Dynavax Technologies Corp

NASDAQ:DVAX

Earnings Call Transcript 2018-Q3

[Operator]

Good day, ladies and gentlemen, and welcome to the Dynavax Technologies Third Quarter 2018 Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call maybe recorded.

I would now like to introduce you host for today’s conference, Mr. Ryan Spencer, Vice President of Corporate Strategy and Communications. Sir, you may begin.

[Ryan Spencer]

Thank you, operator. Good afternoon. Welcome to the Dynavax third quarter 2018 financial results and corporate update conference call. With me today are Eddie Gray, our Chief Executive Officer; Rob Janssen, our Chief Medical Officer; and Michael Ostrach, our CFO.

Before we begin, I advise you we will be making forward-looking statements today, including statements regarding clinical and financial information, expectations, and anticipated key events. These statements are subject to a number of risks and uncertainties that could cause actual results to differ materially. These risks are summarized in today's press release and are detailed in the Risk Factors section of our current 10-Q and 10-K periodic reports filed with the SEC, which we encourage you all to review.

I’ll now turn the call over to Eddie Gray, the Chief Executive Officer of Dynavax.

[Eddie Gray, Chief Executive Officer]

Thank you, Ryan, and thank you all for joining us for this conference call. Since our last quarterly call, Dynavax’s achieved several key business objectives in both the HEPLISAV-B commercial program and the SD-101 clinical program. Our conviction that HEPLISAV-B will become the standard of care for adults has only strengthened as the year progresses.

SD-101 consistently continues to generate encouraging clinical data with three presentations at the recent ESMO conference once more indicating SD-101 in combination with anti PD-1 therapy provides significant benefit to patients beyond what concurrently we achieved with anti PD-1 alone.

Today, we reported HEPLISAV-B net sales of $1.5 million for the third quarter. This modest increase from quarter two does reflect some effects of summertime with a slowdown in both P&T reviews and operations at our institutional customers especially during the month of July. However, this summer effect is behind us.

Within the quarter three number, September was the best sales month since launch. In addition, although [indiscernible] unaudited, we can now see that October continues this trend strongly. Not only has it surpassed September, but shipments in October are comfortably in excess of the total shipments for quarter three.

September and October combined 55% of the total shipments since launch. October was a particularly strong month for orders from new customers. And as we look forward to the ordering patents in November and early December, we feel confident in saying that we are now experiencing the start of an inflection in HEPLISAV-B sales that we've consistently predicted for year end. In addition, looking further forward, we remained firm in our expectation for HEPLISAV-B to be cash generative by the end of 2019.

Now, I realized that a number of investors are unsure how to think about sales and sales growth of HEPLISAV-B in the absence of traditional NRx, TRx data from which to project. Given that, why can we be confident that the start of our inflection is here?

Well, it's true that we do not capture our share in a smooth NRx, TRx manner. We capture market share customer-by-customer and therefore market share growth is often lumpy in individual months as a new customer joins the HEPLISAV ranks and takes an initial stocking order, sometimes quite large. And this than at a later point stimulates an increase level of channel stocking to keep pace with improved anticipated demand.

Well with eight full months in the field now, we've accumulated experience and information to begin recognizing patents in the sales and ordering cycles for typical large customers. So we see it takes a number of months to schedule and hold the P&T committee meeting and then when the institution adds HEPLISAV-B to their formulary at least eight more weeks to operationalize that decision and make an initial purchase. We have discussed this in detail on previous calls.

This first purchase normally represents a small initial order, while current stock is initialized and provide our education an awareness is established within the customer. After the initial ordering period, we often then see a stock in order which represents about four weeks to eight weeks of historical usage, and then beyond that we see repeat orders start to settle into a regular pattern.

So in addition to the healthy increase in the number of units ordered recently by new customers, many of our now – over 1,000 customers have begun to reorder. Importantly, we are seeing customer switches to HEPLISAV-B across the spectrum of customer types, including the largest customers. HEPLISAV-B has now been approved for use in six of the top 10 integrated delivery networks.

Our largest national occupational health customer has begun the process of introducing HEPLISAV-B to its sites of care, multiple military basis have switch to HEPLISAV-B including for new recruits, and we have secured our first retail pharmacy partner under in contract discussions with several other national chains. In addition to what we are now seeing in sales patents, the progress of new potential customers for the future also continues well.

During our quarter two call, we reported 219 of our largest targeted accounts had progressed beyond the P&T review. 91 had ordered HEPLISAV-B and 24 had fully implemented HEPLISAV-B through their system. As of last week, we added 402 accounts beyond P&T, 200 had ordered HEPLISAV-B, and 68 customers are fully implemented our product in their system.

At the end of quarter two, we had 198 P&T or vaccine subcommittee meetings scheduled and the quarter three number is now 291, all of which – August well had increased sales opportunities going forward. With that greater insight and understanding, we can see the quarter four will deliver the first sign of change in the sales patent.

As I said, September was a record month and October has outperformed quarter three. In November and early December, established customers and some of the September, October, new customers will reorder, while that’s not perhaps matching October we can also see further large new customers adding to our roster in this period. Thanksgiving week and the whole second half of December will likely be pretty quiet.

Perhaps they should, but sadly nobody asks for the Christmas to bring them a prophylactic hepatitis B vaccine. What all that adds up to is continued market share gain customer-by-customer, continued progress albeit lumpy on a month-by-month basis, but we are confident quarter four will represent the first evidence of inflection in sales has promised, and our expectations to be cash generative in 2019 remain unchanged.

On the operational side, our manufacturing group achieved several critical objectives this past quarter. You may recall that when the FDA approval decision was delayed, we suspended operations are Dusseldorf antigen production facility. Following approval, manufacturing operations have been successfully reestablished, several batches have recently been completed and the Dusseldorf facility is now fully back on the stream.

This is important timing because as those of you who attended the October ACIP meeting will know the CDC disclosed that Merck will remain unable to supply its adults, hepatitis B vaccine through the end of 2019.

Our confidence in HEPLISAV-B and its commercial inflection has led us to take some important strategic decisions for the program. As the market for this product is driven by institutional sales, varying customer types and complex purchasing processes, having sector knowledge and relationships are critical to success. These relationships established by our field team have enabled us to reach this point of inflection and are critical to ensure that we maintain the momentum we are beginning to experience.

As such, we will directly hire our field team as Dynavax employees and move away from the contract sales organization model, a process we expect to be completed by spring. This is a move we have always anticipated, but deferred out of prudence until we had first address the operational challenge of launching HEPLISAV-B before taking on the task of supporting our national field team.

We expect this transition to be cause neutral and we'll implement the decision once we have put in place the necessary support services and systems. At the same time, we plan to take down the $75 million tranche remaining under our term loan agreements. Along with our existing cash, this would extend our runway beyond the point where we expect HEPLISAV-B to become cash generative and facilitate expansion of the immuno-oncology clinical programs.

So turning now to oncology, here also we have results giving us considerable confidence. At the ESMO conference, two weeks ago, our clinical collaborators presented three sets of interim clinical results from trials of SD-101 in combination with KEYTRUDA. These encouraging and consistent results continue to confirm SD-101s potential to improve outcomes for patients beyond what can be achieved with PD-L1 at therapy alone.

Most importantly in a late-breaking poster discussion, we again reported 70% overall response rate for the 2 milligram dose of SD-101 and patients with advanced melanoma naive to anti-PD1 therapy. The patient population had increased by more than 50% from 30% to 47%, and yet the overall remained identical to the ORR we reported in June at ASCO.

This – has been consistent throughout the study. And in addition to consistent ORR and the 2 milligram group, as we increase the size of the study, so we saw the ORR in the 8 milligram group, improved to 48% since ASCO up from 38%.

Consistent with our mechanism of action, we see additional responses occur over time, with some patients having responses as late as six to nine months after initiation of combination therapy. Indeed, this phenomenon has continued. We now have three patients who have progressed from partial response to complete response since our ESMO report, 1 in the 2 milligram group and 2 in the 8 milligram group.

In nearly every comparison responses were better in the 2 milligram group; no particular subgroup drove the difference in efficacy between the two groups. In addition to the ORR data, progression-free survival, responses in PD-1 negative patients and the biomarker activity analysis, all supported the clear clinical impact at ST-101s activity in this population.

There are ongoing responses now more than two years out in the 2 milligram group with more than 70% of patients having ongoing responses or stable disease that were still on the study. The six-month PFS in the 2 milligram group is 85% and the median has not yet been reached.

In the 2 milligram group responses appeared to be independent of baseline PDL-1 expression. Tumor shrinkage occurred in both injected target lesions and non-injected target lesions and over 60%, 70% of not injected lesions decreased by greater than 30%.

And the 2 milligram group, approximately 60% of patients had multiple lesions injected with an ORR of approximately 60%. The ORR in the patients who have a single lesion injected was approximately 80%. Based on these data, injections into multiple lesions do not result in a higher ORR and injections into a single lesion. Additionally, the number of injected lesions did not affect PFS.

Gene expression, biomarker data comparing pre and post treatment biopsy support the validity of the clinical responses we've seen in the study. For each of the immune cell group sampled, we saw a higher gene activity and fold changes from baseline in patients who received 2 milligram then in those have received 8 milligram in correlation with the better clinical responses in the 2 milligram group.

In our second presentation at ESMO, we reported to 21.4% ORR and 29 melanoma patients refractory or resistant to anti PD-1 therapy, who received the 8 milligram dose. Once again, supporting the view SD-101 is providing benefit beyond what could reasonably be expected from KEYTRUDA alone. Each we’re heavily pretreated patients with predominant metastatic disease involving the liver, lung, and adrenal glands. We saw tumor shrinkage and injected and non-injected lesions with durable tumor shrinkage and ongoing responses of 10 months to 12 months.

Of our third presentation, we reported 27.3% ORR in 22 patients with head and neck squamous cell carcinoma naive to anti PD-1 who also received the 8 milligram dose. Our lead investigator stated at the poster discussion that the clinically meaningful ORR should be at least 26% in such a challenging patient population or about double what can be achieved with anti PD-1 monotherapy.

The activity we've seen in this group is encouraging because the second line or later patients in this study do progress very rapidly, including several instances progression even before we could treat them with SD-101. This late stage of disease may not be conducive to an immunotherapy that takes time to have its best effects.

Nonetheless because of the better efficacy data in those with melanoma who received low dose SD-101. We're looking forward to see if the lower dose can induce even better responses in this difficult to treat population. In all three studies, adverse events related to SD-101 treatment with transient, mild to moderate flu-like symptoms with no increase in frequency of immune related adverse events over the individual monotherapies reported in other studies, nor was there evidence of any new safety signal.

These results represent the most exciting dataset for a combination with KEYTRUDA melanoma patients naive to anti PD-1 therapy of which we are aware with data that remains consistent over time and across multiple tumor types. In this patient population, our ORR PFS and side effect profile compare favorably to outcomes achieved with single agent anti PD-1 and all other doublets, including the combination of Ipilimumab and Nivolumab.

We are pursuing multiple pass forward for SD-101, we met the summer with the FDA along with our clinical partner, Merck, to ensure we had a clear understanding of the city design and endpoints for approval of a Phase III study in melanoma patients naive to anti PD-1 therapy. We are evaluating opportunities to share cost of that trial with a partner.

In addition, we are advancing in some valuable clinical applications that we are fully capable of pursuing on our own. These are tumors where we believe there's a high likelihood of responsiveness to our mode of action and to clear registrational pathway. The first example is the I-SPY 2 TRIAL, neoadjuvant treatments of locally advanced breast cancer that we recently announced.

We are also testing the 2 milligram dose in patients with advanced melanoma who have tumors refractory or resistant to anti PD-1 therapy. If the results were the 2-milligram dose or as good or better than those we've demonstrated with 8 milligram and the recurrent resistant melanoma population. We have a clear registrational paths for a study well within our means and capabilities.

In naive had a neck patients having first decided on the dose. We plan to initiate a controlled Phase II/III study that we have designed, comparing the combination to monotherapy in first line, had a neck patients and the cost of discussions with prospective partners regarding the Phase III program. We may find partners with the capabilities and products that can enhance and broaden the SD-101 clinical program and have an interest in supporting the initiatives that we plan to take forward on our own as well.

I will now turn the call over to our CFO, Michael Ostrach to review the quarter three financial results.

[Michael Ostrach]

Thank you, Eddie. Today I'll review our third quarter 2018 financial results and financial position. We recorded net product revenue of $1.5 million in the third quarter and $2.9 million for the nine months ended September 30. Product revenue net represents the net revenue we've estimated will recover from sales of HEPLISAV-B after all adjustments such as discounts and returns are realized.

Initial commercial efforts have been focused on ensuring market access to enable healthcare providers to purchase HEPLISAV-B, including payer coverage and securing contracts with group purchasing organizations, physician buying groups and federal government entities.

Sales efforts are focused on advancing HEPLISAV-B through the complex approval and procurement processes in large institutional accounts across the country. And during the third quarter, several key accounts made positive decisions to make HEPLISAV-B available in their networks.

Based on the progress we have seen in obtaining these approvals and our experience with the time required for implementation and procurement by customers, we expect quarterly sales will increase in the fourth quarter and next year as healthcare providers complete their reviews and the operational activities required to switch to a two dose regimen that's provided by HEPLISAV-B.

Our cost of sales product reflects costs of $3.9 million and $9.3 million for the three and nine-month periods, ended September 30. Included in cost of sales product are inventory reserves and certain fill, finish and overhead costs for HEPLISAV-B that we incurred after FDA approval. Cost of sales product also includes costs at our manufacturing facility in Dusseldorf, which previously were included in research and development expense.

These charges are a result of the costs associated with resuming activities at Dusseldorf after receiving regulatory approval of the pre-filled syringe presentation of HEPLISAV-B in late March 2018. These charges we expect to cost of sales to diminish in future periods as we resume the ongoing commercial production at the Dusseldorf facility. Excluding these costs, we expect our cost of sales to HEPLISAV-B to increase as a percentage of net sales in future periods as we produced and then sell inventory that reflects the full cost of manufacturing.

Cost of sales amortization of intangible assets is $3.8 million and $8.5 million for the three months and nine months consists of amortization of intangible assets recorded for fees and milestone payments under three patent sublicense agreements. At September 30, only one of these has not been fully amortized an intangible asset of $14 million, which has been – has an estimated remaining life through April 2020 patent expiration date.

R&D expenses for the quarter were $16.8 million compared to $16.4 million in the third quarter. The slight increase reflects increased compensation and related personnel costs related to ongoing development of SD-101, DV281 and the earlier stage oncology programs. And as mentioned earlier, upon approval of the pre-filled syringe presentation in Q1, costs associated with resuming operating activities in Dusseldorf were charged to cost of sales product and the costs incurred to manufacture the product for commercial sale were accounted for as inventory.

SG&A for the third quarter was $15.8 million compared to $6 million in the third quarter of last year. This increase is due to an increase in HEPLISAV-B sales, marketing and commercial activities, including full-deployment of a contract sales force, cost for the post-marketing studies and consultants for commercial development services.

During the quarter, we used approximately $36 million of cash. We expect quarterly operating expenses to increase a bit in the fourth quarter as we expand our clinical trial activity and make improvements to the facility plan to replace and expand our current lab and office space in Berkeley.

At the end of the quarter, we had $180.2 million of cash. In addition as Eddie mentioned, we are planning to take down the remaining $75 million tranche of our term loan during the first or second quarter of next year.

Operator, we can now open the call for questions.

[Operator]

Thank you. [Operator Instructions] Our first question comes from Anupam Rama with JPMorgan. Your line is now open.

[Unidentified Analyst]

Hey, guys. Thanks so much for taking my question. This is Matt on for Anupam. Just a couple from us here. So you mentioned that you've designed the Phase II/III study of SD-101 [indiscernible] treatment naive melanoma. Just wondering about guidance on when details will be given for the trial design? And then a follow-up, how conversations with partners evolved in ESMO on this potential trial? Thanks.

[Eddie Gray, Chief Executive Officer]

I'm sorry, Anupam, confirm which trial you’re mentioning. Was it the melanoma?

[Unidentified Analyst]

Yes, the treatment of melanoma Phase II/III?

[Eddie Gray, Chief Executive Officer]

That was head to neck.

[Unidentified Analyst]

Apologies, the treatment [melanoma 19]?

[Eddie Gray, Chief Executive Officer]

The treatment melanoma, okay, well Rob, perhaps you can just sort of comment on your confidence that you got the information you needed from the meeting with the FDA. What we know about sort of study design and…

[Robert Janssen, Chief Medical Officer]

Yes. So the key elements of the study design is the primary endpoint would be progression-free survival and the size of this study would be about 700 patients randomized one-to-one, so it would be SD-101 plus pembro compared with placebo plus pembro. That sample size is based on a hazard ratio of 0.7 for PFS, but the actual size of the study really is based on overall survival, which would be a secondary end point.

[Eddie Gray, Chief Executive Officer]

Obviously having good clarity about study design is helpful in many descriptions about potential partnerships, but I'm not going to comment on the individual discussions at this point in time Anupam.

[Unidentified Analyst]

Great. Thank you very much and congrats on the HEPLISAV progress?

[Eddie Gray, Chief Executive Officer]

Thank you.

[Operator]

Thank you. Our next question comes from Brian Abrahams with RBC Capital Markets. Your line is now open.

[Brian Abrahams, RBC Capital Markets]

Hey guys, thanks very much for taking my questions and appreciate all the helpful metrics on the HEPLISAV launch. A couple of HEPLISAV questions for me. I'm sort of curious what you see as the key areas of investment going forward to really ensure center education and awareness for HEPLISAV-B. And I would really be interested in hearing about the potential advantages of an in-house salesforce, and achieving uptake once you're through with the initial operational hurdles of this year? And then I had a follow-up. Thanks.

[Eddie Gray, Chief Executive Officer]

Yes. I think in terms of the investments around awareness and the like, we have always maintained that there are really two key phases of HEPLISAV. The one is the one that we're in now, which is really around conversion of the traditional markets, as identified by the CDC list.

And ultimately – approximately a year or so for now, when we can be confident that if we drive new patients and particularly diabetic patients in for a vaccination that it will be HEPLISAV that’s in the fridge, and HEPLISAV that they receive rather than one of the older product.

So at this point in time, those remain the two phases. And the critical issue for us in the first phase which will underpin the next few years of work is relationships with key institutional customers. And it's those relationships which are central to our salesforce effort, and being able to ensure that we retain not just a) salesforce, but b) individuals who’ve grown and developed to those relationships are extremely important for us going forward.

And that's why we've made the decision at this time coinciding with what we – as I said, I strongly believe to be the first signs of inflection. The last thing we need to be doing at this point in time is stuttering in the performance of HEPLISAV with bringing new customers on, because we're starting to [indiscernible].

Human nature is what it is, and particularly when sales organize – individuals in sales organizations are not doing the standard job, but taking on greater responsibility and who are holding much more of the value of the relationship between ourselves and the customer in their own hands. And increasingly, human nature says to people that they want to be part of the company itself. And if that doesn't happen, then it tends to lead to dissatisfaction and looking elsewhere.

As I said, we always know that that patent would emerge. It's always been our intention to take this step. It was really when did we believe we could see in the market the evidence that it was right to do it and we believe that points arrived.

[Brian Abrahams, RBC Capital Markets]

That makes a lot of sense. And then just as a follow-up, I'm wondering if you have a clear sense yet on sort of end user adoption at this point, maybe relative to the increasing in stocking orders that you're seeing in September and October.

Just wondering if you have a sense of the yet have the consistency of orders like this that you'll see going forward. And then I guess just as a correlated to that, as you mentioned the timeline, the expectation for cash flow positivity at the end of next year. Just wondering if that reflect any changes at all and your spend patterns – your spend expectation for the launch as well. And I'll hop back in here. Thanks.

[Eddie Gray, Chief Executive Officer]

Okay. So I think what I would say if this is the point of your question, Brian, which is a good question. Is that what we have seen is what we have not been led in purchases by the distributors in the wholesalers. This is a product where the distributors and wholesalers have taken a position of saying. Look we have hepatitis B vaccines in the market currently.

As you convert our and our customers – and our customers tell us that they want to order this, then we will service though – we will order for new service order this. And then we will start to build our own stock in the channel on the basis of results. So this is not a performance which is driven by people stocking the channel. This is a performance which is being driven by institutional customers telling the wholesalers or the distribution – the matching distributors that they all going to use this product and here is the first order.

And on the back of that, the channel is starting to adjust unbilled, sensible stock level. So whilst I don't have hard and fast numbers that says X percentage, I can tell you that X percent of what we sold is now in patients arms. It's very clear that we're not making these sales to stock the channel, the channels being very lean about the product on the full. We do know that this is getting through to customers and customers are putting it in patient's homes.

I think in terms of the spend pattern Michael, you may want to comment in addition, but certainly for the HEPLISAV-B expenditure. We would expect that on a quarterly basis to remain pretty similar. As I said, we expect the sales force decision to be at worst cost neutral. The normal ebbs and flows of manufacturing capacity. We will probably drive any changes more than anything else, but a consistent expectation for episodic emphasis. I think Michael, anything else?

[Michael Ostrach]

Right, I think with respect to what's been refreshing is to realize that available of course the sales and marketing team are continuing to make adjustments. They are not a major adjustments, meaning that we have this estimated how as to cover that the market. So we're very confident that there doesn't need to be any meaningful changes in what we're allocating to the spending for the product and then also actually includes manufacturing.

With respect to the rest of the Company, there will be – I think year-to-year a modest increase in the immuno-oncology and investment, as we move DV281 into an expanded trial, whereas getting early next year and we have plans to add a few more Phase II studies for HEPLISAV or SD-101 during the year as well.

[Brian Abrahams, RBC Capital Markets]

That’s really helpful. Thanks Michael. And thanks Eddie.

[Operator]

Thank you. Our next question comes from Katherine Xu with William Blair. Your line is now open

[Katherine Xu, William Blair & Company, L.L.C.]

Good evening. I have a number of questions, for relationship between the integrated delivery networks and your customers. Can you clarify that a little bit? It also little bit, and also, Eddie when you mentioned you’re talking with a number of retail pharmacies right now, one of them probably close to some kind of deal. Is that sort of targeting the diabetic patients already? And then can you just update us on where the post-marketing study is at this point? And also DV281, the next data point timing on that? That'd be great. Thank you.

[Eddie Gray, Chief Executive Officer]

Okay. The first question, sorry, I was scribbling. The first question was about IDNs and distributors. Well, IDNs generally speaking, employee set number of distributors, so more than older that sort of cultural thing within each IDN. Some have exclusive arrangements with the individual customers.

Part of what we have spoken about in previous quarterly calls has been on the – to ensure that all the electronic connections between all branches of customers, including IDNs and the different delivery options that they have are in place. I have to say so far we're feeling very pleased that that's going well and we're not getting a feedback from our customers about difficulties and when orders are put in deliveries appears to be consistently going to where it should.

I think on the retail pharmacy, yes. Actually, retail pharmacy already captures a part of the traditional market and we are primarily at this point in time talking to them about servicing customers in the traditional markets. We will be ultimately talking to them and we have had some early conversations with some of them who are more proactive about seeking out vaccine opportunities about the desire to reach out to diabetics. I would say that in general, they see that as a very exciting opportunity and see it as a business chance going forward.

In terms of the post-marketing study, it was – got up and running in August, and at the moment, we know that it is recruiting on schedule. We expected recruitment to be about 11 months or so timeframe. And so far [Kaiser] report that is as I say on schedule. The DV281 question was – of update. Yes. Rob, perhaps you could just summarize where we are…

[Robert Janssen, Chief Medical Officer]

Right. So the dose escalation, we're still in the middle of the dose escalation, which should wrap up late this year, early next year. And I would anticipate we'll be reporting data AACR or ASCO.

[Operator]

Thank you. Our next question comes from Joseph Thome with Cowen. Your line is now open.

[Joseph Thome, Cowen and Company, LLC]

Hi there, and thank you for taking my questions. Just a couple first on HEPLISAV. So you have about 400 patients that are through committee approval and other 300 that are having this scheduled. I guess, what proportion of the addressable market do you think this represents? And of those 200 that have purchased, are there some that maybe have chosen not to purchase? Again, if you've experienced this, maybe what is their reasoning?

[Eddie Gray, Chief Executive Officer]

So the number of people who say no to HEPLISAV is remarkably low and I think the rest of it is really the sort of split that we've always indicated exists in the market, which is dependent really upon the culture of the individual customer. Some cultures – some customers have quite high control structures and have a tendency to make a decision in favor of a single results in this case HEPLISAV and convert all of their system actively to HEPLISAV.

All those have more open cultures where they make products available and then it's our role talking to the physicians in the system to understand why HEPLISAV is the best choice for patients and get them to make that choice. So we see both. I think we would say so far that we are very encouraged now.

I don't have percentages I can give you, but I think we're encouraged by the number of customers who are opting to go completely to HEPLISAV and we do see customers who perhaps initially make a decision to make both available then start to realize that actually now they're dealing with one, two dose vaccine and one, three dose vaccine and they'd come back around then to look at it again and say, actually if we're going to make this move, we should make it properly.

So we don't necessarily get the 100% move first time out. But there are customers who've gone down that route who were now showing signs of circling background to take that final step. So I think we're very encouraged by those things that we say. And I think I would just reconfirm that the number of people who feel that they don't have the patient population or this is not the right thing for them are quite remarkably low.

[Joseph Thome, Cowen and Company, LLC]

Great, and then one follow-up on SD-101, you mentioned that you've heard much of the Phase II, III study in first line – frontline had neck cancer. Are there any additional details you can provide around what that study would look like and timing and whatever else you think would be relevant for that?

[Robert Janssen, Chief Medical Officer]

Well, yes, we're looking at – because we're enrolling our 2 milligram cohort right now and looking at – the dose level in head and neck. It'll be some time, probably Q2 with the early. Yes, I would think for beginning net study, potentially even second half of the year with earliest.

End of Q&A

[Eddie Gray, Chief Executive Officer]

Okay. Thanks Rob. And I think – we should probably bring the call to a close. So let me just make a few final remarks if I may. So in the last part of the third quarter, and at the start of the full, we've seen the half of the south, the launch began to gain momentum.

By the end of next year, it will be a net generator of cash and will be well on its way to becoming the standard of care for adult vaccination against hepatitis B. SD-101 is consistently generating, encouraging results in multiple settings that only seem to improve over time.

Later this week, we will present a poster at 60 meeting demonstrating consistent pharmacodynamics and immunological responses to SD-101 in three cancer types, including biomarker data, supporting the higher response rate we've seen the 2 milligram group compared to the 8 milligram group.

We expect to report additional SD-101 clinical results, including in particular results for patients in the 2 milligram groups for head and neck and resistant refractory melanoma studies, as well as follow-up for the melanoma patients naive to anti-PD-1 at major medical meetings next year. On the first safety results, as we've heard from Rob for DVT rates you want all early next year.

Additionally, we're planning SD-101 clinical studies in additional tumors and as a result of being encouraging results so far in patients with head and neck cancer. In a phase II, III study in combination with anti-PD-1 in first line treatments for patients with head and neck cancer.

During the next months, the expansion of our clinical dataset will inform important strategic choices including partnership options, expansion of tumor types, under study, on selection of the best options for progression into registrational studies. Thank you again for joining us.

[Operator]

Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program, and you may all disconnect. Everyone have a great day.