits, recruitment and travel costs), expenses incurred under agreements with contract research organizations, contract manufacturing organizations and service providers that assist in conducting clinical studies and costs associated with our preclinical activities, development activities and regulatory operations.
Inventories, net Inventory is stated at the lower of cost or estimated net realizable value, on a first-in, first-out, or FIFO, basis. We primarily use actual costs to determine our cost basis for inventories.
Inventories Inventory is stated at the lower of cost or estimated net realizable value, on a first-in, first-out, or FIFO, basis. We primarily use actual costs to determine our cost basis for inventories. Our assessment of market value requires the use of estimates regarding the net realizable value of our inventory balances, including an assessment of excess or obsolete inventory.
As we continue to progress our clinical-stage pipeline, we expect research and development expenses to continue to represent a substantial portion of our expenses and continue to increase in future years. 65 Selling, General and Administrative Selling, general and administrative expenses 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.
Selling, General and Administrative Expenses Selling, general and administrative expenses consist 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.
We also sublease one of our leased premises to a third party. Rent is subject to scheduled annual increases and the subtenant is responsible for certain operating expenses and taxes throughout the life of the sublease. The sublease term expires on March 31, 2031, unless earlier terminated, concurrent with the term of our lease.
Rent is subject to scheduled annual increases and the subtenant is responsible for certain operating expenses and taxes throughout the life of the sublease. The sublease term expires on March 31, 2031, unless earlier terminated, concurrent with the term of our lease. The subtenant has no option to extend the sublease term.
Our assessment of market value requires the use of estimates regarding the net realizable value of our inventory balances, including an assessment of excess or obsolete inventory. We determine excess or obsolete inventory based on multiple factors, including an estimate of the future demand for our products, product expiration dates and current sales levels.
We determine excess or obsolete inventory based on multiple factors, including an estimate of the future demand for our products, product expiration dates and current sales levels.
In conjunction with our agreement with Symphony Dynamo, Inc. and Symphony Dynamo Holdings LLC (“Holdings”) in November 2009, we agreed to make contingent cash payments to Holdings equal to 50% of the first $50 million from any upfront, pre-commercialization milestone or similar payments received by us from any agreement with any third party with respect to the development and/or commercialization of cancer and hepatitis C therapies originally licensed to Symphony Dynamo, Inc., including our immune-oncology compound, SD-101.
Generally, we are only obligated to pay for actual time spent and materials consumed by the organizations at any point in time during the contract through the notice period. 70 In conjunction with our agreement with Symphony Dynamo, Inc. and Symphony Dynamo Holdings LLC (“Holdings”) in November 2009, we agreed to make contingent cash payments to Holdings equal to 50% of the first $50 million from any upfront, pre-commercialization milestone or similar payments received by us from any agreement with any third party with respect to the development and/or commercialization of cancer and hepatitis C therapies originally licensed to Symphony Dynamo, Inc., including our immune-oncology compound, SD-101.
During the year ended December 31, 2022, net cash used in investing activities was $316.0 million compared to $14.2 million of cash provided by investing activities for the year ended December 31, 2021.
During the year ended December 31, 2023, net cash used in investing activities was $153.9 million compared to $316.0 million of cash used in investing activities for the year ended December 31, 2022.
The Clover Supply Agreement also provides terms for Clover to order additional quantities of CpG 1018 adjuvant beyond the quantities reserved by CEPI. In August of 2022, we signed an amendment (the “Clover Amendment No 1”) to the Clover Supply Agreement.
The Clover Supply Agreement also provides terms for Clover to order additional quantities of CpG 1018 adjuvant beyond the quantities reserved by CEPI. In 2022 and 2023, we signed four amendments to the Clover Supply Agreement.
As our CpG 1018 adjuvant customers have purchased a significant quantity of CpG 1018 adjuvant as part of their initial COVID-19 vaccine development stockpile, we currently expect minimal to no CpG 1018 adjuvant revenue for 2023 associated with these arrangements as compared to 2022.
As our CpG 1018 adjuvant customers have purchased a significant quantity of CpG 1018 adjuvant as part of their initial COVID-19 vaccine development inventory, we currently expect minimal to no CpG 1018 adjuvant revenue in 2024.
Baxter provides formulation, fill and finish services and produces HEPLISAV-B for commercial use. Pursuant to the Baxter Agreement, we are obligated to purchase an annual minimum number of batches of HEPLISAV-B for each of the next four calendar years through December 31, 2026, and there are certain limits on the number of batches that Baxter is required to produce.
Pursuant to the Baxter Agreement, we are obligated to purchase an annual minimum number of batches of HEPLISAV-B through December 31, 2026, and there are certain limits on the number of batches that Baxter is required to produce.
For the years ended December 31, 2022 and 2021, we recorded net income of $293.2 million and $76.7 million, respectively, compared to the net loss of $75.2 million for the year ended December 31, 2020. We cannot be certain that sales of our products, and the revenue from our other activities are sustainable.
For the year ended December 31, 2023, we recorded a net loss of $6.4 million. For the year ended December 31, 2022, we recorded a net income of $293.2 million. We cannot be certain that sales of our products, and the revenue from our other activities will be sustainable.
We have completed all obligations and product delivery under our CpG 1018 adjuvant collaboration agreements as of December 31, 2022.
There was no CpG 1018 adjuvant product revenue for the year ended December 31, 2023, as we completed all obligations and product delivery under our CpG 1018 adjuvant collaboration agreements as of December 31, 2022.
The increase was primarily driven by the commencement of the Phase 2 clinical trial which commenced in August 2022. 63 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 HEPLISAV-B and inventory costs to produce CpG 1018 adjuvant for our collaboration partners.
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 HEPLISAV-B and inventory costs to produce CpG 1018 adjuvant for our collaboration partners.
We also paid Holdings $0.5 million in each of those years, which we recorded in selling, general and administrative expenses in our consolidated statements of operations for the years ended December 31, 2022 and 2021. No liability has been recorded under this agreement as of December 31, 2022. 70
We recorded the proceeds as gain on sale of assets in our consolidated statements of operations. We paid Holdings $0.5 million in each of September 2021, May 2022 and October 2023. We included the payments in selling, general and administrative expenses in our consolidated statements of operations. No liability has been recorded under this agreement as of December 31, 2023.
Certain of these leases also include renewal options at our election to renew or extend the lease for two successive five-year terms. These optional periods have not been considered in the determination of the Right-of-use (“ROU”) assets or lease liabilities associated with these leases as we did not consider the exercise of these options to be reasonably certain.
These optional periods have not been considered in 69 the determination of the Right-of-use (“ROU”) assets or lease liabilities associated with these leases as we did not consider the exercise of these options to be reasonably certain. We also sublease one of our leased premises to a third party.
Recent Accounting Pronouncements See Note 2 – Summary of Significant Accounting Policies, in the accompanying notes to the consolidated financial statements included in Part II, Item 8, “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K for information regarding recent accounting pronouncements that are of significance, or potential significance to us.
See Note 10 – Convertible Notes, in the accompanying notes to the consolidated financial statements included in Part II, Item 8, “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K.
In addition, we could receive up to an additional $250.0 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 2020, we recognized a gain on sale of SD-101 assets of $6.9 million, net of transaction costs.
In addition, we could receive up to an additional $250.0 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 each of September 2023 and May 2022, we received payment of $1.0 million from TriSalus because it met a pre-commercialization milestone.
During the years ended December 31, 2022 and 2021, net cash provided by financing activities was $19.5 million and $55.8 million, respectively. Cash provided by financing activities for the year ended December 31, 2022 included proceeds of $8.5 million from warrants exercised, and proceeds of $11.1 million from the exercise of stock options and employee stock purchase plan.
Cash provided by financing activities for the year ended December 31, 2022 included proceeds of $8.5 million from warrants exercised, and proceeds of $11.1 million from the exercise of stock options and employee stock purchase plan. Contractual Obligations We lease our facilities in Emeryville, California and Düsseldorf, Germany.
For the year ended December 31, 2022, HEPLISAV-B product revenue, net was $125.9 million. CpG 1018® Adjuvant Supply for COVID-19 Vaccines 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.
CpG 1018® Adjuvant Supply for COVID-19 Vaccines In January 2021, we entered into an agreement (together with subsequent amendments, the "CEPI Agreement") with Coalition for Epidemic Preparedness Innovations (“CEPI”) for the manufacture and reservation of a specified quantity of CpG 1018 adjuvant. In May 2021, we entered into the first amendment to the CEPI Agreement.
As of December 31, 2022, we have no material non-cancelable purchase and other commitments for the supply of CpG 1018 adjuvant within the next 12 months. In addition to the non-cancelable commitments noted above, we have entered into contractual arrangements that obligate us to make payments to the contractual counterparties upon the occurrence of future events.
In addition to the non-cancelable commitments noted above, we have entered into contractual arrangements that obligate us to make payments to the contractual counterparties upon the occurrence of future events.
In July 2020, we sold assets related to SD-101 to Surefire Medical, Inc. d/b/a TriSalus Life Sciences (“TriSalus”). We paid $2.5 million to Holdings in August 2020.
In July 2020, we sold assets related to SD-101 to Surefire Medical, Inc. d/b/a TriSalus Life Sciences (“TriSalus”). We paid $2.5 million to Holdings in August 2020. In each of September 2021, May 2022 and September 2023, we received $1.0 million from TriSalus because it met pre-commercialization milestones.
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 June 2022 and October of 2022, we signed two amendments to the Bio E Supply Agreement ("Bio E Amendment No 1" and "Bio E Amendment No 2", respectively).
The Bio E Supply Agreement also provides terms for Bio E to order 61 additional quantities of CpG 1018 adjuvant beyond the quantities reserved by CEPI.
The following is a summary of our cost of sales - product (in thousands, except for percentages): Increase from Year Ended December 31, 2021 to 2022 Cost of Sales - Product: 2022 2021 $ % HEPLISAV-B $ 40,131 $ 26,999 $ 13,132 49 % CpG 1018 adjuvant 222,022 146,573 75,449 51 % Total cost of sales - product $ 262,153 $ 173,572 $ 88,581 51 % HEPLISAV-B cost of sales-product increased by $13.1 million for the year ended December 31, 2022 compared to 2021.
The following is a summary of our cost of sales - product (in thousands, except for percentages): Increase (Decrease) from Year Ended December 31, 2022 to 2023 Cost of Sales - Product: 2023 2022 $ % HEPLISAV-B $ 50,167 $ 40,131 $ 10,036 25 % CpG 1018 adjuvant - 222,022 (222,022 ) (100 )% Total cost of sales - product $ 50,167 $ 262,153 $ (211,986 ) (81 )% HEPLISAV-B cost of sales-product increased by $10.0 million for the year ended December 31, 2023 compared to the year ended December 31, 2022.
In May 2021, we issued $200.0 million aggregate principal amount of 2.50% convertible senior notes due 2026 in a private placement. The purchasers also partially exercised their option to purchase additional Convertible Notes in May 2021 and we issued an additional $25.5 million of the Convertible Notes.
The purchasers also partially exercised their option to purchase additional Convertible Notes in May 2021 and we issued an additional $25.5 million of the Convertible Notes. As of December 31, 2023, the aggregate principal amount of our Convertible Notes was $225.5 million, excluding debt discount of $2.8 million.
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.
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. Seasonality HEPLISAV-B is currently our only revenue-producing product. We believe that HEPLISAV-B product revenue is, and will likely continue to be, subject to seasonal variations.
The subtenant has no option to extend the sublease term. Sublease income was $7.7 million for each of the years ended December 31, 2022, 2021 and 2020. Sublease income is included in other income (expense) in our consolidated statements of operations.
Sublease income was $7.6 million, $7.7 million and $7.7 million for the years ended December 31, 2023, 2022 and 2021, respectively. Sublease income is included in other income (expense) in our consolidated statements of operations. Rent received from the subtenant in excess of rent paid to the landlord is shared by paying the landlord 50% of the excess rent.
Contractual Obligations We lease our facilities in Emeryville, California and Düsseldorf, Germany. We lease and sublease certain manufacturing and office space with lease terms ranging from 3 to 12 years. These leases require monthly lease payments that may be subject to annual increases throughout the lease term.
We lease and sublease certain manufacturing and office space with lease terms ranging from 3 to 12 years. These leases require monthly lease payments that may be subject to annual increases throughout the lease term. Certain of these leases also include renewal options at our election to renew or extend the lease for two successive five-year terms.
All of our HEPLISAV-B sales in the U.S. are to certain wholesalers and specialty distributors whose principal customers include independent hospitals and clinics, integrated delivery networks, public health clinics and prisons, the Department of Defense, Department of Veterans Affairs and retail pharmacies. All of our HEPLISAV-B sales in Germany are to one distributor.
In March 2023, we received marketing authorization in Great Britain for HEPLISAV-B for the active immunization against hepatitis B virus infection caused by all known subtypes of hepatitis B virus in adults aged 18 years and older. 60 All of our HEPLISAV-B sales in the U.S. are to certain wholesalers and specialty distributors whose principal customers include independent hospitals and clinics, integrated delivery networks, public health clinics and prisons, the Department of Defense, the Department of Veterans Affairs and retail pharmacies.
Cash used in investing activities during the year ended December 31, 2022 included $309.9 million of net purchases of marketable securities compared to $22.7 million of net proceeds from maturities and redemptions of marketable securities during 2021.
Cash used in investing activities during the year ended December 31, 2023 included $150.8 million of net purchases of marketable securities compared to $309.9 million of net purchases of marketable securities for the year ended December 31, 2022. During the year ended December 31, 2023, net cash provided by financing activities was $1.4 million.
For the year ended December 31, 2022 and 2021, we recognized $8.8 million and $0.5 million of revenue from our agreement with the DoD, respectively.
During the year ended December 31, 2023, we recognized $17.6 million of revenue from our agreement with the DoD.
We do not allocate stock-based compensation or facility expenses to specific programs because these costs are deployed across multiple programs. The following is a summary of our research and development expense (in thousands, except for percentages).
We do not allocate stock-based compensation or facility expenses to specific programs because these costs are deployed across multiple programs.
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 $176.4 million. As of December 31, 2022, advance payments totaling $107.7 million were recorded as CEPI accrual in our consolidated balance sheets.
The CEPI 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 (the “Advance Payments”) of up to $176.4 million.
As of December 31, 2022, we had $120.5 million remaining under the 2020 ATM Agreement. Prior to January 1, 2021, we incurred net losses in each year since our inception.
We agreed to pay Cowen a commission of up to 3% of the gross sales proceeds of any common stock sold through Cowen under the ATM Agreement. As of December 31, 2023, we had approximately $120.0 million remaining under the ATM Agreement. 68 Prior to January 1, 2021, we incurred net losses in each year since our inception.
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.
Liquidity and Capital Resources As of December 31, 2023, we had $742.3 million in cash and 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.
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.
Change in fair value of warrant liability reflects the changes in fair value of warrants issued in connection with equity financing in August 2019.
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.
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 of our Convertible Notes. Sublease income is recognized in connection with our sublease of office and laboratory space.
For additional information on the various current and future potential risks posed by the COVID-19 pandemic, please read Item 1A. Risk Factors, included above. 60 Critical Accounting Estimates We prepare our consolidated financial statements in accordance with U.S. generally accepted accounting principles. In doing so, we are required to make estimates and assumptions.
Critical Accounting Estimates We prepare our consolidated financial statements in accordance with U.S. generally accepted accounting principles. In doing so, we are required to make estimates and assumptions.
By comparison, during the year ended December 31, 2021, we generated $335.5 million of cash from our operations primarily due to our net income of $76.7 million, of which $82.4 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, inventory write-off, non-cash interest expense and accretion and amortization on marketable securities.
By comparison, during the year ended December 31, 2022, we generated $62.7 million of cash from our operations, which consisted of our net income of $293.2 million, a $69.0 million of net adjustments from non-cash items, which included stock-based compensation, change in fair value of warrant liability, non-cash interest expense, depreciation and amortization, amortization of right-of-use assets, accretion of discount on marketable securities and inventory write-off, and approximately $298.4 million net changes from operating assets and liabilities, which included $349.9 million decrease in deferred revenue due to the fulfillment of our obligations to deliver CpG 1018 adjuvant to our collaboration partners, $24.8 million decrease in accrued liabilities and other liabilities, $159.7 million decrease in prepaid manufacturing, which converted into CpG 1018 adjuvant inventory during 2022, $32.4 million increase in inventories and $21.1 million decrease in CEPI accrual.
The following is a summary of our other income (expense) (in thousands, except for percentages): Increase (Decrease) from Year Ended December 31, 2021 to 2022 2022 2021 $ % Interest income $ 7,912 $ 140 $ 7,772 5,551 % Interest expense $ (6,732 ) $ (11,176 ) $ (4,444 ) (40 )% Sublease income $ 7,685 $ 7,735 $ (50 ) (1 )% Loss on debt extinguishment $ - $ (5,232 ) $ 5,232 NM Change in fair value of warrant liability $ 1,801 $ (49,354 ) $ 51,155 104 % Other $ 111 $ 922 $ (811 ) (88 )% NM = Not meaningful Interest income for the year ended December 31, 2022 increased, as compared to 2021, primarily due to higher yields and balances in our marketable securities portfolio.
The following is a summary of our other income (expense) (in thousands, except for percentages): Increase (Decrease) from Year Ended December 31, 2022 to 2023 2023 2022 $ % Interest income $ 31,993 $ 7,912 $ 24,081 304 % Interest expense $ (6,757 ) $ (6,732 ) $ 25 (0 )% Sublease income $ 7,577 $ 7,685 $ (108 ) (1 )% Change in fair value of warrant liability $ - $ 1,801 $ (1,801 ) (100 )% Other $ (152 ) $ 111 $ (263 ) (237 )% • Interest income increased due to higher yields and balances in our marketable securities portfolio. • The change in the fair value of warrant liability resulted primarily from the warrants, which expired in February 2022.
With the full repayment of the Term Loans, all security interests, covenants, liens and encumbrances under the Loan Agreement were permanently released. 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”).
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.
Rent received from the subtenant in excess of rent paid to the landlord is shared by paying the landlord 50% of the excess rent. The excess rent is considered a variable lease payment and the total estimated payments are being recognized as additional rent expense on a straight-line basis.
The excess rent is considered a variable lease payment and the total estimated payments are being recognized as additional rent expense on a straight-line basis. In May 2021, we issued $200.0 million aggregate principal amount of 2.50% convertible senior notes due 2026 in a private placement.
We also manufacture and sell CpG 1018 adjuvant, the adjuvant used in HEPLISAV-B, and have established a portfolio of global commercial supply agreements in the development of COVID-19 vaccines across a variety of vaccine platforms.
In addition, we manufacture and have supplied in the past, and could supply in the future, our CpG 1018 adjuvant to a number of global customers, including companies engaged in the development and manufacture of COVID-19 vaccines across a variety of vaccine platforms utilizing CpG 1018 adjuvant.
There were no warrants outstanding as of December 31, 2022. 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.
There were no warrants outstanding as of December 31, 2023. • 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. 67 Income Taxes Our income tax expense and effective income tax rate were as follows (in thousands, except for percentages): Increase (Decrease) from Year Ended December 31, 2022 to 2023 2023 2022 $ % Income tax expense $ 2,022 $ 1,143 $ 879 77 % Effective income tax rate (46.3 )% 0.4 % - - Income tax expense increased by $0.9 million for the year ended December 31, 2023 compared to the year ended December 31, 2022.
We recognized CpG 1018 adjuvant net product revenue of $288.0 million and $72.2 million from Clover, for the years ended December 31, 2022 and 2021, respectively.
We did not recognize CpG 1018 adjuvant net product revenue from Clover for the year ended December 31, 2023. We recognized CpG 1018 adjuvant net product revenue of $288.0 million from Clover for the year ended December 31, 2022. In July 2021, we entered into an agreement (together with subsequent amendments, the “Bio E Supply Agreement”) with Biological E.
As of December 31, 2022, our aggregate minimum commitment under the Baxter Agreement was $9.3 million within the next 12 months, and $34.1 million beyond the next 12 months. We have entered into material purchase commitments with commercial manufacturers for the supply of HEPLISAV-B.
As of December 31, 2023, our aggregate minimum commitment under the Baxter Agreement was $11.4 million within the next 12 months, and $24.5 million beyond the next 12 months. On September 7, 2023 (the “Effective Date”), we entered into an agreement (the “Avecia Supply Agreement”) with Nitto Denko Avecia Inc.
We are being fully reimbursed by the DoD for the costs of this study which is recorded in other revenue in our consolidated statements of operations. (2) For the year ended December 31, 2022, "Other" includes pre-clinical investments and approximately $1.2 million in final close-out costs associated with the divestment of our immuno-oncology portfolio in 2019.
Under the agreement, we are conducting a Phase 2 clinical trial and studies combining our CpG 1018 adjuvant with the DoD's rF1V vaccine. We are being fully reimbursed by the DoD for the costs of this study, which is recorded in other revenue in our consolidated statements of operations.
For the year ended December 31, 2022, total CpG 1018 adjuvant product revenue, net, amounted to $587.7 million. Past performance is not a reliable indicator of future performance, however, and future revenue and associated profitability may therefore vary significantly.
Past performance is not a reliable indicator of future performance, however, and future revenue and associated profit or loss may therefore vary significantly.
Our assumptions of future demand for our products are inherently uncertain and if we were to change any of these judgments or estimates, it could cause a material increase or decrease in the amount of inventory reserves that we report in a particular period. 61 Stock-Based Compensation The fair value of stock options is estimated on the date of grant using the Black-Scholes option pricing model.
Our assumptions of future demand for our products are inherently uncertain and if we were to change any of these judgments or estimates, it could cause a material increase or decrease in the amount of inventory reserves that we report in a particular period. 63 Recent Accounting Pronouncements See Note 2 – Summary of Significant Accounting Policies, in the accompanying notes to the consolidated financial statements included in Part II, Item 8, “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K for information regarding recent accounting pronouncements that are of significance, or potential significance to us.
In September 2021, we received payment of $1.0 million from TriSalus for achieving a pre-commercialization milestone, which was recognized as a gain on sale of SD-101 assets our consolidated statements of operations for the year ended December 31, 2021.
In each of the third quarter of 2023 and second quarter of 2022, we recognized a gain on sale of SD-101 assets of $1.0 million in our consolidated statements of operations.
As of December 31, 2021, the aggregate principal amount of our Convertible Notes was $225.5 million, excluding debt discount of $5.0 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 bear interest at a rate of 2.50% per year, payable semiannually in arrears on May 15 and November 15 of each year. The Convertible Notes mature on May 15, 2026, unless converted, redeemed or repurchased in accordance with their terms prior to such date.
As of December 31, 2022, advance payments totaling $107.7 million were recorded as CEPI accrual in our consolidated balance sheets. As of December 31, 2022, the aggregate principal amount of our Convertible Notes was $225.5 million, excluding debt discount of $3.9 million.
As of December 31, 2023, remaining Advance Payments totaling $60.3 million were reflected in CEPI accrual long-term in our consolidated balance sheets, representing the outstanding balance of the Advance Payments relating to the Clover Supply Agreement (as defined and discussed below). As of December 31, 2022, we recorded Advance Payments of $107.7 million included in CEPI accrual.
Increase (Decrease) from Year Ended December 31, 2021 to 2022 Program Expenses (*) : 2022 2021 $ % HEPLISAV-B development $ 3,973 $ 11,265 $ (7,292 ) (65 )% CpG 1018 adjuvant development 2,379 5,652 (3,273 ) (58 )% Tetanus, diphtheria, and acellular pertussis 8,994 4,715 4,279 91 % Shingles 13,943 3,442 10,501 305 % Plague (1) 4,065 113 3,952 3497 % Other (2) 5,421 1,627 3,794 233 % Other Research and Development Expenses: Facility costs 1,871 1,596 275 17 % Non-cash stock-based compensation 5,954 3,818 2,136 56 % Total research and development $ 46,600 $ 32,228 $ 14,372 45 % (*) Certain prior period amounts have been reclassified for consistency with the current year presentation.
The following is a summary of our research and development expenses (in thousands, except for percentages): Increase (Decrease) from Year Ended December 31, 2022 to 2023 Program Expenses: 2023 2022 $ % HEPLISAV-B development $ 3,486 $ 3,973 $ (487 ) (12 )% CpG 1018 adjuvant development 2,140 2,379 (239 ) (10 )% Tetanus, diphtheria, and acellular pertussis 6,620 8,994 (2,374 ) (26 )% Shingles 14,252 13,943 309 2 % Plague (1) 8,319 4,065 4,254 105 % Other 8,210 5,421 2,789 51 % Other Research and Development Expenses: Facility costs 2,574 1,871 703 38 % Non-cash stock-based compensation 9,285 5,954 3,331 56 % Total research and development $ 54,886 $ 46,600 $ 8,286 18 % 65 (1) In September 2021, we entered into an agreement with the DoD for the development of a recombinant plague vaccine adjuvanted with CpG 1018.
The Bio Farma Supply Agreement also provides terms for Bio Farma to order additional quantities of CpG 1018 adjuvant for delivery throughout the life of the agreement. We recognized CpG 1018 adjuvant net product revenue of $25.4 million from Bio Farma for the year ended December 31, 2022.
These additional amounts are not considered collectible until the achievement of these future milestones. We did not recognize CpG 1018 adjuvant net product revenue from Bio E for the year ended December 31, 2023. We recognized CpG 1018 adjuvant net product revenue of $206.2 million from Bio E for the year ended December 31, 2022.
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. 62 The following is a summary of our revenues (in thousands, except for percentages): Increase from Year Ended December 31, 2021 to 2022 Revenues: 2022 2021 $ % HEPLISAV-B $ 125,937 $ 61,870 $ 64,067 104 % CpG 1018 adjuvant 587,708 375,229 212,479 57 % Total product revenue, net 713,645 437,099 276,546 63 % Other revenue 9,038 2,343 6,695 286 % Total revenues $ 722,683 $ 439,442 $ 283,241 64 % HEPLISAV-B product revenue increased by $64.1 million for the year ended December 31, 2022 compared to 2021.
The following is a summary of our revenues (in thousands, except for percentages): Increase (Decrease) from Year Ended December 31, 2022 to 2023 Revenues: 2023 2022 $ % HEPLISAV-B $ 213,295 $ 125,937 $ 87,358 69 % CpG 1018 adjuvant - 587,708 (587,708 ) (100 )% Total product revenue, net 213,295 713,645 (500,350 ) (70 )% Other revenue 18,989 9,038 9,951 110 % Total revenues $ 232,284 $ 722,683 $ (490,399 ) (68 )% HEPLISAV-B product revenue increased by $87.4 million for the year ended December 31, 2023 compared to the year ended December 31, 2022.
Our prepaid manufacturing balance decreased by $159.7 million as we released all of our CMOs prepaid manufacturing costs upon completion of their CpG 1018 production. 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.
Overall, cash provided by our operations during the year ended December 31, 2023 increased by $37.8 million compared to the same period in December 31, 2022. 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.
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. 68 During the year ended December 31, 2022, we generated $62.7 million of cash from our operations primarily due to our net income of $293.2 million, of which $69.0 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, inventory write-off, non-cash interest expense and accretion and amortization on marketable securities.
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.
Approximately $56.8 million of the increase was due to higher volume, which was driven by continued improvement in market share and utilization of adult vaccines. Approximately $7.2 million of the increase was due to higher net sales price.
Approximately $76.5 million of the increase was primarily due to higher volume driven by continued improvement in market share, particularly in the integrated delivery networks and retail segments, and growth in the U.S. hepatitis-B vaccine market related to the Advisory Committee on Immunization Practices ("ACIP") universal recommendation. Approximately $10.9 million of the increase was due to higher net sales price.
The amendments primarily established new payment schedules for certain outstanding invoices and reduced the scope of the Bio E Supply Agreement. We recognized CpG 1018 adjuvant net product revenue of $206.2 million and $185.7 million from Bio E, for the years ended December 31, 2022 and 2021, respectively.
The Bio E Amendments primarily established: (i) a new payment schedule for certain outstanding invoices related to the CEPI product to be the earlier of December 31, 2022, or receipt of certain amounts by Bio E from the Government of India in connection with their advance purchase agreement for CORBEVAX, and (ii) further modified the scope of the Bio E Supply Agreement, by reducing certain quantities of CpG 1018 adjuvant to be delivered.
HEPLISAV-B development costs for the year ended December 31, 2022 decreased, compared to 2021, primarily due to the completion of HEPLISAV-B dialysis study. In addition, HEPLISAV-B development costs for year ended December 31, 2021 included certain activities associated with increasing production yields at our Düsseldorf manufacturing facility.
Research and development expenses increased by $8.3 million for the year ended December 31, 2023 compared to the year ended December 31, 2022. • HEPLISAV-B development costs decreased due to lower clinical costs following the completion of the HEPLISAV-B dialysis study and lower other HEPLISAV-B related development costs.
There were no HEPLISAV-B inventory write-offs during the year ended December 31, 2022. CpG 1018 adjuvant cost of sales-product for the year ended December 31, 2022 increased by $75.4 million compared to 2021.
There was no CpG 1018 adjuvant cost of sales-product for the year ended December 31, 2023, as we satisfied all delivery obligations under our CpG 1018 adjuvant collaboration agreements as of December 31, 2022.
Cash provided by financing activities for the year ended December 31, 2021 included net proceeds of $219.8 million from the issuance of our Convertible Notes, $28.2 million from our 2020 ATM Agreement, $17.8 million proceeds from warrants exercised, $7.4 million from options exercised and employee stock purchase plan, offset by $190.2 million repayment of our long-term debt, and $27.2 million purchases of capped call options.
Cash used in financing activities for the year ended December 31, 2023 included $6.5 million for the payments of taxes related to net share settlement of restricted stock units ("RSUs"), partially offset by proceeds received from the exercise of options and from share purchases under our employee stock purchase plan for $7.9 million combined.
Our effective tax rate for the year ended December 31, 2022 was 0.4%, which is primarily comprised of net operating losses and research and development credits, as well as changes in our valuation allowance. 67 Liquidity and Capital Resources As of December 31, 2022, we had $624.4 million in cash and cash equivalents, and marketable securities.
Our income tax expense of $2.0 million and $1.1 million for the years ended December 31, 2023 and 2022 which is primarily comprised of state and foreign income tax expense. Our effective tax rate for the year ended December 31, 2023 was (46.3)%, which is primarily comprised of state and foreign income tax expense.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeWe do not have derivative financial instruments in our investment portfolio. To assess our risk, we calculate that if interest rates were to rise or fall from current levels by 100 basis points or by 125 basis points, the pro forma change in fair value of investments would be $4.1 million or $5.1 million, respectively.
Biggest changeTo assess our risk, we calculate that if interest rates were to rise or fall from current levels by 100 basis points or by 125 basis points, the pro forma change in fair value of investments would be $7.0 million or $9.0 million as of December 31, 2023, compared to $4.1 million or $5.1 million as of December 31, 2022, respectively.
As of December 31, 2022, the effect of our exposure to these exchange rate fluctuations has not been material, and we do not expect it to become material in the foreseeable future. We do not hedge our foreign currency exposures and have not used derivative financial instruments for speculation or trading purposes. 71
As of December 31, 2023 and 2022, the effect of our exposure to these exchange rate fluctuations has not been material, and we do not expect it to become material in the foreseeable future. We do not hedge our foreign currency exposures and have not used derivative financial instruments for speculation or trading purposes. 71
The cumulative translation adjustment reported in the consolidated balance sheet as of December 31, 2022 was a $4.0 million loss primarily related to the translation of Dynavax GmbH assets, liabilities and operating results from Euros to U.S. dollars.
The cumulative translation adjustment reported in the consolidated balance sheet as of December 31, 2023 and 2022 was a $3.0 million and $4.0 million loss, respectively, primarily related to the translation of Dynavax GmbH assets, liabilities and operating results from Euros to U.S. dollars.
Added
We do not have derivative financial instruments in our investment portfolio.

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