UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September~~June 30, ~~2017~~2023


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission file number: 001-34207

Dynavax Technologies Corporation

(Exact name of registrant as specified in its charter)


Delaware		33-0728374
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

~~2929 Seventh~~2100 Powell Street, Suite ~~100~~720

~~Berkeley,~~ Emeryville, CA ~~94710-2753~~94608

~~(510)~~ (510) 848-5100

(Address, including Zip Code, and telephone number, including area code, of the registrant’s principal executive offices)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class:	Trading symbol(s):	Name of each exchange on which registered:
Common Stock, $0.001 par value	DVAX	Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes☒ No ☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registration was required to submit ~~and post~~ such files). Yes☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

As of ~~November~~August 1, ~~2017,~~2023, the registrant had outstanding ~~60,596,251~~128,797,357 shares of common stock.

~~INDEX~~

INDEX

DYNAVAX TECHNOLOGIES CORPORATION


		Page No.
PART I FINANCIAL INFORMATION
Item 1.	Financial Statements ~~(unaudited)~~(Unaudited)	4
	Condensed Consolidated Balance Sheets as of ~~September~~June 30, ~~2017~~2023 and December 31, ~~2016~~2022	4
	Condensed Consolidated Statements of Operations for the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2023 and ~~2016~~2022	5
	Condensed Consolidated Statements of Comprehensive ~~Loss~~Income (Loss) for the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2023 and ~~2016~~2022	56
	Condensed Consolidated Statements of Stockholders’ Equity for the Three and Six Months Ended June 30, 2023 and 2022	7
	Condensed Consolidated Statements of Cash Flows for the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2023 and ~~2016~~2022	68
	Notes to Unaudited Condensed Consolidated Financial Statements	79
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1824
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	2333
Item 4.	Controls and Procedures	2333
PART II OTHER INFORMATION
Item 1.	Legal Proceedings	2434
Item 1A.	Risk Factors	2534
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3964
Item 5.3.	~~Other Information~~Defaults upon Senior Securities	3964
Item 6.4.	~~Exhibits~~Mine Safety Disclosures	4064
Item 5.	~~SIGNATURES~~Other Information	4264
Item 6.	Exhibits	65
SIGNATURES		67

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are subject to a number of risks and uncertainties. All statements that are not historical facts are forward-looking statements, including statements about the direct and indirect impact of the ongoing COVID-19 global pandemic on our ~~ability to successfully develop, timely achieve regulatory approval for~~business and ~~commercialize HEPLISAV-B™~~operations, including sales of HEPLISAV-B®, our ability to successfully ~~develop~~commercialize HEPLISAV-B, CpG 1018 adjuvant or any future product, our anticipated market opportunity and ~~obtain regulatory approval~~level of sales of HEPLISAV-B and CpG 1018 adjuvant, our ~~early stage product candidates, SD-101 and DV281, and our other early stage compounds,~~ability to manufacture sufficient supply of HEPLISAV-B to meet future demand, our business, collaboration and regulatory strategy, our ~~intellectual property position, our product development efforts, our~~ ability to successfully ~~commercialize~~support the development, manufacture and commercialization of other vaccines containing our ~~product candidates,~~CpG 1018 adjuvant, including ~~HEPLISAV-B,~~any current or potential vaccine or vaccine candidate for COVID-19 that stem from any of our collaborations, our ability to manufacture ~~commercial~~sufficient supply of CpG 1018 adjuvant to meet potential future demand in connection with new vaccines, including COVID-19 vaccines, our ability to advance our other product candidates, such as our Tdap, shingles and plague programs, and to otherwise develop and expand our clinical research pipeline, meet regulatory requirements, ~~the timing of the introduction of our products,~~including post-marketing obligations and commitments, uncertainty regarding our capital needs and future operating results and profitability, anticipated sources of funds, liquidity and cash needs (including our ability to collect on accounts receivables), as well as our plans, objectives, strategies, expectations and intentions. These statements appear throughout this Quarterly Report on Form 10-Q and can be identified by the use of forward-looking language such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “future,” or “intend,” or the negative of these terms or other variations or comparable terminology.

Actual results may vary materially from those in our forward-looking statements as a result of various factors that are identified in “Item 1A—Risk Factors” and “Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this document. No assurance can be given that the risk factors described in this Quarterly Report on Form 10-Q are all of the factors that could cause actual results to vary materially from the forward-looking statements. All forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q. Readers should not place undue reliance on these forward-looking statements and are cautioned that any such forward-looking statements are not guarantees of future performance. We assume no obligation to update any forward-looking statements.

This Quarterly Report on Form 10-Q includes trademarks and registered trademarks of Dynavax Technologies Corporation. Products or service names of other companies mentioned in this Quarterly Report on Form 10-Q may be trademarks or registered trademarks of their respective owners. References herein to “we,” “our,” “us,” “Dynavax” or the “Company” refer to Dynavax Technologies Corporation and its ~~subsidiary.~~subsidiaries.

P~~ART~~

PART I. FINANCIAL INFORMATION

~~ITEM 1.~~

~~FINANCIAL STATEMENTS~~

ITEM 1. FINANCIAL STATEMENTS

Dynavax Technologies Corporation

Condensed Consolidated Balance Sheets

(In thousands, except per share amounts)


	September 30,			December 31,			June 30,			December 31,
	2017			2016			2023			2022
	(unaudited)			(Note 1)			(unaudited)			(Note 1)
Assets
Current assets:
Cash and cash equivalents	$	20,096		$	24,289		$	226,823		$	202,004
Marketable securities available-for-sale		171,584			57,126			454,702			422,391
Accounts and other receivables		783			1,342
Accounts receivables, net of allowance for doubtful accounts of $12,313 and $0 at June 30, 2023 and December 31, 2022, respectively								43,245			145,130
Other receivables								2,108			2,385
Inventories								53,088			59,446
Prepaid expenses and other current assets		4,633			6,842			17,494			85,629
Total current assets		197,096			89,599			797,460			916,985
Property and equipment, net		16,622			17,174			37,442			37,596
Operating lease right-of-use assets								25,366			25,745
Goodwill		2,213			1,971			2,039			2,006
Restricted cash	626			602				210			207
Other assets		1,270		334				73,915			3,311
Total assets	$	217,827		$	109,680		$	936,432		$	985,850
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	2,243		$	3,796		$	3,246		$	3,211
Accrued research and development		3,079			5,048			3,594			4,775
CEPI accrual (Note 6)								-			107,738
Accrued liabilities		7,567			11,192			33,872			30,719
Other current liabilities								4,150			3,631
Total current liabilities		12,889			20,036			44,862			150,074
Convertible Notes, net of debt discount of $3,366 and $3,922 at June 30, 2023 and December 31, 2022, respectively (Note 7)								222,134			221,578
Long-term portion of lease liabilities								31,545			32,801
CEPI accrual long-term (Note 6)								60,337			-
Other long-term liabilities	504			443				349			384
Total liabilities		13,393			20,479			359,227			404,837
Commitments and contingencies (Note 4)
Commitments and contingencies (Note 5)
Stockholders’ equity:
Preferred stock: $0.001 par value; 5,000 shares authorized at September 30, 2017 and December 31, 2016; no shares issued and outstanding at September 30, 2017 and December 31, 2016		-			-
Common stock: $0.001 par value; 139,000 and 69,500 shares authorized at September 30, 2017 and December 31, 2016, respectively; 60,587 and 38,599 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively	61			39
Preferred stock: $0.001 par value; 5,000 shares authorized at June 30, 2023 and December 31, 2022; zero shares outstanding at June 30, 2023 and December 31, 2022, respectively								-			-
Common stock: $0.001 par value; 278,000 shares authorized at June 30, 2023 and December 31, 2022; 128,779 shares and 127,604 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively								129			128
Additional paid-in capital		1,085,433			904,957			1,527,544			1,510,518
Accumulated other comprehensive loss		(1,156	)		(3,624	)		(5,372	)		(5,438	)
Accumulated deficit		(879,904	)		(812,171	)		(945,096	)		(924,195	)
Total stockholders’ equity		204,434			89,201			577,205			581,013
Total liabilities and stockholders’ equity	$	217,827		$	109,680		$	936,432		$	985,850

See accompanying notes.

Dynavax Technologies Corporation

Condensed Consolidated Statements of Operations

(In thousands, except per share amounts)

(Unaudited)

Three Months Ended September 30,

Nine Months Ended September 30,

2017

2016

2017

2016

Revenues:

Collaboration revenue
$
-

$
-

$
-

$
2,578

Grant revenue

53

162

306

289

Service and license revenue

-

-

-

884

Total revenues

53

162

306

3,751

Operating expenses:

Research and development

16,417

23,234

47,576

66,051

General and administrative

6,027

11,766

18,111

29,086

Restructuring

-

-

2,783

-

Total operating expenses

22,444

35,000

68,470

95,137

Loss from operations

(22,391
)

(34,838
)

(68,164
)

(91,386
)
Other income (expense):

Interest income

429

170

809

615

Other (expense) income, net

(166
)

(26
)

(378
)

68

Net loss
$
(22,128
)

$
(34,694
)

$
(67,733
)

$
(90,703
)
Basic and diluted net loss per share
$
(0.38
)

$
(0.90
)

$
(1.36
)

$
(2.36
)
Weighted average shares used to compute basic and diluted net loss
per share

57,650

38,512

49,785

38,493


	Three Months Ended June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
Revenues:
Product revenue, net	$	56,440		$	255,320		$	99,891		$	367,647
Other revenue		3,809			1,144			7,283			2,809
Total revenues		60,249			256,464			107,174			370,456
Operating expenses:
Cost of sales - product		13,537			83,369			28,249			123,331
Research and development		13,046			9,689			26,651			20,784
Selling, general and administrative		37,071			36,179			73,614			68,351
Gain on sale of assets (Note 5)		-			(1,000	)		-			(1,000	)
Bad debt expense		-			-			12,313			-
Total operating expenses		63,654			128,237			140,827			211,466
(Loss) income from operations		(3,405	)		128,227			(33,653	)		158,990
Other income (expense):
Interest income		7,378			765			13,975			1,026
Interest expense		(1,688	)		(1,683	)		(3,374	)		(3,363	)
Sublease income		1,993			2,025			3,591			3,634
Change in fair value of warrant liability (Note 10)		-			-			-			1,801
Other		(71	)		40			(48	)		145
Net income (loss) before income taxes		4,207			129,374			(19,509	)		162,233
Provision for income taxes		(776	)		(619	)		(1,392	)		(619	)
Net income (loss)	$	3,431		$	128,755		$	(20,901	)	$	161,614
Net income (loss) per share attributable to common stockholders:
Basic	$	0.03		$	1.02		$	(0.16	)	$	1.29
Diluted	$	0.03		$	0.87		$	(0.16	)	$	1.08
Weighted-average shares used in computing net income (loss) per share attributable to common stockholders:
Basic		128,625			126,347			128,275			125,456
Diluted		152,142			149,905			128,275			149,821

See accompanying notes.

~~Dynavax Technologies Corporation~~

Condensed Consolidated Statements of Comprehensive ~~Loss~~(Loss) Income

(In thousands)

(Unaudited)

Three Months Ended September 30,

Nine Months Ended September 30,

2017

2016

2017

2016

Net loss
$
(22,128
)

$
(34,694
)

$
(67,733
)

$
(90,703
)
Other comprehensive income:

Unrealized gain (loss) on marketable securities
available-for-sale

14

(61
)

(31
)

7

Cumulative foreign currency translation adjustments

759

208

2,499

511

Total other comprehensive income

773

147

2,468

518

Total comprehensive loss
$
(21,355
)

$
(34,547
)

$
(65,265
)

$
(90,185
)


	Three Months Ended June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
Net income (loss)	$	3,431		$	128,755		$	(20,901	)	$	161,614
Other comprehensive income (loss), net of tax:
Change in unrealized loss on marketable securities available- for-sale		(1,197	)		(629	)		(531	)		(1,901	)
Cumulative foreign currency translation adjustments		25			(1,768	)		597			(2,393	)
Total other comprehensive (loss) income		(1,172	)		(2,397	)		66			(4,294	)
Total comprehensive income (loss)	$	2,259		$	126,358		$	(20,835	)	$	157,320

See accompanying notes.

Dynavax Technologies Corporation

Condensed Consolidated Statements of Stockholders’ Equity

(In thousands)

(Unaudited)


	Common Stock				Preferred Stock				Additional Paid-In			Accumulated Other Comprehensive			Accumulated			Total Stockholders'
Three Months Ended June 30, 2023	Shares		Par Amount		Shares		Par Amount		Capital			(Loss)			Deficit			Equity
Balances at March 31, 2023		128,472	$	128		-	$	-	$	1,516,331		$	(4,200	)	$	(948,527	)	$	563,732
Issuance of common stock upon exercise of stock options		203		-		-		-		1,378			-			-			1,378
Issuance of common stock upon release of restricted stock awards, net of statutory tax withholdings		104		1		-		-		(727	)		-			-			(726	)
Stock compensation expense		-		-		-		-		10,562			-			-			10,562
Total other comprehensive loss		-		-		-		-		-			(1,172	)		-			(1,172	)
Net income		-		-		-		-		-			-			3,431			3,431
Balances at June 30, 2023		128,779	$	129		-	$	-	$	1,527,544		$	(5,372	)	$	(945,096	)	$	577,205

Six Months Ended June 30, 2023
Balances at December 31, 2022		127,604	$	128		-	$	-	$	1,510,518		$	(5,438	)	$	(924,195	)	$	581,013
Issuance of common stock upon exercise of stock options		244		-		-		-		1,617			-			-			1,617
Issuance of common stock upon release of restricted stock awards, net of statutory tax withholdings		850		1		-		-		(5,964	)		-			-			(5,963	)
Issuance of common stock under Employee Stock Purchase Plan		81		-		-		-		777			-			-			777
Stock compensation expense		-		-		-		-		20,596			-			-			20,596
Total other comprehensive income		-		-		-		-		-			66			-			66
Net loss		-		-		-		-		-			-			(20,901	)		(20,901	)
Balances at June 30, 2023		128,779	$	129		-	$	-	$	1,527,544		$	(5,372	)	$	(945,096	)	$	577,205

	Common Stock				Preferred Stock				Additional Paid-In			Accumulated Other Comprehensive			Accumulated			Total Stockholders'
Three Months Ended June 30, 2022	Shares		Par Amount		Shares		Par Amount		Capital			(Loss)			Deficit			Equity
Balances at March 31, 2022		126,297	$	126		-	$	-	$	1,476,013		$	(4,163	)	$	(1,184,492	)	$	287,484
Issuance of common stock upon exercise of stock options		132		-		-		-		1,028			-			-			1,028
Issuance of common stock upon release of restricted stock awards		10		-		-		-		-			-			-			-
Stock compensation expense		-		-		-		-		7,929			-			-			7,929
Total other comprehensive loss		-		-		-		-		-			(2,397	)		-			(2,397	)
Net income		-		-		-		-		-			-			128,755			128,755
Balances at June 30, 2022		126,439	$	126		-	$	-	$	1,484,970		$	(6,560	)	$	(1,055,737	)	$	422,799

Six Months Ended June 30, 2022
Balances at December 31, 2021		122,945	$	123		-	$	-	$	1,441,868		$	(2,266	)	$	(1,217,351	)	$	222,374
Issuance of common stock upon exercise of warrants		1,879		2		-		-		24,668			-			-			24,670
Issuance of common stock upon exercise of stock options		287		-		-		-		2,150			-			-			2,150
Issuance of common stock upon release of restricted stock awards		1,246		1		-		-		(1	)		-			-			-
Issuance of common stock under Employee Stock Purchase Plan		82		-		-		-		710			-			-			710
Stock compensation expense		-		-		-		-		15,575			-			-			15,575
Total other comprehensive loss		-		-		-		-		-			(4,294	)		-			(4,294	)
Net income		-		-		-		-		-			-			161,614			161,614
Balances at June 30, 2022		126,439	$	126		-	$	-	$	1,484,970		$	(6,560	)	$	(1,055,737	)	$	422,799

See accompanying notes.

Dynavax Technologies Corporation

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

Nine Months Ended September 30,

2017

2016

Operating activities

Net loss
$
(67,733
)

$
(90,703
)
Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization

2,456

1,574

Gain on disposal of property and equipment

(32
)

-

Accretion of discounts and amortization of premiums on marketable securities

(104
)

155

Reversal of deferred rent upon lease amendment

(209
)

-

Cash-settled portion of stock-based compensation expense

-

602

Stock compensation expense

10,844

10,030

Changes in operating assets and liabilities:

Accounts and other receivables

559

(896
)
Prepaid expenses and other current assets

(1,841
)

804

Other assets

(936
)

(99
)
Accounts payable

(1,499
)

704

Accrued liabilities and other long term liabilities

(1,274
)

(286
)
Deferred revenues

-

(2,654
)
Net cash used in operating activities

(59,769
)

(80,769
)
Investing activities

Purchases of marketable securities

(192,684
)

(122,027
)
Proceeds from maturities of marketable securities

78,298

186,670

Purchases of property and equipment, net

(374
)

(6,516
)
Net cash (used in) provided by investing activities

(114,760
)

58,127

Financing activities

Proceeds from issuance of common stock, net

169,187

-

Proceeds from exercise of stock options and restricted stock awards, net

285

131

Proceeds from Employee Stock Purchase Plan

292

616

Net cash provided by financing activities

169,764

747

Effect of exchange rate changes on cash and cash equivalents

572

104

Net decrease in cash and cash equivalents

(4,193
)

(21,791
)
Cash and cash equivalents at beginning of period

24,289

44,812

Cash and cash equivalents at end of period
$
20,096

$
23,021

Supplemental disclosure of cash flow information

Accrual for litigation settlement and insurance recovery (Note 4)
$
-

$
4,050

Release of accrual for litigation settlement and insurance recovery (Note 4)
$
4,050

$
-

Non-cash investing and financing activities:

Disposal of fully depreciated property and equipment
$
-

$
1,160

Net change in unrealized (loss) gain on marketable securities
$
(31
)

$
7

Common stock issuance costs - cash not paid as of period end
$
110

$
-


	Six Months Ended June 30,
	2023			2022
Operating activities
Net (loss) income	$	(20,901	)	$	161,614
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:
Depreciation and amortization		2,113			2,085
Amortization of right-of-use assets and loss on disposal of property and equipment		1,335			1,644
Accretion of discounts on marketable securities		(7,263	)		(498	)
Change in fair value of warrant liability (Note 10)		-			(1,801	)
Stock-based compensation expense		20,596			15,575
Bad debt expense (Note 6)		12,313			-
Non-cash interest expense		556			540
Gain on sale of assets (Note 5)		-			(1,000	)
Changes in operating assets and liabilities:
Accounts and other receivables, net		42,448			(42,426	)
Inventories		6,358			(12,644	)
Prepaid manufacturing		-			105,178
Prepaid expenses and other current assets		(3,172	)		(60,774	)
Other assets		703			35
Accounts payable		(151	)		2,319
CEPI accrual (Note 6)		-			(21,478	)
Lease liabilities		(1,679	)		(1,678	)
Deferred revenue		-			(157,866	)
Accrued liabilities and other liabilities		2,412			(22,617	)
Net cash provided by (used in) operating activities		55,668			(33,792	)
Investing activities
Purchases of marketable securities		(259,531	)		(313,660	)
Proceeds from maturities of marketable securities		233,953			152,950
Purchases of property and equipment, net		(2,034	)		(4,271	)
Proceeds from sale of assets		-			1,000
Net cash used in investing activities		(27,612	)		(163,981	)
Financing activities
Proceeds from warrants exercises		-			8,455
Proceeds from exercise of stock options and/or release of restricted stock awards, net		1,617			2,150
Proceeds from Employee Stock Purchase Plan		777			710
Payments for taxes related to net share settlement of RSUs		(5,778	)		-
Net cash (used in) provided by financing activities		(3,384	)		11,315
Effect of exchange rate changes on cash and cash equivalents, and restricted cash		150			(657	)
Net increase (decrease) in cash and cash equivalents, and restricted cash		24,822			(187,115	)
Cash and cash equivalents, and restricted cash at beginning of period		202,211			436,408
Cash and cash equivalents, and restricted cash at end of period	$	227,033		$	249,293
Supplemental disclosure of cash flow information
Cash paid during the period for income taxes	$	710		$	509
Cash paid during the period for interest	$	2,819		$	2,819
Reclassification of contract asset from other current assets to other assets	$	71,307		$	-
Reclassification of CEPI accrual to CEPI accrual long-term	$	(60,337	)	$	-
Advance Payments forgiven per CEPI-Bio E Assignment Agreement (Note 6)	$	(47,401	)	$	-
Non-cash investing and financing activities:
Purchases of property and equipment, not yet paid	$	540		$	1,214
Right-of-use assets obtained in exchange of operating lease liabilities	$	901		$	1,767

See accompanying notes.

Dynavax Technologies Corporation

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Organization ~~and Summary of Significant Accounting Policies~~

Dynavax Technologies Corporation (“we,” “our,” “us,” “Dynavax” or the “Company”), is a ~~clinical-stage immunotherapy~~commercial stage biopharmaceutical company focused on developing and commercializing innovative vaccines in areas of significant unmet need, leveraging our demonstrated expertise and capabilities in vaccines and our proven, proprietary vaccine adjuvant technology. Our first marketed product, HEPLISAV-B® [Hepatitis B Vaccine (Recombinant), Adjuvanted] is approved in the ~~power of~~United States, the ~~body’s innate~~European Union and ~~adaptive immune response through toll-like receptor (“TLR”) stimulation. Our current product candidates are being investigated for use in multiple cancer indications, as a vaccine~~Great Britain for the prevention of infection caused by all known subtypes of hepatitis B virus in adults aged 18 years and asolder. In May 2022, we commenced commercial shipments of HEPLISAV-B in Germany. We also manufacture and sell CpG 1018®, the adjuvant used in HEPLISAV-B, and have established a ~~disease modifying therapy~~portfolio of global commercial supply agreements in the development of COVID-19 vaccines across a variety of vaccine platforms utilizing CpG 1018 adjuvant. As of June 30, 2023, we have satisfied all delivery obligations under these global commercial supply agreements.

We are also 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 for ~~asthma. We were incorporated~~Tdap and shingles, and a Phase 2 clinical trial for plague in ~~California~~collaboration with and fully funded by the U.S. Department of Defense ("DoD"). Additionally, we are working to advance product candidates utilizing our CpG 1018 adjuvant through discovery efforts and through preclinical and clinical collaborations with third-party research organizations, including an ongoing collaboration with the Icahn School of Medicine at Mount Sinai investigating universal and seasonal influenza vaccine candidates and Queensland Institute of Medical Research, testing poly T cell epitope proteins with other antigens in ~~August 1996 under the name Double Helix Corporation, and we changed our name to Dynavax Technologies Corporation in September 1996. We reincorporated in Delaware in 2000.~~preclinical models.

Basis of Presentation

Our accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and pursuant to the instructions to Form 10-Q and Article 10 of Regulation S-X. In our opinion, these unaudited condensed consolidated financial statements include all adjustments, consisting of normal recurring adjustments, which we consider necessary to present fairly our financial position and the results of our operations and cash flows. As permitted under those rules, certain footnotes or other financial information that are normally required by GAAP have been condensed or omitted. Interim-period results are not necessarily indicative of results of operations or cash flows to be expected for a full-year period or any other interim-period.

The condensed consolidated balance sheet atas of December 31, ~~2016~~2022 has been derived from audited financial statements at that date, but excludes some disclosures required by GAAP for complete financial statements.

The unaudited condensed consolidated financial statements and these notes should be read in conjunction with the audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, ~~2016,~~2022, as filed with the Securities and Exchange Commission (the “SEC”).

The unaudited condensed consolidated financial statements include the accounts of Dynavax and our wholly-owned ~~subsidiary,~~subsidiaries, Dynavax ~~GmbH.~~GmbH, located in Düsseldorf, Germany, Dynavax India LLP, located in India, and a branch of Dynavax registered in Italy. All significant intercompany accounts and transactions among these entities have been eliminated from the unaudited condensed consolidated financial statements. We operate in one business segment: ~~the~~ discovery, ~~and development of biopharmaceutical products.~~

~~Liquidity and Financial Condition~~

~~As of September 30, 2017, we had cash, cash equivalents and marketable securities of~~ ~~$191.7 million. During the nine months ended September 30, 2017, we received approximately $169 million in net proceeds from our underwritten public offering in August 2017 and an~~ ~~At Market Issuance Sales Agreement (the “2015 ATM Agreement”) and we used $59.8 million of cash in operating activities.~~

~~We have incurred significant operating losses and negative cash flows from operations since our inception. We expect spending to increase in connection with the~~ development and ~~manufacturing of our product candidates, particularly SD-101 and DV281, our lead investigational cancer immunotherapeutic product candidates, and to support~~ commercialization of HEPLISAV-B, if it is approved by the U.S. Food and Drug Administration (“FDA”), as well as human clinical trials for our other product candidates and additional applications and advancement of our technology. In order to continue these activities, we will need additional funding. This may occur through strategic alliance and licensing arrangements and/or future public or private debt and equity financings. Sufficient funding may not be available, or if available, may be on terms that significantly dilute or otherwise adversely affect the rights of existing stockholders. If adequate funds are not available in the future, we may need to delay, reduce the scope of or put on hold one or more development programs while we seek strategic alternatives, which could have an adverse impact on our ability to achieve our intended business objectives.novel vaccines.

Our ability to raise additional capital in the equity and debt markets is dependent on a number of factors, including, but not limited to, the market demand for our common stock, which itself is subject to a number of development and business risks and uncertainties, as well as the uncertainty that we would be able to raise such additional capital at a price or on terms that are favorable to us.

Use of Estimates

The preparation of unaudited condensed consolidated financial statements in conformity with GAAP requires management to make informed estimates and assumptions that may affect the amounts reported in the unaudited condensed consolidated financial statements and accompanying ~~notes.~~notes, including amounts of revenues and expenses during the reported periods. Management’s estimates are based on historical information available as of the date of the unaudited condensed consolidated financial statements and various other assumptions we believe are reasonable under the circumstances. On an ongoing basis, we evaluate our estimates, judgments and methodologies. Significant estimates and assumptions in the unaudited condensed consolidated financial statements include those related to revenue recognition; accounts receivable; useful lives of long-lived assets; valuation procedures for right-of-use assets and operating lease liabilities; valuation of inventory; research and development expenses; contingencies and share-based compensation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results ~~could~~may differ materially from these ~~estimates.~~

~~Summary of Significant Accounting Policies~~

~~There have been no material changes~~estimates under different assumptions or conditions. Changes in ~~our significant accounting policies during the nine months ended September 30, 2017, as compared with those disclosed~~estimates are reflected in ~~our Annual Report on Form 10-K for the year ended December 31, 2016.~~

~~Revenue Recognition~~

Our revenues consist of amounts earned from collaborations, grants and fees from services and licenses. We enter into license and manufacturing agreements and collaborative research and development arrangements with pharmaceutical and biotechnology partners that may involve multiple deliverables. Our arrangements may include one or more of the following elements: upfront license payments, cost reimbursement for the performance of research and development activities, milestone payments, other contingent payments, contract manufacturing service fees, royalties and license fees. Each deliverable in the arrangement is evaluated to determine whether it meets the criteria to be accounted for as a separate unit of accounting or whether it should be combined with other deliverables. In order to account for the multiple-element arrangements, we identify the deliverables included within the arrangement and evaluate which deliverables represent separate units of accounting. Analyzing the arrangement to identify deliverables requires the use of judgment, and each deliverable may be an obligation to deliver services, a right or license to use an asset, or another performance obligation. We recognize revenue when there is persuasive evidence that an arrangement exists, delivery has occurred or services have been rendered, the price is fixed or determinable and collectability is reasonably assured.

Non-refundable upfront fees received for license and collaborative agreements and other payments under collaboration agreements where we have continuing performance obligations related to the payments are deferred and recognized over our estimated performance period. Revenue is recognized on a ratable basis, unless we determine that another method is more appropriate, through the date at which our performance obligations are completed. Management makes its best estimate of the period over which we expect to fulfill our performance obligations, which may include clinical development activities. Given the uncertainties of research and development collaborations, significant judgment is required to determine the duration of the performance period. We recognize revenues for costs that are reimbursed under collaborative agreements as the related research and development costs are incurred.

~~Contingent consideration received for the achievement of a substantive milestone is recognized in its entirety~~reported results in the period in which the milestone is achieved. A milestone is defined as an event having all of the following characteristics: (i) there is substantive uncertainty at the date the arrangement is entered into that the event will be achieved, (ii) the event can only be achieved based in whole or in part on either the entity’s performance or a specific outcome resulting from the entity’s performance and (iii) if achieved, the event would result in additional payments being due to the entity.they become known.

Our license and collaboration agreements with our partners provide for payments to be paid to us upon the achievement of milestones. Given the challenges inherent in developing biologic products, there is substantial uncertainty whether any such milestones will be achieved at the time we entered into these agreements. In addition, we evaluate whether milestones meet the criteria to be considered substantive. The conditions include: (i) work is contingent on either of the following: (a) the vendor’s performance to achieve the milestone or (b) the enhancement of the value of the deliverable item or items as a result of a specific outcome resulting from the vendor’s performance to achieve the milestone; (ii) it relates solely to past performance and (iii) it is reasonable relative to all the deliverable and payment terms within the arrangement. As a result of our analysis, we may consider our development milestones to be substantive. Milestone payments that are contingent upon the achievement of substantive at-risk performance criteria are recognized in full upon achievement of those milestone events in accordance with the terms of the agreement. All revenue recognized to date under our collaborative agreements has been nonrefundable.

Our license and collaboration agreements with certain partners also provide for contingent payments based solely upon the performance of our partner. We expect to recognize the contingent payments as revenue upon receipt, provided that all other revenue recognition criteria have been satisfied.

~~Revenues from manufacturing services are recognized upon meeting the criteria for substantial performance and acceptance by the customer.~~

~~Revenue from royalty payments is contingent on future sales activities by our licensees. Royalty revenue is recognized when all revenue recognition criteria have been satisfied.~~

~~Revenue from government and private agency grants is recognized as the related research expenses are incurred and to the extent that funding is approved.~~

~~Research and Development Expenses and Accruals~~

Research and development expenses include personnel and facility-related expenses, outside contracted services including clinical trial costs, manufacturing and process development costs, research costs and other consulting services and non-cash stock-based compensation. Research and development costs are expensed as incurred. Amounts due under contracts with third parties may be either fixed fee or fee for service, and may include upfront payments, monthly payments and payments upon the completion of milestones or receipt of deliverables. Non-refundable advance payments under agreements are capitalized and expensed as the related goods are delivered or services are performed.

We contract with third parties to perform various clinical trial activities in the on-going development of potential products. The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows to our vendors. Payments under the contracts depend on factors such as the achievement of certain events, successful enrollment of patients, and completion of portions of the clinical trial or similar conditions. Our accrual for clinical trials is based on estimates of the services received and efforts expended pursuant to contracts with clinical trial centers and clinical research organizations. We may terminate these contracts upon written notice and we are generally only liable for actual effort expended by the organizations to the date of termination, although in certain instances we may be further responsible for termination fees and penalties. We estimate our research and development expenses and the related accrual as of each balance sheet date based on the facts and circumstances known to us at that time. ~~There have been no material adjustments to the prior period accrued estimates for clinical trial activities through September 30, 2017.~~

~~Restructuring~~

Restructuring costs are comprised of severance costs related to workforce reductions. We recognize restructuring charges when the liability is incurred. Employee termination benefits are accrued at the date management has committed to a plan of termination and employees have been notified of their termination dates and expected severance payments.

Recent Accounting Pronouncements

Accounting Standards Update ~~2014-09~~2016-13

In ~~May 2014,~~June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses of Financial Instruments, which was codified in Accounting Standards Codification (“ASC”) ~~606, Revenue Recognition, Revenue from Contracts with Customers, which amends~~326, Financial Instruments — Credit Losses (“ASC 326"). The standard changes the ~~guidance in former~~methodology for measuring credit losses on financial instruments and the timing of when such losses are recorded. Because we were a smaller reporting company based on the most recent determination as of November 15, 2019, ASC ~~605, Revenue Recognition,~~ ~~which providesa single comprehensivemodelforentitiesto use in accountingforrevenuearisingfromcontractswith customersand will supersedemostcurrentrevenuerecognitionguidance.In July 2015, the FASB deferred the~~326 became effective ~~date~~ for ~~annual reporting periods~~us for fiscal years beginning after December 15, ~~2017 (including interim periods within those periods), with early application permitted. Accordingly,~~2022. As such, we adopted ASC 326 effective January 1, 2023, utilizing the modified retrospective transition method. Upon adoption, we updated ~~standard~~our impairment model to utilize a forward-looking current expected credit losses (“CECL”) model in place of the incurred loss methodology for financial instruments measured at amortized cost, primarily including our accounts receivable and contract asset. In relation to available-for-sale (“AFS") debt securities, the guidance eliminates the concept of “other-than-temporary” impairment, and instead focuses on determining whether any impairment is ~~effective for the Company in the first fiscal quarter~~a result of ~~2018.~~a credit loss or other factors. The FASB issued supplemental adoption guidance and clarification to Accounting Standards Update (“ASU”) 2014-09 in March 2016, April 2016 and May 2016 within ASU 2016-08 "Revenue From Contracts With Customers: Principal vs. Agent Considerations," ASU 2016-10 "Revenue From Contracts with Customers: Identifying Performance Obligations and Licensing," and ASU 2016-12 "Revenue from Contracts with Customers: Narrow-Scope Improvements and Practical Expedients," respectively. ~~We anticipate~~ adoption of ASC ~~606 using the modified retrospective method~~ ~~on January 1, 2018. Based on preliminary assessment, the adoption of this guidance is~~326 did not expected to materially impact the Company’s revenue recognition as there are currently no collaboration agreements where we have significant performance obligations. We will reevaluate the impact of this guidance as we enter into new revenue arrangements and will continue to review variable consideration, potential disclosures, and the method of adoption in order to complete the evaluation of the impact on the consolidated financial statements. In addition, we will continue to monitor additional changes, modifications, clarifications or interpretations undertaken by the FASB, which may impact the current conclusions.

~~Accounting Standards Update 2016-02~~

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The ASU requires companies to recognize lease right-of-use assets and lease liabilities by lessees for all operating leases with lease terms greater than 12 months. The ASU is effective for annual periods beginning after December 15, 2018 and interim periods therein on a modified retrospective basis, and will be effective for us starting in the first quarter of fiscal 2019 with early adoption permitted. We are currently evaluating the impact this guidance will have on our consolidated financial statements and believe the adoption will modify our analyses and disclosures of lease agreements considering operating leases are a significant portion of the Company’s total lease commitments.

~~Accounting Standards Update 2016-18~~

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of the FASB Emerging Issues Task Force). This ASU requires that the reconciliation of the beginning-of-period and end-of-period amounts shown in the statement of cash flows include cash, cash equivalents and amounts generally described as restricted cash or restricted cash equivalents. The ASU is effective for annual periods beginning after December 15, 2018 with early adoption permitted. The adoption of this standard is not expected to have a material impact on our unaudited condensed consolidated financial ~~statements.~~

~~Accounting Standards Update 2017-04~~

~~In January 2017,~~statements as of the FASB issued ASU 2017-04, Intangibles – Goodwill and other (Topic 350), which simplifies the test for goodwill impairment by eliminating a previous requirement to calculate the implied fair value of goodwill to measure a goodwill impairment charge. We will adopt the standard effective January 1, 2020. The adoption ~~is not expected to have a material impact on our consolidated financial statements.~~date.

~~Accounting Standards Update 2017-09~~

In May 2017, the FASB issued ASU 2017-09, Compensation – Stock Compensation (Topic 718): Scope of Modification Accounting. The ASU provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. The ASU is effective for annual periods beginning after December 15, 2017 with early adoption permitted. The adoption of this standard is not expected to have a material impact on our consolidated financial statements.

2. Fair Value Measurements

We measure fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The accounting standard describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value which are the following:

•

Level 1—Observable inputs, such as quoted prices in active markets for identical assets or liabilities;

•

Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and

•

Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities; therefore, requiring an entity to develop its own valuation techniques and assumptions.

Assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurements. We review the fair value hierarchy classification on a quarterly basis. Changes in the ability to observe valuation inputs may result in a reclassification of levels for certain assets or liabilities within the fair value hierarchy. There were no transfers between Level 1, 2 and 3 during each of the three and six months ended June 30, 2023.

The carrying amounts of cash equivalents, accounts and other receivables, accounts payable and accrued liabilities are considered reasonable estimates of their respective fair value because of their short-term nature.

Recurring Fair Value Measurements

The following table represents the fair value hierarchy for our financial assets (cash equivalents and marketable securities) measured at fair value on a recurring basis (in thousands):

	Level 1		Level 2		Level 3		Total
September 30, 2017
									Level 1		Level 2		Level 3		Total
June 30, 2023
Assets
Money market funds	$	14,124	$	-	$	-	$	14,124	$	152,296	$	-	$	-	$	152,296
U.S. Treasuries		-		33,649		-		33,649
U.S. treasuries										-		20,357		-		20,357
U.S. government agency securities		-		95,731		-		95,731		-		172,791		-		172,791
Corporate debt securities		-		45,204		-		45,204		-		261,554		-		261,554
Total	$	14,124	$	174,584	$	-	$	188,708
Total assets									$	152,296	$	454,702	$	-	$	606,998

	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
December 31, 2016
December 31, 2022
Assets
Money market funds	$	18,981	$	-	$	-	$	18,981	$	172,418	$	-	$	-	$	172,418
U.S. Treasuries		-		3,499		-		3,499
U.S. treasuries										-		42,308		-		42,308
U.S. government agency securities		-		30,437		-		30,437		-		88,032		-		88,032
Corporate debt securities		-		24,941		-		24,941		-		292,051		-		292,051
Total	$	18,981	$	58,877	$	-	$	77,858
Total assets									$	172,418	$	422,391	$	-	$	594,809

Money market funds are highly liquid investments and are actively traded. The pricing information on these investment instruments is readily available and can be independently validated as of the measurement date. This approach results in the classification of these securities as Level 1 of the fair value hierarchy.

U.S. ~~Treasuries,~~treasuries, U.S. ~~Government~~government agency securities and corporate debt securities are measured at fair value using Level 2 inputs. We review trading activity and pricing for these investments as of each measurement date. When sufficient quoted pricing for identical securities is not available, we use market pricing and other observable market inputs for similar securities obtained from various ~~third party~~third-party data providers. These inputs represent quoted prices for similar assets in active markets or these inputs have been derived from observable market data. This approach results in the classification of these securities as Level 2 of the fair value hierarchy.

~~There were no transfers between Level 1~~3. Cash and ~~Level 2 during the nine months ended September 30, 2017.~~Cash Equivalents, Restricted Cash and Marketable Securities

~~3. Cash,~~The following table provides a reconciliation of cash and cash equivalents, and ~~marketable securities~~restricted cash reported within the condensed consolidated balance sheets that sum to the total of the same amounts shown in the condensed consolidated statements of cash flows (in thousands):


	June 30, 2023		December 31, 2022		June 30, 2022		December 31, 2021
Cash and cash equivalents	$	226,823	$	202,004	$	249,091	$	436,189
Restricted cash		210		207		202		219
Total cash and cash equivalents, and restricted cash shown in the condensed consolidated statements of cash flows	$	227,033	$	202,211	$	249,293	$	436,408

Restricted cash balances relate to certificates of deposit issued as collateral to certain letters of credit issued as security to our facility leases (see Note 5).

Cash and cash equivalents and marketable securities consist of the following (in thousands):


	Amortized Cost		Unrealized Gains		Unrealized Losses			Estimated Fair Value
June 30, 2023
Cash and cash equivalents:
Cash	$	74,527	$	-	$	-		$	74,527
Money market funds		152,296		-		-			152,296
Total cash and cash equivalents		226,823		-		-			226,823
Marketable securities available-for-sale:
U.S. treasuries		20,512		-		(155	)		20,357
U.S. government agency securities		174,012		-		(1,221	)		172,791
Corporate debt securities		262,114		6		(566	)		261,554
Total marketable securities available-for-sale		456,638		6		(1,942	)		454,702
Total cash and cash equivalents, and marketable securities	$	683,461	$	6	$	(1,942	)	$	681,525
December 31, 2022
Cash and cash equivalents:
Cash	$	29,586	$	-	$	-		$	29,586
Money market funds		172,418		-		-			172,418
Total cash and cash equivalents		202,004		-		-			202,004
Marketable securities available-for-sale:
U.S. treasuries		42,502		-		(194	)		42,308
U.S. government agency securities		88,429		-		(397	)		88,032
Corporate debt securities		292,865		12		(826	)		292,051
Total marketable securities available-for-sale		423,796		12		(1,417	)		422,391
Total cash and cash equivalents, and marketable securities	$	625,800	$	12	$	(1,417	)	$	624,395

Amortized Cost

Unrealized Gains

Unrealized Losses

Estimated Fair Value

September 30, 2017

Cash and cash equivalents:

Cash
$
2,972

$
-

$
-

$
2,972

Money market funds

14,124

-

-

14,124

Corporate debt securities

3,000

-

-

3,000

Total cash and cash equivalents

20,096

-

-

20,096

Marketable securities available-for-sale:

U.S. Treasuries

33,664

-

(15
)

33,649

U.S. government agency securities

95,748

-

(17
)

95,731

Corporate debt securities

42,200

4

-

42,204

Total marketable securities available-for-sale

171,612

4

(32
)

171,584

Total cash, cash equivalents and marketable securities
$
191,708

$
4

$
(32
)

$
191,680

December 31, 2016

Cash and cash equivalents:

Cash
$
3,557

$
-

$
-

$
3,557

Money market funds

18,981

-

-

18,981

U.S. government agency securities

1,751

-

-

1,751

Total cash and cash equivalents

24,289

-

-

24,289

Marketable securities available-for-sale:

U.S. Treasuries

3,499

-

-

3,499

U.S. government agency securities

28,685

3

(2
)

28,686

Corporate debt securities

24,938

5

(2
)

24,941

Total marketable securities available-for-sale

57,122

8

(4
)

57,126

Total cash, cash equivalents and marketable securities
$
81,411

$
8

$
(4
)

$
81,415

The maturities of our marketable securities available-for-sale are as follows (in thousands):


	September 30, 2017				June 30, 2023
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Mature in one year or less	$	171,612	$	171,584	$	399,173	$	397,890
Mature after one year through two years		-		-		57,465		56,812
	$	171,612	$	171,584	$	456,638	$	454,702

~~There were no realized gains or losses from the sale of marketable securities during the nine months ended September 30, 2017 and 2016.~~

We have classified our entire investment portfolio as available-for-sale and available for use in current operations and accordingly have classified all investments as short-term. Available-for-sale securities are carried at fair value based on inputs that are observable, either directly or indirectly, such as quoted market prices for similar ~~securities;~~securities, quoted prices in markets that are not ~~active;~~active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the ~~securities, with unrealized gains and~~securities. Unrealized losses are included in accumulated other comprehensive loss in stockholders’ equity. ~~Realized gains and losses and declines in value, if any, judged to be other than temporary~~Commencing with our adoption of ASC 326 on ~~available-for-sale securities are included in interest income or expense. The cost of securities sold is based on the specific identification method. Management assesses~~January 1, 2023, we determine whether ~~declines~~a decline in the fair value of ~~investment~~our AFS debt securities ~~are other than temporary. In determining whether a decline~~below their amortized cost basis (i.e., an impairment) is ~~other than temporary, management considers the following factors:~~

~~Whether the investment has been in a continuous realized loss position for over 12 months;~~

~~the duration~~due to ~~maturity of our investments;~~

~~our intention and ability to hold the investment to maturity and if it~~credit-related factors or noncredit-related factors. Any impairment that is not ~~more likely than~~credit related is recognized in other comprehensive income (loss), net of applicable taxes. Credit-related impairments (if any) are recognized as an allowance on the balance sheet with a corresponding adjustment to earnings. Both the allowance and the adjustment to net income can be reversed if conditions change.

There were no realized gains or losses from the sale of marketable securities during each of the three and six months ended June 30, 2023 and 2022. We do not ~~that we will be~~intend to sell, and are not required to sell, the ~~investment~~investments that are in an unrealized loss position before recovery of ~~the~~their amortized cost ~~bases;~~basis. During each of the three and six months ended June 30, 2023, we did not record an allowance for credit losses, as management believes any such losses would be immaterial based on the investment-grade credit rating for each of

•

~~the credit rating, financial condition and near-term prospects of the issuer; and~~

the ~~type~~investments as of ~~investments made.~~

~~To date,~~June 30, 2023. As such, there have been no declines in fair value that have been identified as ~~other than temporary.~~a credit-related impairment.

4. Inventories

The following table presents inventories (in thousands):


	June 30, 2023		December 31, 2022
Raw materials	$	23,371	$	25,517
Work-in-process		22,851		23,934
Finished goods		6,866		9,995
Total	$	53,088	$	59,446

4.5. Commitments and Contingencies

Leases

We lease our facilities in ~~Berkeley,~~Emeryville, California ~~(“Berkeley Lease”)~~ and Düsseldorf, ~~Germany (“Düsseldorf Lease”) under operating~~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 ~~expire in December 2025 and March 2023, respectively. In May 2017, we amended~~may be subject to annual increases throughout the ~~Berkeley Lease~~lease term. Certain of these leases also include options to renew or extend the ~~term~~lease for two successive five-year terms. These optional periods have not been considered in the determination of the right-of-use assets or lease ~~to expire in December 2025 and to terminate the lease of an adjacent building. The early termination of the adjacent building’s lease~~liabilities associated with these leases as we did not ~~result in~~consider the exercise of these options to be reasonably certain.

We also sublease one of our leased premises to a ~~termination fee as~~third party. Rent is subject to scheduled annual increases and the lease rate under the amended Berkeley Lease was not above market rates. In addition, as a result of the early termination, we reversed the deferred rent liability of $0.2 million against rent expense during the nine months ended September 30, 2017. The amended Berkeley Lease providessubtenant is responsible for ~~periods of escalating rent. The total cash payments over~~certain operating expenses and taxes throughout the life of the ~~Berkeley Lease and Dusseldorf Lease are divided by~~sublease. The sublease term expires on March 31, 2031, unless earlier terminated, concurrent with the ~~total number~~term of ~~months in~~our lease. The subtenant has no option to extend the ~~lease period and the average rent is charged to expense each month during the lease period.~~

~~Total net rent expense related to our operating leases~~sublease term. Sublease income for the three ~~month periods~~and six months ended ~~September~~June 30, ~~2017 and 2016,~~2023 was ~~$0.7~~$2.0 million and ~~$0.6~~$3.6 million, respectively. ~~Total net~~Sublease income for the three and six months ended June 30, 2022 was $2.0 million and $3.6 million, respectively. Sublease income is included in other income (expense) in our condensed consolidated statements of operations. Rent received from the subtenant in excess of rent paid to the landlord shall be 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 ~~related to our operating leases~~on a straight-line basis.

Our lease expense comprises of the following (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Operating lease expense	$	1,392	$	1,867	$	2,780	$	3,474

Cash paid for amounts included in the ~~nine month periods~~measurement of lease liabilities for each of the six months ended ~~September~~June 30, ~~2017~~2023 and ~~2016~~2022 was ~~$1.7~~$3.5 million, and ~~$1.6 million, respectively. Deferred rent was $0.5 million and $0.3 million as~~were included in change in lease liabilities in our condensed consolidated statements of ~~September 30, 2017 and December 31, 2016, respectively.~~cash flows.

~~Future minimum payments under the non-cancelable portion~~The balance sheet classification of our operating ~~leases at September 30, 2017, are~~lease liabilities was as follows (in thousands):


	June 30, 2023		December 31, 2022
Operating lease liabilities:
Current portion of lease liabilities (included in other current liabilities)	$	4,150	$	3,631
Long-term portion of lease liabilities		31,545		32,801
Total operating lease liabilities	$	35,695	$	36,432

Years ending December 31,

2017 (remaining)

$
544

2018

2,349

2019

2,552

2020

2,614

2021

2,542

Thereafter

9,130

Total

$
19,731

As of June 30, 2023, the maturities of our sublease income and operating lease liabilities were as follows (in thousands):


Years ending December 31,	Sublease Income		Operating Lease Liabilities
2023 (remaining)	$	2,790	$	3,670
2024		5,684		7,431
2025		5,854		6,806
2026		6,030		6,004
2027		6,211		6,044
Thereafter		21,500		21,242
Total	$	48,069		51,197
Less:
Present value adjustment				(15,502	)
Total			$	35,695

The weighted average remaining lease term and the weighted average discount rate used to determine the operating lease liabilities were as follows:


	June 30, 2023			December 31, 2022
Weighted average remaining lease term	7.1 years			7.6 years
Weighted average discount rate		10.1	%		10.1	%

Commitments

As of June 30, 2023 and December 31, 2022, our material non-cancelable purchase and other commitments for the supply of HEPLISAV-B totaled $38.3 million and $43.4 million, respectively. As of June 30, 2023 and December 31, 2022, we have no non-cancelable purchase and other commitments for the supply of CpG 1018 adjuvant.

As of June 30, 2023, the aggregate principal amount of our convertible senior notes ("Convertible Notes") was $225.5 million, excluding debt discount of $3.4 million (see Note 7).

During 2004, we established a letter of credit with Deutsche Bank as security for our Düsseldorf lease in the amount of €0.2 million (Euros). The letter of credit remained outstanding through June 30, 2023 and was collateralized by a certificate of deposit for €0.2 million, which has been included in restricted cash in the condensed consolidated balance sheets as of June 30, 2023.

In ~~addition~~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 ~~non-cancelable commitments included above,~~development and/or commercialization of cancer and hepatitis C therapies originally licensed to Symphony Dynamo, Inc., including our immune-oncology compound, SD-101. In July 2020, we ~~have entered into contractual arrangements that obligate us~~sold assets related to ~~make payments~~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 and May 2022, we received $1.0 million from TriSalus because it met a pre-commercialization milestone. We recorded the ~~contractual counterparties upon the occurrence~~proceeds as gain on sale of ~~future events, including a $2.5 million payment due upon approval~~assets in our condensed consolidated statements of ~~HEPLISAV-B. In addition,~~operations in the ~~normal course~~third quarter of 2021 and second quarter of 2022. We paid Holdings $0.5 million in each of September 2021 and May 2022. We included the payments in selling, general and administrative expenses in our condensed consolidated statements of operations ~~we have entered into license~~in the third quarter of 2021 and ~~other agreements and intend to continue to seek additional rights relating to compounds or technologies in connection with our discovery, manufacturing and development programs. Under the terms~~second quarter of ~~the agreements, we may be required to pay future up-front fees, milestones and royalties on net sales~~2022. No liability has been recorded under this agreement as of ~~products originating from the licensed technologies, if any, or other payments contingent upon the occurrence of future events that cannot reasonably be estimated.~~June 30, 2023.

We rely on and have entered into agreements with research institutions, contract research organizations and clinical investigators as well as clinical and commercial material manufacturers. These agreements are terminable by us upon written notice. Generally, we are liable only for actual effort expended by the organizations at any point in time during the contract through the notice period.Contingencies

From time to time, we may be involved in claims, suits, and proceedings arising from the ordinary course of our business, including actions with respect to intellectual property claims, commercial claims, and other matters. Such claims, suits, and proceedings are inherently uncertain and their results cannot be predicted with certainty. Regardless of the outcome, such legal proceedings can have an adverse impact on us because of legal costs, diversion of management resources, and other factors. In addition, it is possible that a resolution of one or more such proceedings could result in substantial damages, fines, penalties or orders requiring a change in our business practices, which could in the future materially and adversely affect our financial position, ~~financial statements,~~ results of operations, or cash flows in a particular period.

1314

6. Collaboration, Development and Supply Agreements

Coalition for Epidemic Preparedness Innovations

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 (“CpG 1018 Materials”). In May 2021, we entered into the first amendment to the CEPI Agreement. The CEPI Agreement enables CEPI to direct the supply of CpG 1018 Materials to CEPI partner(s). CEPI partner(s) would purchase CpG 1018 Materials under separately negotiated agreements. The CEPI Agreement also allows us to sell CpG 1018 Materials to third parties if not purchased by a CEPI partner within a two-year term.

In exchange for reserving CpG 1018 Materials and agreeing to sell CpG 1018 Materials to CEPI partner(s) at pre-negotiated prices, CEPI agreed to provide payments in the form of an interest-free, unsecured, forgivable loan (the “Advance Payments”). We are obligated to repay the Advance Payments, in proportion to quantity sold, if and to the extent we receive payments from sales of CpG 1018 Materials reserved under the CEPI Agreement. If the vaccine programs pursued by CEPI partner(s) are unsuccessful and no alternative use is found for CpG 1018 Materials reserved under the CEPI Agreement, the applicable Advance Payments will be forgiven at the end of the two-year term.

On ~~September 7, 2016,~~April 27, 2023, we entered into a ~~Stipulation~~waiver and second amendment to the CEPI Agreement by and between us and CEPI (the “CEPI-Bio E Assignment Agreement”). Pursuant to the CEPI-Bio E Assignment Agreement, CEPI has forgiven the entirety of ~~Settlement~~the outstanding Advance Payments for CpG 1018 Materials allocated to ~~settle~~and ordered by Bio E under the ~~case entitled~~ CEPI Agreement and has assumed our previous rights to $47.4 million of Bio E accounts receivable.

Through June 30, 2023, we received Advance Payments totaling approximately $175.0 million pursuant to the CEPI Agreement, of which $67.3 million have been repaid and $47.4 million have been forgiven (as discussed above). As of June 30, 2023, remaining Advance Payments totaling $60.3 million in CEPI accrual long-term were reflected in our condensed 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. There were no deferred revenue balances related to the CEPI Agreement as of June 30, 2023 and December 31, 2022.

Zhejiang Clover Biopharmaceuticals, Inc. and Clover Biopharmaceuticals (Hong Kong) Co., Limited

In ~~re Dynavax Technologies Securities Litigation filed in 2013. The settlement, which was approved by the U.S. District Court~~June 2021, we entered into an agreement with Zhejiang Clover Biopharmaceuticals, Inc. and Clover Biopharmaceuticals (Hong Kong) Co., Limited (collectively, “Clover”), for the ~~Northern District~~commercial supply of ~~California~~CpG 1018 adjuvant, for use with Clover’s COVID-19 vaccine candidate, SCB-2019 (together with subsequent amendments, the “Clover Supply Agreement”). 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”). 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. The terms and conditions of the Clover Supply Agreement were operative through December 2022, and as of June 30, 2023, we had satisfied all delivery obligations thereunder.

For CpG 1018 adjuvant reserved for Clover under the CEPI Agreement, Clover is obligated to pay us the purchase price upon the earliest of (i) the true-up exercise, (ii) within a specified period after Clover delivers Clover Product to a customer, or (iii) Clover’s receipt of payment for Clover Product from a customer. When we transfer control of CpG 1018 adjuvant that is reserved under the CEPI Agreement, we recognize product revenue and a corresponding contract asset as our right to consideration is contingent on ~~February 6, 2017, provided for a payment~~something other than the passage of ~~$4.1~~time, as outlined above.

The contract asset of $71.3 million ~~by us and results~~relating to Clover was included in a dismissal and release of all claims against all defendants, including us. The settlement was paid by our insurers in February 2017. The $4.1 million accrued liability and corresponding $4.1 million prepaid expense and other current assets as of December 31, 2022. The contract asset ~~reflected~~was subsequently reclassified to other assets (long term) and remains classified in other assets (long term) as of June 30, 2023. The contract asset was reclassified to other assets (long term) to reflect the timing of expected long term demand for CpG 1018 adjuvant for Clover Product.

Corresponding Advance Payments of $60.3 million relating to Clover are recorded in CEPI accrual long-term in our condensed consolidated balance sheets as of June 30, 2023. These Advance Payments may be repaid using cash collected from Clover or forgiven in accordance with the CEPI Agreement. We had no accounts receivable balance from Clover as of June 30, 2023 and December 31, 2022. We did not recognize CpG 1018 adjuvant net product revenue from Clover for each of the three and six months ended June 30, 2023. We recognized CpG 1018 product revenue, net of $91.3 million and $113.6 million, respectively, for each of the three and six months ended June 30, 2022.

Biological E. Limited

In July 2021, we entered into an agreement (together with subsequent amendments, the “Bio E Supply Agreement”) with Biological E. Limited (“Bio E”), for the commercial supply of CpG 1018 adjuvant, for use with Bio E’s subunit COVID-19 vaccine candidate, CORBEVAX™. Under the Bio E Supply Agreement, Bio E 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 (“Bio E Product”) with specified delivery dates in 2021 and the first quarter of 2022. The Bio E Supply Agreement also provides terms for Bio E to order additional quantities of CpG 1018 adjuvant beyond the quantities reserved by CEPI. In June 2022 and in October 2022, we entered into amendments to the Bio E Supply Agreement (the “Bio E Amendment No. 1” and the “Bio E Amendment No. 2,” together the “Bio E Amendments”). 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 from 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. The terms and conditions of the Bio E Supply Agreement were operative through December 2022, and as of June 30, 2023, we had satisfied all delivery obligations thereunder.

As of June 30, 2023, net accounts receivable from Bio E, which relate to CpG 1018 Materials delivered under the Bio E Supply Agreement and CEPI Agreement, was $1.0 million (net of an allowance for doubtful accounts of $12.3 million). The allowance for doubtful accounts of $12.3 million was determined by assessing changes in Bio E’s credit risk, contemplation of ongoing negotiations relating to Bio E Amendment No. 3 (defined below), and Bio E's dependence on cash collections from the Government of India, which have been delayed and significantly reduced in connection with the overall reduction in demand for CORBEVAX from the Government of India. In connection with the Bio E accounts receivable, a corresponding liability for Advance Payments of $47.4 million (the “Bio E CEPI Advance Payments”) remained outstanding in CEPI accrual, reflecting amounts previously provided by CEPI under the CEPI Agreement in our consolidated balance ~~sheet~~sheets as of December 31, ~~2016~~2022. The Bio E CEPI Advance Payments may be repaid using cash collected from Bio E or, in the alternative, forgiven in accordance with the CEPI Agreement.

On April 26, 2023, we entered into a third amendment to the Bio E Supply Agreement (the “Bio E Amendment No. 3”), and on April 27, 2023, we entered into the CEPI-Bio E Assignment Agreement. Pursuant to the CEPI-Bio E Assignment Agreement, CEPI has forgiven the entirety of remaining amounts outstanding relating to the Bio E CEPI Advance Payments for CpG 1018 Materials allocated to Bio E and has assumed our previous rights to collect $47.4 million of Bio E accounts receivable. Pursuant to the Bio E Amendment No. 3, we collected $13.5 million from Bio E. Accordingly, as of June 30, 2023, the CEPI-Bio E Assignment Agreement resulted in: (i) an accounts receivable balance of $1.0 million (net of allowance for doubtful accounts of $12.3 million) which we expect to collect in August 2023, and (ii) the derecognition of $47.4 million CEPI accrual in connection with the Bio E CEPI Advance Payments. The Bio E Amendment No. 3 provides for additional future payment of either $5.5 million in the event that Bio E receives at least $125.0 million, or $12.3 million in the event that Bio E receives at least $250.0 million in future payments from the Government of India associated with its CORBEVAX product on or before August 15, 2025. 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 each of the three and six months ended June 30, 2023. We recognized CpG 1018 adjuvant net product revenue of $51.0 million and $118.3 million for the three and six months ended June 30, 2022, respectively.

U.S. Department of Defense

In September 2021, we entered into an agreement with the DoD for the development of a recombinant plague vaccine adjuvanted with CpG 1018 adjuvant for approximately $22.0 million over two and a half years. Under the agreement, we will conduct a Phase 2 clinical trial combining our CpG 1018 adjuvant with the DoD's rF1V vaccine. For the three and six months ended June 30, 2023, we recognized revenue of $3.8 million and $7.3 million, respectively, which is included in other revenue in our condensed consolidated statements of operations. For the three and six months ended June 30, 2022, we recognized revenue of $1.1 million and $2.7 million, respectively.

In July 2023, we executed a contract modification with the DoD to support advancement into a nonhuman primate challenge study, with the agreement now totaling $33.7 million through 2025.

7. Convertible Notes

In May 2021, we issued $225.5 million of 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 ~~released~~$219.8 million. We used $190.2 million of the net

proceeds to retire our previous loan agreement with CRG Servicing LLC and $27.2 million of the net proceeds to pay the costs of the Capped Calls described below.

The Convertible Notes are general, unsecured obligations and accrue interest at a rate of 2.50% per annum payable semiannually in arrears on May 15 and November 15 of each year, beginning on November 15, 2021. The Convertible Notes mature on May 15, 2026, unless converted, redeemed or repurchased prior to such date.

The Convertible Notes are convertible into cash, shares of our common stock or a combination of cash and shares of our common stock, at our election, at an initial conversion rate of 95.5338 shares of our common stock per $1,000 principal amount of the Convertible Notes, which is equivalent to an initial conversion price of approximately $10.47 per share of our common stock. The Convertible Notes are convertible at the option of the holders at any time prior to the close of business on the business day immediately preceding February 15, 2026, only under the following circumstances:

•

During any calendar quarter (and only during such calendar quarter), if the ~~first~~last reported sale price of our common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of ~~2017.~~the conversion price on each applicable trading day;

•

During the five business day period after any ten consecutive trading day period (the “measurement period”), in which the “trading price” (as defined the indenture governing the Convertible Notes) per $1,000 principal amount of the Convertible Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of our common stock and the conversion rate on each such trading day;

•

If we call such Convertible Notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date; or

•

Upon the occurrence of specified corporate events as set forth in the indenture governing the Convertible Notes.

On or after February 15, 2026, until the close of business on the second scheduled trading day immediately preceding the maturity date, holders of the Convertible Notes may convert all or any portion of their Convertible Notes regardless of the foregoing circumstances.

Since we have the election of repaying the Convertible Notes in cash, shares of our common stock, or a combination of both, we continued to classify the Convertible Notes as long-term debt on the condensed consolidated balance sheets as of June 30, 2023.

We may redeem for cash all or any portion of the Convertible Notes (subject to the partial redemption limitation described in the indenture governing the Convertible Notes), at our option, on or after May 20, 2024 and prior to the 31st scheduled trading day immediately preceding the maturity date, if the last reported sale price of our common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on the trading day immediately preceding the date on which we provide notice of redemption, at a redemption price equal to 100% of the principal amount of the Convertible Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.

If we undergo a fundamental change (as set forth in the indenture governing the Convertible Notes), noteholders may require us to repurchase for cash all or any portion of their Convertible Notes at a repurchase price equal to 100% of the principal amount of the notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date. In ~~February 2017,~~addition, following certain corporate events (as set forth in the indenture governing the Convertible Notes) or if we ~~tentatively agreed~~deliver a notice of redemption prior to the maturity date, we will, in certain circumstances, adjust the conversion rate for a noteholder who elects to convert its notes in connection with such a corporate event or such notice of redemption.

We accounted for the Convertible Notes as a single liability in accordance with ASU 2020-06 - Accounting for Convertible Instruments and Contracts in an Entity's Own Equity (“ASU 2020-06”). As of June 30, 2023, the Convertible Notes were recorded at the aggregate principal amount of $225.5 million less unamortized issuance costs of $3.4million as a long-term liability on the condensed consolidated balance sheets. As of June 30, 2023, the fair value of the Convertible Notes was $319.8 million. The fair value was estimated using a reputable third-party valuation model based on observable inputs and is considered Level 2 in the fair value hierarchy. The debt issuance costs are amortized to interest expense over the contractual term of the Convertible Notes at an effective interest rate of 3.1%.

The following table presents the components of interest expense related to Convertible Notes (in thousands):


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2023		2022		2023		2022
Stated coupon interest	$	1,409	$	1,409	$	2,818	$	2,819
Amortization of debt issuance cost		279		271		556		540
Total interest expense	$	1,688	$	1,680	$	3,374	$	3,359

Capped Calls

In connection with the issuance of the Convertible Notes, we entered into capped call transactions with one of the initial purchasers of the Convertible Notes and other financial institutions, totaling $27.2 million (the “Capped Calls”). The Capped Calls cover, subject to customary adjustments, the number of shares of our common stock that initially underlie the Convertible Notes (or 21,542,871 shares of our common stock). The Capped Calls have an initial strike price and an initial cap price of $10.47 per share and $15.80 per share, respectively, subject to certain adjustments. Conditions that cause adjustments to the initial strike price of the Capped Calls mirror conditions that result in corresponding adjustments to the conversion price of the Convertible Notes. 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 ~~settlement for derivative complaints filed in 2013, all~~cap based on the cap price.

For accounting purposes, the Capped Calls are considered separate financial instruments and not part of ~~which will be paid~~the Convertible Notes. As the Capped Calls transactions meet certain accounting criteria, we recorded the cost of the Capped Calls, totaling $27.2 million, as a reduction to additional paid-in capital within the condensed consolidated statements of stockholders’ equity.

8. Revenue Recognition

Disaggregation of Revenues

The following table disaggregates our product revenue, net by product and geographic region and disaggregates our ~~insurers. We recorded an accrual~~other revenues by geographic region (in thousands):


	Three Months Ended						Three Months Ended
	June 30, 2023						June 30, 2022
	U.S.		Non U.S.		Total		U.S.		Non U.S.		Total
Product revenue, net
HEPLISAV-B	$	56,440	$	-	$	56,440	$	31,739	$	941	$	32,680
CpG 1018 adjuvant		-		-		-		-		222,640		222,640
Total product revenue, net	$	56,440	$	-	$	56,440	$	31,739	$	223,581	$	255,320
Other revenue		3,809		-		3,809		1,083		61		1,144
Total revenues	$	60,249	$	-	$	60,249	$	32,822	$	223,642	$	256,464

	Six Months Ended						Six Months Ended
	June 30, 2023						June 30, 2022
	U.S.		Non U.S.		Total		U.S.		Non U.S.		Total
Product revenue, net
HEPLISAV-B	$	99,891	$	-	$	99,891	$	52,549	$	941	$	53,490
CpG 1018 adjuvant		-		-		-		-		314,157		314,157
Total product revenue, net	$	99,891	$	-	$	99,891	$	52,549	$	315,098	$	367,647
Other revenue		7,283		-		7,283		2,689		120		2,809
Total revenues	$	107,174	$	-	$	107,174	$	55,238	$	315,218	$	370,456

Revenues from Major Customers and Collaboration Partners

All of ~~$0.9 million reflected in accrued liabilities~~our HEPLISAV-B sales in the ~~consolidated balance sheet as~~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 ~~December 31, 2016~~Defense, the Department of Veterans Affairs and ~~do not expect any significant additional charges related~~retail pharmacies. All of our HEPLISAV-B sales in Germany are to ~~this matter. In addition, we record anticipated recoveries under existing insurance contracts when recovery is assured. We recorded~~one distributor.

The following table summarizes HEPLISAV-B product revenue from each of our three largest customers (as a ~~current asset~~percentage of total HEPLISAV-B net product revenue):


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2023			2022			2023			2022
Largest customer		24	%		18	%		24	%		21	%
Second largest customer		21	%		18	%		23	%		18	%
Third largest customer		18	%		18	%		17	%		17	%

The following table summarizes CpG 1018 adjuvant product revenue from each of our three largest collaboration partners (as a percentage of total CpG 1018 adjuvant net product revenue):


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2023			2022			2023			2022
Largest collaboration partner		0	%		41	%		0	%		38	%
Second largest collaboration partner		0	%		31	%		0	%		36	%
Third largest collaboration partner		0	%		23	%		0	%		22	%

Contract Balances

The following table summarizes balances and activities in HEPLISAV-B product revenue allowance and reserve categories for the ~~amount of $0.9 million reflected in prepaid expenses~~six months ended June 30, 2023 (in thousands):


	Balance at Beginning of Period		Provisions related to current period sales		Credit or payments made during the period			Adjustments related to prior periods			Balance at End of Period
Six months ended June 30, 2023:
Accounts receivable reserves (1)	$	8,179	$	26,738	$	(24,944	)	$	(229	)	$	9,744
Revenue reserve accruals (2)	$	10,552	$	21,319	$	(16,059	)	$	(50	)	$	15,762

(1)

Reserves are for chargebacks, discounts and other ~~current assets in~~fees.

(2)

Accruals are for returns, rebates and other fees.

When we transfer control of CpG 1018 adjuvant that is reserved under the ~~consolidated balance sheet as of December 31, 2016. Amounts recorded for contingencies can result from a complex series of judgments about future events~~CEPI Agreement to Clover and ~~uncertainties and can rely heavily on estimates and assumptions.~~

~~5. Collaborative Research and Development Agreements~~

~~AstraZeneca~~

Pursuant to a research collaboration and license agreement with AstraZeneca AB (“AstraZeneca”), as amended, we discovered and performed initial clinical development of AZD1419, a TLR9 agonist product candidate for the treatment of asthma.

~~In June 2016, all of our remaining performance obligations~~perform services under our agreement with ~~AstraZeneca were completed. As no further performance obligations remain,~~the DoD, we ~~revised the estimated period of performance of development work to June 2016 from September 2016,~~recognize revenue and ~~recognized remaining deferred payments~~a corresponding contract asset as ~~revenue as of June 30, 2016. The revision of the performance period led to the recognition of an additional $0.8 million in collaboration revenue during 2016.~~

In November 2016, AstraZeneca initiated the Phase 2a trial of AZD1419 in asthma patients. Upon AstraZeneca’s initiation of the Phase 2a trial, we earned a milestone payment of $7.2 million, which was offset against $7.4 million in unused development funding previously advanced by AstraZeneca. We recognized the $7.2 million milestone as revenue during the fourth quarter of 2016. The remaining balance of unused development funding, net of the $7.2 million milestone payment, was $0.2 million which was paid during the first quarter of 2017. No liability related to unused development funding remains on the accompanying condensed consolidated balance sheet as of September 30, 2017.

Under the terms of the agreement, as amended, we are eligible to receive up to approximately $100 million in additional milestone payments, based on the achievement of certain development and regulatory objectives. Additionally, upon commercialization of AZD1419, we are eligible to receive tiered royalties ranging from the mid to high single-digits based on product sales of any products originating from the collaboration. We have the option to co-promote in the United States products arising from the collaboration, if any. AstraZeneca has theour right to ~~sublicense its rights upon our prior consent.~~

consideration is conditioned on something other than the passage of time. See Note 6 for further discussion. The following table summarizes balances and activities in our contract asset account (in thousands):


	Balance at Beginning of Period		Additions		Subtractions			Reclassification (1)			Balance at End of Period
Six months ended June 30, 2023:
Contract asset, included in other current assets (2)	$	71,965	$	7,199	$	(6,255	)	$	(71,307	)	$	1,602
Contract asset, included in other assets (long term)	$	-	$	-	$	-		$	71,307		$	71,307

(1)

The Clover contract asset was reclassified to long term assets to reflect the ~~revenues earned under~~timing of expected long term demand for CpG 1018 adjuvant for Clover Product. See Note 6 for further discussion.

(2)

The $1.6 million of contract asset is derived from our agreement with ~~AstraZeneca, included as collaboration revenue in our consolidated statements of operations (in thousands):~~

Three Months Ended

Nine Months Ended

September 30,

September 30,

2017

2016

2017

2016

Initial payment
$
-

$
-

$
-

$
521

Subsequent payment

-

-

-

1,953

Performance of research activities

-

-

-

104

Total
$
-

$
-

$
-

$
2,578

~~As of September 30, 2017 and December 31, 2016,~~ ~~no deferred revenue from~~ the ~~initial payment, subsequent payment or development funding payments remained.~~

DoD.

Absent early termination, the agreement will expire when all of AstraZeneca’s payment obligations expire. AstraZeneca has the right to terminate the agreement at any time upon prior written notice and either party may terminate the agreement early upon written notice if the other party commits an uncured material breach of the agreement.

6.9. Net ~~Loss~~Income (Loss) Per Share

Basic net ~~loss per share is calculated by dividing the net loss by the weighted-average number of common shares outstanding during the period. Diluted net loss~~income (loss) per share is computed by dividing ~~the~~ net ~~loss~~income (loss) attributable to common stockholders by the weighted-average number of shares of our common ~~shares outstanding during the period and giving effect to all potentially dilutive common shares using the treasury-stock method. For purposes of this calculation, outstanding options and~~ stock ~~awards are considered to be potentially dilutive common shares and are only included in~~outstanding.

For the calculation of diluted net ~~loss~~income per share, ~~when their~~net income attributable to common stockholders for basic net income per share is adjusted by the effect of dilutive securities, including awards under our equity compensation plans and change in fair value of warrant liability. Diluted net income per share attributable to common stockholders is ~~dilutive. Stock options~~computed by dividing the resulting net income attributable to common stockholders by the weighted-average number of fully diluted common shares outstanding.

The numerators and ~~stock awards totaling approximately 6,120,000~~denominators of the basic net income (loss) and ~~4,680,000 shares of~~diluted net income per share computations for our common stock are calculated as ~~of September 30, 2017 and 2016, respectively,~~follows (in thousands):


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2023		2022		2023			2022
Numerator
Net income (loss)	$	3,431	$	128,755	$	(20,901	)	$	161,614
Less: undistributed earnings allocated to participating securities		-		-		-			(316	)
Net income (loss) attributable to common stockholders, basic		3,431		128,755		(20,901	)		161,298
Add: undistributed earnings allocated to participating securities		-		-		-			316
Less: removal of change in fair value of warrant liability		-		-		-			(1,801	)
Add: interest expense on convertible notes		1,266		1,260		-			2,519
Net income (loss) attributable to common stockholders, diluted	$	4,697	$	130,015	$	(20,901	)	$	162,332
Denominator
Weighted average common stock outstanding, basic		128,625		126,347		128,275			125,456
Effect of dilutive shares:
Stock-based compensation plans		1,974		2,015		-			2,659
Dilutive warrants		-		-		-			163
Convertible Notes (as converted to common stock)		21,543		21,543		-			21,543
Weighted average common stock outstanding, diluted		152,142		149,905		128,275			149,821

The following were excluded from the calculation of diluted net ~~loss~~income (loss) per share ~~for the three and nine months ended September 30, 2017 and 2016, because~~as the effect of their inclusion would have been anti-dilutive. For periods in which we have a net loss and no instruments are determined to be dilutive, such as the three and nine months ended September 30, 2017 and 2016, basic and diluted net loss per share are the same.anti-dilutive (in thousands).


	Three months ended June 30,				Six months ended June 30,
	2023		2022		2023		2022
Outstanding securities not included in diluted net income (loss) per share calculation:
Stock options and stock awards		6,900		9,647		15,532		9,067
Convertible Notes (as converted to common stock)		-		-		21,543		-
Total		6,900		9,647		37,075		9,067

~~7. Common Stock~~

10. Common Stock ~~Outstanding~~and Warrants

Common Stock

As of ~~September~~June 30, ~~2017,~~2023, there were ~~60,587,000~~128,779,031 shares of our common stock outstanding.

InWe entered into an at-the-market Sales Agreement with Cowen and Company, LLC (“Cowen”) on August ~~2017,~~6, 2020 and an amendment to such agreement on August 3, 2023 (the sales agreement as amended, the “2020 ATM Agreement”). Under the 2020 ATM Agreement, we ~~completed an underwritten public offering of 5,750,000~~may offer and sell from time to time, at our sole discretion, shares of our common stock ~~and received net~~having an aggregate offering price of up to $120.0 million through Cowen as our sales agent. We agreed to pay Cowen a commission of up to 3% of the gross sales proceeds of ~~approximately $80.8 million.~~

~~During 2017, we sold 15,997,202~~ ~~shares of o~~urany common stock ~~and received net~~sold through Cowen under the 2020 ATM Agreement. As of June 30, 2023, we had approximately $120.0 million remaining under the 2020 ATM Agreement.

Warrants

During the six months ended June 30, 2022, all of the 1,882,600 outstanding warrants as of December 31, 2021 were exercised or expired, resulting in cash proceeds totaling $8.5 million. During the six months ended June 30, 2022, we recognized the decrease in the estimated fair value of ~~$88.2~~warrant liability of $1.8 million ~~pursuant to an At the Market Agreement that terminated~~as income in ~~June 2017. See Note 10.~~other income (expense) in our condensed consolidated statements of operations.

11. Equity Plans and Stock-Based Compensation

~~Option activity~~In January 2021, we adopted the Dynavax Technologies Corporation 2021 Inducement Award Plan (“2021 Inducement Plan”), pursuant to which we reserved 1,500,000 shares of common stock for issuance under the plan to be used exclusively for grants of awards to individuals who were not previously our ~~stock-based compensation plans during the nine months ended September 30, 2017 was as follows (in thousands except per share amounts):~~

Shares Underlying Outstanding Options
(in thousands)

Weighted-Average Exercise
Price Per Share

Weighted-Average Remaining Contractual Term (years)

Aggregate Intrinsic Value
(in thousands)

Balance at December 31, 2016

3,975

$
21.38

Options granted

329

$
6.99

Options exercised

(50
)

$
11.82

Options cancelled:

Options forfeited (unvested)

(351
)

$
18.43

Options cancelled (vested)

(217
)

$
29.11

Balance at September 30, 2017

3,686

$
20.05

5.79

$
13,420

Vested and expected to vest at September 30, 2017

3,671

$
20.06

5.79

$
13,390

Exercisable at September 30, 2017

2,394

$
22.18

5.40

$
5,948

employees or directors. In June ~~2017, stockholders of~~2021, we amended the ~~Company approved a proposal~~2021 Inducement Plan (“Amended 2021 Inducement Plan”) to increase the ~~aggregate~~ number of shares of common stock reserved under the 2021 Inducement Plan to 3,250,000. The Amended 2021 Inducement Plan was terminated effective as of April 3, 2022 and, therefore, there are no shares of our common stock available for grant.

In May 2022, our stockholders approved the amendment and restatement of our 2018 Equity Incentive Plan (the “Amended 2018 EIP”) to, among other things, increase the authorized number of shares of common stock by 15,000,000. The maximum number of shares of common stock that may be issued under the Amended 2018 EIP will not exceed 32,600,000 shares of common stock. As of June 30, 2023, the Amended 2018 EIP and the Amended and Restated 2014 Employee Stock Purchase Plan are our active plans.

The Amended 2018 EIP is administered by our Board of Directors, or a designated committee of the Board of Directors, and awards granted under the Amended 2018 EIP have a term of seven years unless earlier terminated by the Board of Directors. As of June 30, 2023, there were 9,838,318 shares of common stock reserved for issuance under the ~~2011 Equity Incentive Plan, as amended, by 1,600,000 shares.~~Amended 2018 EIP.

~~Restricted stock unit activity under~~Under our ~~stock-based compensation plans during the nine months ended September 30, 2017 was as follows (in thousands except per share amounts):~~

Number of Shares (In thousands)

Weighted-Average Grant-Date Fair Value

Non-vested as of December 31, 2016

699

$
12.12

Granted

2,136

4.83

Vested

(171
)

18.62

Forfeited or expired

(221
)

8.44

Non-vested as of September 30, 2017

2,443

$
5.62

~~The aggregate intrinsic value of the restricted stock units outstanding as of September 30, 2017, based on our stock price on that date, was $52.5 million.~~ ~~Fair value of restricted stock units is determined at the date of~~Amended 2018 EIP, we may grant ~~using our closing stock price.~~

~~As of September 30, 2017, approximately 21,000 shares underlying~~ stock options, ~~and approximately 63,000 restricted stock unit awards with performance-based vesting criteria were outstanding. Vesting criteria for these restricted stock units awards with~~RSUs, performance-based awards, ~~were not probable as~~and other awards that are settled in shares of ~~September 30, 2017.~~

~~Under~~ our ~~stock-based compensation plans, option~~common stock. Our equity awards generally vest over a ~~three or four-year~~three-year period contingent upon continuous service and unless exercised, expire seven to or ten years from the date of grant (or earlier upon termination of continuous service). Activity under our stock plans is set forth below:

Stock Options

The following table summarizes the activity of stock options for the six months ended June 30, 2023:


	Shares Underlying Outstanding Options (in thousands)			Weighted- Average Exercise Price Per Share		Weighted- Average Remaining Contractual Term (years)		Aggregate Intrinsic Value (in thousands)
Balance as of December 31, 2022		9,339		$	10.70		4.61	$	16,291
Options granted		1,916			11.08
Options exercised		(244	)		6.63
Options cancelled:
Options forfeited (unvested)		(58	)		10.94
Options expired (vested)		(241	)		21.86
Balance as of June 30, 2023		10,712		$	10.61		4.67	$	31,452
Vested and expected to vest as of June 30, 2023		10,465		$	10.59		4.63	$	31,057
Exercisable as of June 30, 2023		6,695		$	10.07		3.92	$	24,620

Restricted Stock Units

The following table summarizes the activity of RSUs for the six months ended June 30, 2023:


	Number of Shares (in thousands)			Weighted-Average Grant-Date Fair Value Per Share
Non-vested as of December 31, 2022		3,479		$	11.00
Granted		2,359			11.02
Vested (1)		(1,421	)		10.02
Forfeited		(190	)		11.49
Non-vested as of June 30, 2023		4,227		$	11.32

(1) Inclusive of approximately 571,159 RSUs for the six months ended June 30, 2023, which were not converted into shares due to net share settlement in order to cover the required amount of employee withholding taxes. The value of the withheld shares was classified as a reduction to additional paid-in capital.

Market-based Performance Stock Units

We granted market-based performance restricted stock units (“PSUs”) to certain executives. These PSUs vest upon a specified market condition. The summary of PSU activities for the six months ended June 30, 2023 is as follows:


	Number of Shares (in thousands)		Weighted-Average Grant-Date Fair Value Per Share
Non-vested as of December 31, 2022		193	$	11.62
Granted		364		18.25
Non-vested as of June 30, 2023		557	$	15.95

Performance-based Options

As of June 30, 2023, approximately 36,000 shares underlying performance-based options were outstanding.

Significant Assumptions in Estimating Fair Value

The fair ~~value-based measurement~~value of each time-based option is estimated on the date of grant using the Black-Scholes option valuation model.

The fair ~~value-based measurements and~~value of each RSU is determined at the date of grant using our closing stock price. The fair value of each PSU is estimated using the Monte Carlo simulation method on the date of grant. The weighted-average assumptions used in the calculations of these fair value measurements are as follows:


	Stock Options						Stock Options						Market-Based Performance Stock Units (“PSUs”)
	Three Months Ended						Six Months Ended						Six Months Ended
	June 30,						June 30,						June 30,
	2023			2022			2023			2022			2023			2022
Weighted-average fair value per share	$	7.13		$	7.39		$	7.26		$	7.97		$	18.25		$	11.62
Risk-free interest rate		3.8	%		2.9	%		4.0	%		2.01	%		4.3	%		1.7	%
Expected life (in years)		4.5			4.5			4.5			4.5			2.9			2.9
Volatility		0.8			0.8			0.8			0.8			0.9			0.9

Stock-based Compensation

Stock Options

Stock Options

Employee Stock Purchase Plan

Three Months Ended

Nine Months Ended

Nine Months Ended

September 30,

September 30,

September 30,

2017

2016

2017

2016

2017

2016

Weighted-average fair value
$
8.11

$
8.90

$
4.73

$
9.67

$
3.05

$
7.86

Risk-free interest rate

1.9
%

1.1
%

1.9
%

1.4
%

1.0
%

0.6
%
Expected life (in years)

4.5

4.5

4.5

4.9

1.2

1.2

Volatility

0.9

0.7

0.9

0.7

1.0

0.6

Compensation expense is based on awards ultimately expected to vest and reflects estimated forfeitures. ~~The components of stock-based compensation expense were (in thousands):~~

Three Months Ended

Nine Months Ended

September 30,

September 30,

2017

2016

2017

2016

Research and development
$
1,973

$
1,639

$
5,707

$
4,490

General and administrative

1,687

2,022

5,137

5,540

Total
$
3,660

$
3,661

$
10,844

$
10,030

~~As of September 30, 2017, the total unrecognized compensation cost related to non-vested~~For equity ~~awards including all~~ awards with time-based vesting, ~~amounted~~the fair value is amortized to ~~$22.0 million, which is expected to be recognized~~expense on a straight-line basis over the ~~remaining weighted-average~~ vesting ~~period~~periods.

We have also granted performance-based equity awards to certain of ~~1.7 years. Additionally, as of September 30, 2017, the total unrecognized compensation cost related to~~our employees. For equity awards with performance-based vesting criteria, ~~not deemed probable of vesting amounted~~the fair value is amortized to ~~$0.4 million.~~

~~Employee Stock Purchase Plan~~

~~The 2014 Employee Stock Purchase Plan, as amended, (the “Purchase Plan”) provides for~~expense when the ~~purchase of common stock by eligible employees and became effective on May 28, 2014. The purchase price per share is the lesser of (i) 85%~~achievement of the ~~fair market value~~vesting criteria becomes probable. We recognized $0.7 million and $1.1 million of the common stock on the commencement of the offer period (generally, the sixteenth day in February or August) or (ii) 85% of the fair market value of the common stock on the exercise date, which is the last day of a purchase period (generally, the fifteenth day in February or August). For the nine months ended September 30, 2017, employees have acquired 84,247 shares of our common stock under the Purchase Plan and 98,227 shares of our common stock remained availablestock-based compensation expense for ~~future purchases under the Purchase Plan.~~

~~9. Restructuring~~

In January 2017, we implemented organizational restructuring and cost reduction plans to align around our immuno-oncology business while allowing us to advance HEPLISAV-B through the FDA review and approval process. To achieve these cost reductions, we suspended manufacturing activities, commercial preparations and other long term investment related to HEPLISAV-B and reduced our global workforce by approximately 40 percent.

~~In the first quarter of 2017 we recorded charges of $2.8 million related to severance, other termination benefits and outplacement services. There were no additional charges~~PSUs during the three and six months ended June 30, ~~2017~~2023, respectively. We recognized $0.2 million and ~~September 30, 2017.~~ ~~Of that amount, we paid $2.7~~$0.4 million of stock-based compensation expense for PSUs during the ~~nine month period~~three and six months ended ~~September~~June 30, ~~2017 and expect to pay the remaining amount~~2022, respectively.

The following table summarizes stock-based compensation expense recorded in ~~the fourth quarter~~each component of ~~2017.~~

~~The outstanding restructuring liabilities are included~~operating expenses in ~~accrued liabilities on the~~our condensed consolidated ~~balance sheets. As~~statements of ~~September~~operations, and amounts capitalized to our inventories (in thousands):


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2023		2022		2023		2022
Research and development	$	2,301	$	1,463	$	4,413	$	2,739
Selling, general and administrative		7,202		5,597		14,033		11,024
Cost of sales - product		399		143		1,094		303
Inventories		660		726		1,056		1,509
Total	$	10,562	$	7,929	$	20,596	$	15,575

12. Income Taxes

We are subject to U.S. federal, state and foreign income taxes. For the three and six months ended June 30, ~~2017,~~2023, we recorded a provision for income taxes of approximately $0.8 million and $1.4 million, respectively. Our effective tax rate was approximately (3.1)% and (5.7)% for the ~~components~~three and six months ended June 30, 2023, respectively. For each of the ~~liabilities were~~three and six months ended June 30, 2022, we recorded a provision for income taxes of approximately $0.6 million and our effective tax rate was approximately 0.4%. The primary difference between the effective tax rate and the federal statutory rate is due to the benefit of net operating losses utilized during the periods and the full valuation allowance we established on our federal, state, and certain foreign deferred tax assets.

The tax benefit of net operating losses, temporary differences and credit carryforwards is required to be recorded as ~~follows (in thousands):~~an asset to the extent that management assesses that realization is "more likely than not." Realization of the future tax benefits is dependent on our ability to generate sufficient taxable income within the carryforward period. A high degree of judgment is required to determine if, and the extent to which, valuation allowances should be recorded against deferred tax assets. In making such determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent financial operations. Based on all available evidence as of June 30, 2023, both positive and negative, and the weight of that evidence to the extent such evidence can be objectively verified, management believes that recognition of the deferred tax assets arising from the above-mentioned future tax benefits is currently not more likely than not to be realized, and, accordingly, has provided a valuation allowance.

Employee Severance and Other Benefits

Restructuring charges
$
2,783

Cash payments

(2,738
)
Balance at September 30, 2017
$
45

~~10. Subsequent Event~~

~~In November 2017, we entered into an At the Market sales agreement under which~~ ~~we can offer and sell our common stock from time to time up to aggregate sales proceeds of $150 million.~~ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

~~ITEM 2.~~

M~~ANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

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

The following discussion and analysis is intended to provide an investor with a narrative of our financial results and an evaluation of our financial condition and results of operations. This discussion should be read in conjunction with the unaudited Condensed Consolidated Financial Statements and related Notes included in Item 1 of this Quarterly Report on Form 10-Q and the Consolidated Financial Statements and the related Notes and ~~Management’s~~Part II, Item 7 "Management’s Discussion and Analysis of Financial Condition and Results of ~~Operations~~Operations" contained in our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2022.

Overview

We are a ~~clinical-stage immunotherapy~~commercial stage biopharmaceutical company focused on developing and commercializing innovative vaccines in areas of significant unmet need, leveraging our demonstrated expertise and capabilities in vaccines and our proven, proprietary vaccine adjuvant technology. Our first marketed product, HEPLISAV-B® [Hepatitis B Vaccine (Recombinant), Adjuvanted], is approved in the ~~power~~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. We also manufacture and sell CpG 1018 adjuvant, the ~~body’s innate~~adjuvant used in HEPLISAV-B, and ~~adaptive immune responses through toll-like receptor (“TLR”~~have established a portfolio of global commercial supply agreements in the development of COVID-19 vaccines across a variety of vaccine platforms utilizing CpG 1018 adjuvant. As of June 30, 2023, we have satisfied all delivery obligations under these global commercial supply agreements.

We are also 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 for Tdap and shingles, and a Phase 2 clinical trial for plague in collaboration with and fully funded by the U.S. Department of Defense ("DoD") ~~stimulation. Our current~~. Additionally, we are working to advance product candidates utilizing our CpG 1018 adjuvant through discovery efforts and through preclinical and clinical collaborations with third-party research organizations, including an ongoing collaboration with the Icahn School of Medicine at Mount Sinai investigating universal and seasonal influenza vaccine candidates and Queensland Institute of Medical Research, testing poly T cell epitope proteins with other antigens in preclinical models.

HEPLISAV-B® Vaccine [Hepatitis B Vaccine (Recombinant), Adjuvanted]

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

We have worldwide commercial rights to HEPLISAV-B and we market it in the United States, the European Union, and have marketing authorization in Great Britain. There are ~~being investigated for use as a vaccine~~four other vaccines approved for the prevention of hepatitis B in the U.S.: Engerix-B and Twinrix® from GlaxoSmithKline plc, Recombivax-HB® from Merck & Co and PreHevbrio™ from VBI Vaccines Inc. 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 May 2021, we entered into a commercialization agreement with Bavarian Nordic for the marketing and distribution of HEPLISAV-B in Germany, and in ~~multiple cancer indications.~~

~~HEPLISAV-B~~ ~~is our investigational adult hepatitis B vaccine. We resubmitted our application to market~~May 2022, we commenced commercial shipments of HEPLISAV-B ~~to the FDA~~ in ~~February 2017 and on July 28, 2017 the FDA’s~~ ~~Vaccines and Related Biological Products Advisory Committee (“VRBPAC”) voted 12 to 1 (with 3 abstentions) that the safety data~~Germany. In March 2023, we received marketing authorization in Great Britain for HEPLISAV-B ~~support licensure~~ 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.

All of ~~age~~our HEPLISAV-B sales in the U.S. are to certain wholesalers and ~~older~~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. All of our HEPLISAV-B sales in Germany are to one distributor. For the three and six months ended June 30, 2023, HEPLISAV-B product revenue, net was $56.4 million and $99.9 million, respectively.

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. 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.

Through June 30, 2023, we have received Advance Payments totaling approximately $175.0 million pursuant to the CEPI Agreement, of which $67.3 million have been repaid and $47.4 million have been forgiven (as discussed below). As of June 30, 2023, remaining Advance Payments totaling $60.3 million were reflected in CEPI accrual long-term in our condensed 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. There were no deferred revenue balances related to the CEPI Agreement as of June 30, 2023 and December 31, 2022.

On April 27, 2023, we entered into a waiver and second amendment to the CEPI Agreement by and between us and CEPI (the “CEPI-Bio E Assignment Agreement”). Pursuant to the CEPI-Bio E Assignment Agreement, CEPI has forgiven the entirety of the outstanding Advance Payments for CpG 1018 Materials allocated to and ordered by Bio E under the CEPI Agreement and has assumed our previous rights to $47.4 million of Bio E accounts receivable.

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. 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”). 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. The terms and conditions of the Clover Supply Agreement were operative through December 2022, and as of June 30, 2023, we had satisfied all delivery obligations thereunder.

For CpG 1018 adjuvant reserved for Clover under the CEPI Agreement, Clover is obligated to pay us the purchase price upon the earliest of (i) the true-up exercise, (ii) within a specified period after Clover delivers Clover Product to a customer, or (iii) Clover’s receipt of payment for Clover Product from a customer. When we transfer control of CpG 1018 adjuvant that is reserved under the CEPI Agreement, we recognize product revenue and a corresponding contract asset as our right to consideration is contingent on something other than the passage of time, as outlined above.

Approximately $71.3 million relating to future amounts receivable representing a contract asset from Clover in connection with the CEPI Agreement are classified as other assets (long term) as of June 30, 2023. The classification as long term reflects the timing of expected utilization of CpG 1018 adjuvant for Clover Product expected to be sold under the CEPI Agreement. Corresponding Advance Payments of $60.3 million relating to Clover are recorded in CEPI accrual long-term in our condensed consolidated balance sheets as of June 30, 2023. These Advance Payments may be repaid using cash collected from Clover or forgiven in accordance with the CEPI Agreement. We had no accounts receivable balance from Clover as of June 30, 2023 and December 31, 2022. We did not recognize CpG 1018 adjuvant net product revenue from Clover for either of the three or six months ended June 30, 2023. We recognized CpG 1018 product revenue, net of $91.3 million and $113.6 million for the three and six months ended June 30, 2022, respectively.

In July 2021, we entered into an agreement (together with subsequent amendments, the “Bio E Supply Agreement”) with Biological E. Limited (“Bio E”), for the commercial supply of CpG 1018 adjuvant, for use with Bio E’s subunit COVID-19 vaccine candidate, CORBEVAX™. Under the Bio E Supply Agreement, Bio E 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. 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 2022, we entered into two amendments to the Bio E Supply Agreement (the “Bio E Amendment No. 1” and the “Bio E Amendment No. 2,” respectively, together the “Bio E Amendments”). 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 from 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. The terms and conditions of the Bio E Supply Agreement were operative through December 2022, and as of June 30, 2023, we had satisfied all delivery obligations thereunder.

As of June 30, 2023, net accounts receivable from Bio E, which relates to CpG 1018 Materials delivered under the Bio E Supply Agreement and CEPI Agreement, was $1.0 million (net of an allowance for doubtful accounts of $12.3 million). The allowance for doubtful accounts of $12.3 million was determined by assessing changes in Bio E’s credit risk, contemplation of ongoing negotiations relating to Bio E Amendment No. 3 (defined below), and Bio E's dependence on cash collections from the Government of India,

which have been delayed and significantly reduced in connection with the overall reduction in demand for CORBEVAX from the Government of India. In connection with the Bio E accounts receivable, a corresponding liability for Advance Payments of $47.4 million (the “Bio E CEPI Advance Payments”) was outstanding in CEPI accrual, reflecting amounts previously provided ~~commentary~~by CEPI under the CEPI Agreement in our consolidated balance sheets as of December 31, 2022. The Bio E CEPI Advance Payments may be repaid using cash collected from Bio E or, in the alternative, forgiven in accordance with the CEPI Agreement.

Past performance is not a reliable indicator of future performance, however, and future revenue and associated profitability may therefore vary significantly. Specifically, 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 for the remainder of 2023 associated with these arrangements. See Note 6 - Collaborative Research Development and License Agreements, in the accompanying notes to the unaudited condensed consolidated financial statements included in Part I, Item 1, “Financial Statements (unaudited)” of this Quarterly Report on Form 10-Q.

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. 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 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 Capped Calls have an initial strike price and an initial cap price of $10.47 per share and $15.80 per share, respectively, subject to certain adjustments under the terms of the Capped Calls. The Capped Calls are freestanding and are considered separately exercisable from the Convertible Notes. 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 ~~design~~cap price.

COVID-19 Update

We are continuing to closely monitor the impact of the COVID-19 pandemic on our business and are taking proactive efforts to help protect the health and safety of our ~~proposed post-marketing safety study for HEPLISAV-B. A prior VRBPAC panel voted 13~~workforce, patients and healthcare professionals, and to ~~1 that~~continue our business operations and advance our goal of bringing important new vaccines to patients as rapidly as possible. We have significantly downsized our office space and are embracing a flexible work environment.

We have actively pursued opportunities to collaborate with other organizations on the ~~immunogenicity data for~~development of a COVID-19 vaccine, by leveraging CpG 1018 adjuvant, our toll-like receptor 9 (“TLR9”) agonist, which is also used in our HEPLISAV-B support approval and thus the July 2017 VRBPAC was only asked to vote on safety. The FDA is not bound by VRBPAC’s recommendations regarding safety and efficacy, but takes its advice into consideration when reviewing marketing applications.product. Since the ~~July VRBPAC meeting,~~first half of 2021, we have ~~worked with FDA~~announced multiple collaborations focused on ~~completing~~COVID-19 and we continue to work to identify other programs where CpG 1018 adjuvant can be utilized to enhance the ~~details~~immune response to a coronavirus vaccine or other vaccines. All five of our vaccine development collaboration partners have received emergency use authorization and/or full approval in respective territories and countries around the world from an applicable regulatory authority as of June 30, 2023. There can be no assurance we will be successful in our efforts to help develop or supply adjuvanted COVID-19 vaccines or other vaccines over the long term.

The extent of the post-marketing study and other steps required for an approval decision. We have reinitiated preparations for the launch of HEPLISAV-B, including resumption of operations at our manufacturing plant in Dusseldorf, Germany, and hiring of personnel and retention of consultants and vendors for commercialization related infrastructure. HEPLISAV-B has a Prescription Drug User Fee Act (“PDUFA”) date of November 9, 2017. If approved by the PDUFA date, costs related to these activities will increase in the fourth quarter of 2017 and into 2018 as we prepare for commercial launch in the first quarter of 2018.

Our lead cancer immunotherapy candidate is SD-101, a C Class CpG TLR9 agonist that was selected for characteristics optimal for treatment of cancer, including high interferon induction. Directly injecting SD-101 into a tumor site optimizes its effect by ensuring proximity to tumor-specific antigens. In animal models, SD-101 demonstrated significant anti-tumor effects at both the injected site and at distant sites. We are conducting a research and clinical program intended to assess potential efficacy of SD-101 in a range of tumors and in combination with a range of treatments, including checkpoint inhibitors and other therapies. In June 2017, we presented updated data at the American Society of Clinical Oncology Annual Meeting in patients with metastatic melanoma from the dose-escalation phase of an ongoing Phase 1/2 study of SD-101 in combination with Keytruda® (pembrolizumab), an anti-PD-1 therapy developed by Merck, known as MSD outside the United States and Canada. Results in patients naïve to anti-PD-1 or anti-PDL-1 treatment showed an overall response rate of 100 percent (seven of seven evaluable patients) and a complete response rate of 29 percent. The combinationimpact of the ~~two drugs was generally well tolerated with no dose-limiting toxicities.~~

We are developing DV281, a novel investigational TLR9 agonist designed specifically for focused delivery to primary lung tumors and lung metastases. In October 2017 we announced initiation of dosing in a Phase 1b study of inhaled DV281, in combination with anti-PD-1 therapy, in patients with non small cell lung cancer.

In addition to the research programs we are conducting and product candidates we are developing, we discovered and licensed to AstraZeneca AB (“AstraZeneca”) an inhaled TLR agonist, AZD1419, which is being developed by AstraZeneca for the treatment of asthma pursuant to a collaboration and license agreement. AstraZeneca initiated a Phase 2a trial in 2016.

~~Our revenues have historically consisted of amounts earned from collaborations, grants and fees from services and licenses. Product revenue will depend~~COVID-19 pandemic on our ability to ~~receive regulatory approvals for, and successfully market, our drug candidates. We have yet to~~ generate ~~any revenues from product~~ sales and ~~have recorded an accumulated deficit~~revenues, our regulatory efforts, our corporate development objectives and the value of, ~~$879.9 million as~~and market for, our common stock, will depend on future developments that are highly uncertain and cannot be predicted with confidence at this time. Because of ~~September 30, 2017. These losses have resulted principally from costs incurred in connection with research and development activities, compensation~~the above and other ~~related personnel costs~~factors, our results of operations may vary substantially from year to year, and ~~general corporate expenses. Research~~from quarter to quarter, and, ~~development activities include costs~~as a result, we believe that period-to-period comparisons of outside contracted services including clinical trial costs, manufacturing and process development costs, research costs and other consulting services. Salaries and other personnel-related costs include non-cash stock-based compensation associated with options and other equity awards granted to employees. General corporate expenses include outside services such as accounting, consulting, business development, commercial, investor relations, insurance services and legal costs. Ourour operating results may ~~fluctuate substantially from period to period principally~~not be meaningful and should not be relied upon as ~~a result~~being indicative of ~~the timing of preclinical activities and other activities related to clinical trials for~~ our ~~drug candidates.~~

~~Since our inception, we have relied primarily~~future performance. For additional information on the ~~proceeds from public~~various current and ~~private sales of our equity securities, government grants and revenues from collaboration agreements to fund our operations. We expect spending to increase in connection with~~future potential risks posed by the development and manufacturing of our product candidates, particularly SD-101 and DV281, our lead investigational cancer immunotherapeutic product candidates, and to support commercialization of HEPLISAV-B if it is approved, as well as human clinical trials for our other product candidates and additional applications and advancement of our technology. In order to continue these activities, we will need additional funding. This may occur through strategic alliance and licensing arrangements and/or future public or private debt and equity financings. If adequate funds are not available in the future, we may need to delay, reduce the scope of or put on hold one or more development programs while we seek strategic alternatives.COVID-19 pandemic, please read Item 1A. Risk Factors, included below.

Critical Accounting ~~Policies and the Use of~~ Estimates

~~The accompanying discussion and analysis of~~We prepare our ~~financial condition and results of operations are based upon our~~unaudited condensed consolidated financial statements ~~and the related disclosures, which have been prepared~~ in accordance with U.S. generally accepted accounting principles. ~~The preparation of these financial statements requires us~~In doing so, we are required to make estimates ~~assumptions~~ and ~~judgments~~assumptions. Our critical accounting estimates are those estimates that ~~affect the reported amounts~~involve a significant level of ~~assets and liabilities and disclosure of contingent assets and liabilities~~uncertainty at the ~~balance sheet dates~~time the estimate was made, and ~~the reported amounts of revenues and expenses for the periods presented. On an ongoing basis, we evaluate our estimates, assumptions and judgments described below that~~changes in them have ~~the greatest potential impact~~had or are reasonably likely to have a material effect on our ~~condensed consolidated~~ financial ~~statements, including those related to revenue recognition, research and development activities and stock-based compensation.~~condition or results of operations. Actual results could differ materially from our estimates. We base our estimates on ~~historical~~past experience and ~~on various~~ other assumptions that we believe ~~to be~~are reasonable under the circumstances, ~~the results of which form the basis for making judgments about the carrying values of assets~~ and ~~liabilities that are not readily apparent from other sources. Accounting assumptions and estimates are inherently uncertain and actual results may differ materially from~~we evaluate these estimates ~~under different assumptions or conditions.~~ on an ongoing basis.

We believe that there have been no significant changes in our critical accounting policies during the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2023, as compared with those disclosed in Part II, Item 7 "Management’s Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2022.

Results of Operations

Revenues

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

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

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

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

Increase

Increase

Three Months Ended

(Decrease) from

Nine Months Ended

(Decrease) from

September 30,

2016 to 2017

September 30,

2016 to 2017

Revenues:
2017

2016

$

%

2017

2016

$

%

Collaboration revenue
$
-

$
-

$
-

-

$
-

$
2,578

$
(2,578
)

(100
)%
Grant revenue

53

162

(109
)

(67
)%

306

289

17

6
%
Service and license revenue

-

-

-

-

-

884

(884
)

(100
)%
Total revenues
$
53

$
162

$
(109
)

(67
)%

$
306

$
3,751

$
(3,445
)

(92
)%


					Increase										Increase
	Three Months Ended				(Decrease) from						Six Months Ended				(Decrease) from
	June 30,				2022 to 2023						June 30,				2022 to 2023
Revenues:	2023		2022		$			%			2023		2022		$			%
HEPLISAV-B	$	56,440	$	32,680	$	23,760			73	%	$	99,891	$	53,490	$	46,401			87	%
CpG 1018 adjuvant		-		222,640		(222,640	)		(100	)%		-		314,157		(314,157	)		(100	)%
Total product revenue, net		56,440		255,320		(198,880	)		(78	)%		99,891		367,647		(267,756	)		(73	)%
Other revenue		3,809		1,144		2,665			233	%		7,283		2,809		4,474			159	%
Total revenues	$	60,249	$	256,464	$	(196,215	)		(77	)%	$	107,174	$	370,456	$	(263,282	)		(71	)%

~~Collaboration~~

HEPLISAV-B product revenue ~~decreased~~increased by $23.8 million and $46.4 million for the three and six months ended June 30, 2023, respectively, compared to the same periods in 2022, primarily due to higher volume driven by continued improvement in market share and utilization of adult vaccines related to the ~~2017~~Advisory Committee on Immunization Practices ("ACIP") universal recommendation.

There was no CpG 1018 adjuvant product revenue for either of the three or six months ended June 30, 2023, as we have completed all obligations and product delivery under our CpG 1018 adjuvant collaboration agreements as of December 31, 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 for the remainder of 2023.

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. We recognized $3.8 million and $7.3 million of revenue from our agreement with the DoD for the three and six months ended June 30, 2023, respectively. The increase was primarily driven by the commencement of the Phase 2 clinical trial in August 2022.

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.

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


					Increase										Increase
	Three Months Ended				(Decrease) from						Six Months Ended				(Decrease) from
	June 30,				2022 to 2023						June 30,				2022 to 2023
Cost of Sales - Product	2023		2022		$			%			2023		2022		$			%
HEPLISAV-B	$	13,537	$	10,252	$	3,285			32	%	$	28,249	$	16,229	$	12,020			74	%
CpG 1018 adjuvant		-		73,117		(73,117	)		(100	)%		-		107,102		(107,102	)		(100	)%
Total cost of sales - product	$	13,537	$	83,369	$	(69,832	)		(84	)%	$	28,249	$	123,331	$	(95,082	)		(77	)%

HEPLISAV-B cost of sales-product increased by $3.3 million and $12.0 million for the three and six months ended June 30, 2023, respectively, compared to the same periods in 2022. The increase was primarily due to higher sales volume driven by continued improvement in HEPLISAV-B market share and utilization.

There was no CpG 1018 adjuvant cost of sales-product for each of the three and six months ended June 30, 2023, as we have completed all ~~performance~~ obligations and product delivery under ~~the AstraZeneca agreement were completed in 2016. Service and license revenue decreased in the 2017 periods~~our CpG 1018 adjuvant collaboration agreements as ~~no manufacturing services were performed on behalf~~ of ~~third parties in 2017.~~December 31, 2022.

Research and Development ~~Expense~~Expenses

Research and development ~~expense consists~~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 ~~travel~~ and ~~supply~~travel costs), ~~outside services, allocated facility~~expenses incurred under agreements with contract research organizations, contract manufacturing organizations and service providers that assist in conducting clinical studies and costs ~~and non-cash stock-based compensation. Outside services relate to~~associated with our preclinical ~~experiments~~activities, development activities and ~~clinical trials,~~ regulatory filings and manufacturing of our product candidates. For the nine months ended September 30, 2017 and 2016, approximately 35% and 69%, respectively, of our total research and development expense, excluding non-cashoperations. We do not allocate stock-based compensation ~~is related~~or facility expenses to ~~our investigational adult hepatitis B vaccine, HEPLISAV-B.~~ specific programs because these costs are deployed across multiple programs.

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


					Increase										Increase
	Three Months Ended				(Decrease) from						Six Months Ended				(Decrease) from
	June 30,				2022 to 2023						June 30,				2022 to 2023
Program Expenses:	2023		2022		$			%			2023		2022		$			%
HEPLISAV-B development	$	27	$	866	$	(839	)		(97	)%	$	1,674	$	2,105	$	(431	)		(20	)%
CpG 1018 adjuvant development		368		562		(194	)		(35	)%		875		1,695		(820	)		(48	)%
Tdap		2,043		2,275		(232	)		(10	)%		3,671		3,840		(169	)		(4	)%
Shingles		4,401		2,855		1,546			54	%		8,150		5,788		2,362			41	%
Plague (1)		1,829		439		1,390			317	%		3,474		1,191		2,283			192	%
Other		1,436		677		759			112	%		3,251		2,506		745			30	%
Other research and development expenses:
Facility costs		641		552		89			16	%		1,143		920		223			24	%
Non-cash stock-based compensation		2,301		1,463		838			57	%		4,413		2,739		1,674			61	%
Total research and development	$	13,046	$	9,689	$	3,357			35	%	$	26,651	$	20,784	$	5,867			28	%

Increase

Increase

Three Months Ended

(Decrease) from

Nine Months Ended

(Decrease) from

September 30,

2016 to 2017

September 30,

2016 to 2017

Research and Development:
2017

2016

$

%

2017

2016

$

%

Compensation and related personnel costs
$
6,587

$
9,313

$
(2,726
)

(29
)%

$
21,305

$
27,675

$
(6,370
)

(23
)%
Outside services

5,705

9,653

(3,948
)

(41
)%

14,331

26,334

(12,003
)

(46
)%
Facility costs

2,152

2,629

(477
)

(18
)%

6,233

7,552

(1,319
)

(17
)%
Non-cash stock-based
compensation

1,973

1,639

334

20
%

5,707

4,490

1,217

27
%
Total research and development
$
16,417

$
23,234

$
(6,817
)

(29
)%

$
47,576

$
66,051

$
(18,475
)

(28
)%

~~For both~~

(1) In September 2021, we entered into an agreement with the DoD for the development of a recombinant plague vaccine adjuvanted with CpG 1018. Under the agreement, we will conduct a Phase 2 clinical trial 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 condensed consolidated statements of operations.

Research and development expenses increased by $3.4 million and $5.9 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2023, respectively, compared to ~~2016:~~the same periods in 2022.

~~Compensation and related personnel~~

•

HEPLISAV-B development costs decreased due to i~~mplementation~~lower clinical costs following the completion of ~~organizational restructuring~~the HEPLISAV-B dialysis study and ~~cost reduction plans~~lower other HEPLISAV-B related development costs. The first quarter of 2023 also included a $1.1 million expense related to an engineering run performed for product testing purposes.

•

CpG 1018 adjuvant development costs decreased as supply agreements were fulfilled across various vaccine platforms utilizing CpG 1018 adjuvant in ~~January 2017. Outside services expense~~2022.

•

Tdap costs decreased ~~primarily~~as we completed the Phase 1 clinical trial in early 2023, offset by an increase in activities to support initiation of a human challenge study in 2024.

•

Shingles program costs increased due to activities supporting initiation of a ~~reduction~~Phase 1/2 study in early 2024.

•

Plague program costs increased compared to the previous year following our initiation of part 2 of the Phase 2 clinical trial in 2023.

•

Other program costs ~~related~~increased as we continue to ~~HEPLISAV-B~~invest in product candidates utilizing our CpG 1018 adjuvant through discovery efforts and through preclinical and clinical ~~and manufacturing activities partially offset by increased costs relating to seeking regulatory approval for HEPLISAV-B and the ongoing development of SD-101 and earlier stage oncology programs.~~ collaborations.

•

Non-cash stock-based compensation expense increased due to ~~recognition~~the need for increased headcount to support the advancement of ~~expense related~~our clinical vaccine programs.

As we continue to share-based awards granted to employees in 2016 and 2017. Facility costs, which includes an overhead allocation primarily comprised of occupancy and related expenses, decreased due to overall lower facility and related costs and a decrease in headcount.

Weprogress our clinical-stage pipeline, we expect research and development ~~spending~~expenses to continue to represent a substantial portion of our expenses and to continue to increase in ~~connection with the development and manufacturing of our product candidates, particularly SD-101 and DV281, and to support a post-marketing study of HEPLISAV-B, if it is approved by the FDA.~~future years.

Selling, General and Administrative ~~Expense~~Expenses

~~General~~Selling, general and administrative ~~expense~~expenses consists primarily of compensation and related costs for our commercial support personnel, ~~costs;~~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, ~~and~~ investor relations and ~~for~~ insurance; legal costs that include corporate and patent-related expenses; allocated facility costs and non-cash stock-based compensation.

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

					Increase										Increase
	Three Months Ended				(Decrease) from						Nine Months Ended				(Decrease) from										Increase										Increase
	September 30,				2016 to 2017						September 30,				2016 to 2017						Three Months Ended				(Decrease) from						Six Months Ended				(Decrease) from
General and Administrative:	2017		2016		$			%			2017		2016		$			%
																					June 30,				2022 to 2023						June 30,				2022 to 2023
Selling, General and Administrative:																					2023		2022		$			%			2023		2022		$			%
Compensation and related personnel costs	$	1,771	$	3,446	$	(1,675	)		(49	)%	$	5,771	$	9,859	$	(4,088	)		(41	)%	$	15,101	$	12,929	$	2,172			17	%	$	30,975	$	26,110	$	4,865			19	%
Outside services		1,574		5,439		(3,865	)		(71	)%		4,336		11,164		(6,828	)		(61	)%		11,772		13,751		(1,979	)		(14	)%		22,605		23,817		(1,212	)		(5	)%
Legal costs		718		561		157			28	%		2,063		1,735		328			19	%		897		444		453			102	%		1,601		1,152		449			39	%
Facility costs		277		298		(21	)		(7	)%		804		788		16			2	%		2,099		3,458		(1,359	)		(39	)%		4,400		6,248		(1,848	)		(30	)%
Non-cash stock-based compensation		1,687		2,022		(335	)		(17	)%		5,137		5,540		(403	)		(7	)%		7,202		5,597		1,605			29	%		14,033		11,024		3,009			27	%
Total general and administrative	$	6,027	$	11,766	$	(5,739	)		(49	)%	$	18,111	$	29,086	$	(10,975	)		(38	)%
Total selling, general and administrative																					$	37,071	$	36,179	$	892			2	%	$	73,614	$	68,351	$	5,263			8	%

~~For both~~Selling, general and administrative expenses increased by $0.9 million and $5.3 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2023, respectively, compared to ~~2016:~~the same periods in 2022.

•

Compensation and related personnel costs and non-cash stock-based compensation ~~decreased~~costs increased due to i~~mplementation of organizational restructuring~~continued headcount and ~~cost reduction plans~~personnel investments in ~~January 2017~~. our general and administrative and field sales functions to support business growth and increased travel.

•

Outside services decreased as the ~~first nine months of 2016~~prior periods included ~~costs~~investments in commercial and marketing efforts related to ~~hiring~~the Centers for Disease Control and Prevention's ACIP universal recommendation and social media campaigns.

•

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 ~~consultants for administrative~~our leases expired in 2022, and ~~commercial development services for the anticipated commercial launch of HEPLISAV-B~~.

lower depreciation expense related to furniture and fixtures fully depreciated in 2022.

We expect our selling, general and administrative ~~spending~~expenses to increase in future periods to support the overall growth in our business.

Gain on Sale of Assets

In July 2020, we sold assets related to our immuno-oncology compound, SD-101, which included intellectual property, clinical and non-clinical data, regulatory filings, clinical supply inventory and certain contracts to Surefire Medical Inc. d/b/a TriSalus Life Sciences (“TriSalus”). Pursuant to the Asset Purchase Agreement, we received $5.0 million upon closing of the transaction and $4.0 million in December 2020 as reimbursement for certain clinical trial expenses. 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 the third quarter of 2020, we recognized a gain on sale of SD-101 assets of $6.9 million, net of transaction costs.

In May 2022, we received payment of $1.0 million from TriSalus because it met a pre-commercialization milestone. In the second quarter of 2022, we recognized a gain on sale of SD-101 assets of $1.0 million in our condensed consolidated statements of operations.

Bad Debt Expense

We recorded $12.3 million of bad debt expense during the six months ended June 30, 2023 in connection with the ~~commercialization~~allowance for doubtful accounts of ~~HEPLISAV-B, if it is approved~~$12.3 million recorded with respect to outstanding accounts receivable from Bio E and relating to CpG 1018 Materials delivered under the Bio E Supply Agreement and CEPI Agreement. The allowance for doubtful accounts was determined by assessing changes in Bio E’s credit risk, contemplation of ongoing negotiations relating to Bio E Amendment No. 3, and Bio E's dependence on cash collections from the Government of India, which have been delayed significantly by the ~~FDA.~~Government of India.

~~Restructuring~~

In January 2017, we implemented organizational restructuring and cost reduction plans to align around our immuno-oncology business while allowing us to advance HEPLISAV-B through the FDA review and approval process. To achieve these cost reductions, we suspended manufacturing activities, commercial preparations and other longer term investment related to HEPLISAV-B and reduced our global workforce by approximately 40 percent. If HEPLISAV-B is approved, we plan to use existing stockpiled inventory to support initial commercial demand.

~~During the nine months ended September 30, 2017 we recorded charges of $2.8 million related to severance, other termination benefits and outplacement services.~~ ~~Of that amount, we paid $2.7 million during the first nine month period ended September 30, 2017 and expect to pay the remaining balance in the fourth quarter of 2017.~~

~~Interest Income and~~ Other Income (Expense)~~, Net~~

Interest income is reported net of amortization of premiums and discounts on marketable securities and includes realized gains ~~and losses~~ on investments. ~~Other (expense)~~Interest expense includes the stated interest and accretion of discount of our Convertible Notes. Sublease income ~~net includes gains~~is recognized in connection with our sublease of office and ~~losses on foreign currency transactions and disposal~~laboratory space. Change in fair value of ~~property and equipment~~.warrant liability reflects the changes in fair value of warrants issued in connection with equity financing in August 2019.

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


							Increase												Increase
	Three Months Ended						(Decrease) from						Six Months Ended						(Decrease) from
	June 30,						2022 to 2023						June 30,						2022 to 2023
	2023			2022			$			%			2023			2022			$			%
Interest income	$	7,378		$	765		$	6,613			864	%	$	13,975		$	1,026		$	12,949			1,262	%
Interest expense	$	(1,688	)	$	(1,683	)	$	5			0	%	$	(3,374	)	$	(3,363	)	$	11			0	%
Sublease income	$	1,993		$	2,025		$	(32	)		(2	)%	$	3,591		$	3,634		$	(43	)		(1	)%
Change in fair value of warrant liability	$	-		$	-		$	-		-			$	-		$	1,801		$	(1,801	)		(100	)%
Other	$	(71	)	$	40		$	111			(278	)%	$	(48	)	$	145		$	(193	)		(133	)%

Increase

Increase

Three Months Ended

(Decrease) from

Nine Months Ended

(Decrease) from

September 30,

2016 to 2017

September 30,

2016 to 2017

2017

2016

$

%

2017

2016

$

%

Interest income
$
429

$
170

$
259

152
%

$
809

$
615

$
194

32
%
Other (expense) income, net
$
(166
)

$
(26
)

$
140

538
%

$
(378
)

$
68

$
(446
)

(656
)%

~~For both the three and nine months ended September 30, 2017 compared to 2016, interest~~•

Interest income increased due to a higher ~~average rate of return on~~yields and balances in our ~~investments and a higher average investment balance.~~ marketable securities portfolio.

•

The change in ~~other (expense)~~the fair value of warrant liability resulted primarily from the warrants expiring in February 2022. There were no warrants outstanding as of June 30, 2023.

Income Taxes

For the three and six months ended June 30, 2023, we recorded a provision for income ~~net~~taxes of approximately $0.8 million and $1.4 million, respectively. Our effective tax rate was approximately (3.1)% and (5.7)% for the three and six months ended June 30, 2023, respectively. For each of the three and six months ended June 30, 2022, we recorded a provision for income taxes of approximately $0.6 million and our effective tax rate was approximately 0.4%. The primary difference between the effective tax rate and the federal statutory rate is ~~primarily~~ due to the benefit of net operating losses utilized during the period ended June 30, 2022 and the full valuation allowance we established on our federal, state, and certain foreign ~~currency transactions resulting from fluctuations in the value of the Euro compared to the U.S. dollar.~~deferred tax assets.

Liquidity and Capital Resources

As of ~~September~~June 30, ~~2017,~~2023, we had ~~$191.7~~ $681.5 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. Our funds are currently invested in ~~short-term~~ money market funds, U.S. ~~Treasuries,~~treasuries, U.S. ~~Government~~government agency securities and corporate debt securities.

~~In August 2017, we completed an underwritten public offering of 5,750,000 shares of~~ We currently anticipate that our ~~common stock~~cash and ~~received net proceeds of approximately $80.8 million.~~

~~During the six months ended June 30, 2017, we sold 15,997,202 shares of our common stock and received net cash proceeds of $88.2 million~~ pursuant to an At the Market Agreement that terminated in June 2017. In November 2017 we entered into an At the Market sales agreement under which we can offer and sell our common stock from time to time up to aggregate sales proceeds of $150 million. The November 2017 sales agreement is more fully described in Part II – Item 5 – Other Information.

During the nine months ended September 30, 2017, we used $59.8 million of cash for our operations primarily due to our net loss of $67.7 million, of which $13.0 million consisted of non-cash charges such as stock-based compensation, depreciation and amortization, reversal of deferred rent upon lease amendment and accretion and amortization on marketable securities. ~~We also recorded charges of $2.8 million primarily related to severance, resulting from implementation of~~ ~~organizational restructuring and cost reduction plans in January 2017~~. By comparison, during the nine months ended September 30, 2016, we used $80.8 million of cash for our operations primarily due to a net loss of $90.7 million, of which $12.4 million consisted of non-cash charges such as stock-based compensation, depreciation and amortization and accretion and amortization on marketable securities. Cash used in our operations during the first nine months of 2017 decreased by $21.0 million. Net cash used in operating activities is impacted by changes in our operating assets and liabilities due to timing of cash receipts and expenditures.

During the nine months ended September 30, 2017, net cash used in investing activities was $114.8 million compared to $58.1 million in net cash provided by investing activities for the nine months ended September 30, 2016. Cash used in investing activities during the first nine months of 2017 included $114.4 million of net purchases of marketable securities compared with $64.6 million of net proceeds of marketable securities during the first nine months of 2016. Cash used in net purchases of property and equipment decreased by $6.1 million during the first nine months of 2017 compared to the same period in 2016 primarily due to the purchase of manufacturing equipment in 2016 for HEPLISAV-B.

During the nine months ended September 30, 2017 and 2016, net cash provided by financing activities was $169.8 million and $0.7 million, respectively. Cash provided by financing activities in the first nine months of 2017 included net proceeds of $169.2 million from the issuance of common stock under our underwritten public offering in August 2017 and our 2015 ATM Agreement.

~~We have incurred significant operating losses and negative cash flows from operations since our inception.~~ ~~As of September 30, 2017, we had cash,~~ cash equivalents, and short-term marketable securities as of ~~$191.7 million~~ June 30, 2023, and ~~we used $59.8 million of cash in operating activities during the first nine months of 2017. We believe that our available cash, cash equivalents and marketable securities~~anticipated revenues from HEPLISAV-B will be sufficient to ~~meet~~fund our ~~projected operating requirements~~operations for at least the next 12 months from the date of this ~~filing. We expect spending~~filing and in the longer term.

Advanced payments received from CEPI to ~~increase~~reserve a specified quantity of CpG 1018 adjuvant are initially accounted for as long-term deferred revenue. When we deliver CpG 1018 adjuvant to CEPI partner(s) or when we receive payment from CEPI partner(s), we reclassify the advanced payments from long-term deferred revenue to accrued liabilities. As of June 30, 2023, CEPI-related net accounts receivable relating to Bio E totaled $1.0 million. CEPI-related accruals and contract assets relating to Clover totaled $60.3 million and $71.3 million as of June 30, 2023, respectively. As of June 30, 2023, the CEPI-related accrual relating to Clover may be repaid using cash collected from Clover or forgiven in ~~connection~~accordance with the ~~development~~CEPI Agreement.

On April 26, 2023, we entered into the Bio E Amendment No. 3, and ~~manufacturing~~on April 27, 2023, we entered into the CEPI-Bio E Assignment Agreement. Pursuant to the CEPI-Bio E Assignment Agreement, CEPI has forgiven the entirety of remaining amounts outstanding relating to the Bio E CEPI Advance Payments for CpG 1018 Materials allocated to Bio E and has assumed our previous rights to collect $47.4 million of Bio E accounts receivable. The CEPI-Bio E Assignment Agreement results in a remaining accounts receivable balance from Bio E of $1.0 million, net of the allowance for doubtful accounts of $12.3 million discussed above. Pursuant to the Bio E Amendment No. 3, we collected $13.5 million from Bio E and expect to collect the remaining $1.0 million in August 2023. The Bio E Amendment No. 3 provides for additional future payment of either $5.5 million in the event that Bio E receives at least $125.0 million, or $12.3 million in the event that Bio E receives at least $250.0 million in future payments from the Government of India associated with its CORBEVAX product on or before August 15, 2025. These additional amounts are not considered collectible until the achievement of these future milestones.

As of June 30, 2023, the aggregate principal amount of our ~~product candidates, particularly SD-101~~Convertible Notes was $225.5 million, excluding debt discount of $3.4 million. The Convertible Notes bear interest at a rate of 2.50% per year, payable semiannually in arrears on May 15 and ~~DV281,~~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.

We entered into an at-the-market Sales Agreement with Cowen and Company, LLC (“Cowen”) on August 6, 2020 and an amendment to such agreement on August 3, 2023 (the sales agreement as amended, the “2020 ATM Agreement”). Under the 2020 ATM Agreement, we may offer and sell from time to time, at our ~~lead investigational cancer immunotherapeutic product candidates, human~~sole discretion, shares of our common stock having an aggregate offering price of up to $120.0 million through Cowen as our sales agent. 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 2020 ATM Agreement. As of June 30, 2023, we had approximately $120.0 million remaining under the 2020 ATM Agreement.

Prior to January 1, 2021, we incurred net losses in each year since our inception. For the three and six months ended June 30, 2023, we recorded a net income (loss) of $3.4 million and $(20.9) million, respectively. For the three and six months ended June 30, 2022, we recorded a net income of $128.8 million and $161.6 million, respectively. We cannot be certain that sales of our products, and the revenue from our other activities will be sustainable. Further, we expect to continue to incur substantial expenses as we continue investing in commercialization of HEPLISAV-B, advancing our research and development pipeline, and investing in clinical trials ~~for our~~and other development. If we cannot generate a sufficient amount of revenue from product ~~candidates and additional applications and advancement of our technology. In order to continue our development activities and if HEPLISAV-B is approved,~~sales, we will need ~~additional funding or a partnership~~ to ~~enable commercialization. This may occur~~finance our operations through strategic alliance and licensing arrangements and/or future public or private debt and equity financings. ~~Sufficient funding~~Raising additional funds through the issuance of equity or debt securities could result in dilution to our existing stockholders, increased fixed interest payment obligations, or both. In addition, these securities may ~~not be available, or if available, may be on terms~~have rights senior to those of our common stock and could include covenants that significantly dilute or otherwise adversely affect the rights of existing stockholders. If adequate funds are not available in the future, we may need to delay, reduce the scope of or put on hold one or more development programs while we seek strategic alternatives, which could have an adverse impact onwould restrict our ~~ability to achieve our intended business objectives.~~operations.

~~Contractual Obligations~~

We lease our facilities in Berkeley, California (“Berkeley Lease”) and Düsseldorf, Germany (“Düsseldorf Lease”) under operating leases that expire in December 2025 and March 2023, respectively. In May 2017, we amended the Berkeley Lease to extend the term of the Berkeley Lease to expire in December 2025 and to terminate the lease of an adjacent building. As a result of the amendment to the Berkeley Lease, our total future minimum lease paymentsus or at ~~September 30, 2017 are $19.7 million.~~

all. In addition, our ability to raise additional funds may be adversely impacted by deteriorating global economic conditions and the ~~non-cancelable commitments included above, we have entered into contractual arrangements that obligate us~~recent or future disruptions to ~~make payments to the contractual counterparties upon the occurrence of future events. In addition,~~and volatility in the ~~normal course~~credit and financial markets in the United States and worldwide resulting from the ongoing COVID-19 pandemic or otherwise. Adequate financing may not be available to us on acceptable terms, or at all. If adequate funds are not available when needed, we may need to significantly reduce our operations while we seek strategic alternatives, which could have an adverse impact on our ability to achieve our intended business objectives.

During the six months ended June 30, 2023, we generated $55.7 million of cash from our operations, ~~we have entered into license~~which consisted of a net loss of $20.9 million, a $29.7 million net increase from non-cash items, which included stock-based compensation, depreciation and amortization, amortization of right-of-use assets, non-cash interest expense, accretion of discounts on marketable securities and bad debt expense, and approximately $46.9 million net cash increase from changes in operating assets and liabilities, which included a decrease of $42.4 million in accounts and other agreements and intend to continue to seek additional rights relating to compounds or technologies in connection with our discovery, manufacturing and development programs. Under the terms of the agreements, we may be required to pay future up-front fees, milestones and royalties on net sales of products originating from the licensed technologies, if any, or other payments contingent upon the occurrence of future events that cannot reasonably be estimated.

We rely on and have entered into agreements with research institutions, contract research organizations and clinical investigators as well as clinical and commercial material manufacturers. These agreements are terminable by us upon written notice. Generally, we are liable only for actual effort expended by the organizations at any point in timereceivables, net. By comparison, during the ~~contract through the notice period.~~

~~Off-balance Sheet Arrangements~~

We do not have any off-balance sheet arrangements as defined by rules enacted by the Securities and Exchange Commission and, accordingly, no such arrangements are likely to have a current or future effect onsix months ended June 30, 2022, we used $33.8 million of cash from our ~~financial position.~~

~~ITEM 3.~~

Q~~UANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK~~

~~Quantitative and Qualitative Disclosure About Market Risk~~

~~Interest Rate Risk~~

~~We are subject to interest rate risk. Our investment portfolio is maintained in accordance with our investment policy,~~operations, which ~~defines allowable investments, specifies credit quality standards and limits the credit exposure of any single issuer. The primary objective~~consisted of our ~~investment activities is to preserve principal and, secondarily, to maximize~~net income ~~we receive~~of $161.6 million, a $17.5 million net increase from our investments without significantly increasing risk. Some of the securities that we invest in may have market risk. This means that a change in prevailing interest rates may cause the principal amount of the investment to fluctuate. To minimize this risk, we maintain our portfolio of cash equivalents and investments in short-term money market funds, U.S. government agency securities, U.S. Treasuries and corporate debt securities. We do not invest in auction rate securities or securities collateralized by home mortgages, mortgage bank debt or home equity loans. We 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 formanon-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 and accretion of discount on marketable securities, and approximately $212.0 million net cash decrease from changes in operating assets and liabilities, which included $157.9 million decrease in deferred revenue, $22.6 million decrease in accrued liabilities and other liabilities, $105.2 million decrease in prepaid manufacturing, which converted into CpG 1018 adjuvant inventory during 2022, and $21.5 million decrease in CEPI accrual. Overall, cash provided by our operations during the six months ended June 30, 2023 increased by $89.5 million. Net cash provided by operating activities is also impacted by changes in our operating assets and liabilities due to timing of cash receipts and expenditures.

During the six months ended June 30, 2023, net ~~unrealized loss on investments would be $1.1~~cash used in investing activities was $27.6 million compared to $164.0 million of cash used in investing activities for the six months ended June 30, 2022. Cash used in investing activities during the six months ended June 30, 2023 included $25.6 million of net purchases of marketable securities compared to $160.7 million of net purchases of marketable securities for the six months ended June 30, 2022.

During the six months ended June 30, 2023, net cash used in financing activities was $3.4 million. During the six months ended June 30, 2022, net cash provided by financing activities was $11.3 million. Cash used in financing activities for the six months ended June 30, 2023 included $5.8 million for the payments of taxes related to net share settlement of RSUs, partially offset by proceeds received from the exercise of options and from share purchases under our employee stock purchase plan for $2.4 million combined. Cash provided by financing activities for the six months ended June 30, 2022 included net proceeds of $8.5 million from warrants exercised and $2.9 million proceeds from options exercised and stock purchases under our employee stock purchase plan.

Contractual Obligations

As of June 30, 2023, our material non-cancelable purchase commitments, for the supply of HEPLISAV-B totaled $38.3 million. As of June 30, 2023, we have no non-cancelable purchase and other commitments for the supply of CpG 1018 adjuvant within the next 12 months or ~~$1.4 million, respectively.~~beyond.

~~Due~~There were no other material changes to the ~~short duration~~contractual obligations previously disclosed in Part II, Item 7 “Management’s Discussion and ~~nature~~Analysis of Financial Condition and Results of Operations” in our ~~cash equivalents and marketable securities, as well as our intention to hold~~Annual Report on Form 10-K for the ~~investments to maturity, we do not expect any~~year ended December 31, 2022.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

During the six months ended June 30, 2023, there were no material ~~loss with respect~~changes to our ~~investment portfolio.~~

~~Foreign Currency Risk~~

~~We have certain investments outside the U.S.~~market risk disclosures as set forth in Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form 10-K for the operations of Dynavax GmbH with exposure to foreign exchange rate fluctuations. The cumulative translation adjustment reported in the condensed consolidated balance sheet as of September 30, 2017 was $1.2 million primarily related to translation of Dynavax GmbH assets, liabilities and operating results from Euros to U.S. dollars. As of September 30, 2017, 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.year ended December 31, 2022.

~~ITEM 4.~~

~~CONTROLS AND PROCEDURES~~

ITEM 4. CONTROLS AND PROCEDURES

(a) Evaluation of disclosure controls and procedures

We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms and that such information is accumulated and communicated to our management, including our ~~Chief~~Principal Executive Officer and Principal Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can only provide reasonable, not absolute, assurance of achieving the desired control objectives.

Based on their evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report, our management, with participation of our Chief Executive Officer and our Chief Financial Officer, concluded that our disclosure controls and procedures are effective and were operating at the reasonable assurance level to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms.

(b) Changes in internal controls

There ~~has~~have been no ~~change~~changes in our internal controls over financial reporting as defined in Rule ~~13a – 15(f)~~13a-15(f) under the Exchange Act during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

P~~ART~~

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

~~ITEM 1.~~

~~LEGAL PROCEEDINGS~~

From time to time in the ordinary course of business, ~~Dynavax receives~~we receive claims or allegations regarding various matters, including employment, vendor and other similar situations in the conduct of our operations.

On July 3, 2013, a purported stockholder derivative complaint was filed in the Superior Court of California for the County of Alameda against certain of our current and former executive officers and directors. On August 9, 2013, a substantially similar purported stockholder derivative complaint was filed in the U.S. District Court for the Northern District of California. The derivative complaints allege breaches of fiduciary duties by the defendants and other violations of law. In general, the complaints allege that certain of our current and former executive officers and directors caused or allowed for the dissemination of materially false and misleading statements regarding our product, HEPLISAV-B. Plaintiffs We are ~~seeking unspecified monetary damages, including restitution from defendants, attorneys’ fees and costs, and other relief.~~

~~On August 21, 2013, pursuant to a stipulation between the parties, the state court stayed the state derivative case pending a decision on the Company’s motion to dismiss in the~~ ~~In re Dynavax Technologies Securities Litigation. On October 17, 2013, pursuant to a stipulation between the parties, the federal court stayed the federal derivative case pending a decision on the Company’s motion to dismiss in the~~ ~~In re Dynavax Technologies Securities Litigation. On May 8, 2015, the parties filed a stipulation to keep the state derivative case stayed until a final resolution in the~~ ~~In re Dynavax Technologies Securities Litigation. On May 15, 2015, the parties also stipulated to keep the federal derivative case stayed until a final resolution in the~~ ~~In re Dynavax Technologies Securities Litigation~~. The parties entered into a stipulation of settlement which provides that the Company will enter into certain corporate governance reforms, that the Company shall cause to be paid an attorneys’ fee of $925,000 to plaintiffs’ counsel, and for dismissal of all claims against defendants in both the state and federal derivative actions. On August 21, 2017, the state court entered an order preliminarily approving the settlement and setting a final approval hearing date of October 17, 2017. On October 17, 2017, the state court entered the final approval order and dismissed the state court action. On October 20, 2017, the parties to the federal derivative action submitted a stipulation to the federal court to dismiss with prejudice the federal derivative action in light of the settlement. On October 24, 2017, the federal court granted the stipulation and dismissed the federal derivative action with prejudice.

On November 18, 2016, two substantially similar securities class action complaints were filed in the U.S. District Court for the Northern District of California against the Company and two of its executive officers, in ~~Soontjens v. Dynavax Technologies Corporation et. al., (“Soontjens”) and~~ ~~Shumake v. Dynavax Technologies Corporation et al., (“Shumake”). The~~ ~~Soontjens~~ complaint alleges that between March 10, 2014 and November 11, 2016, the Company and certain of its executive officers violated Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5 promulgated thereunder, in connection with statements related to HEPLISAV-B. The ~~Shumake~~ complaint alleges violations of the same statutes related to the same subject, but between January 7, 2016 and November 11, 2016. The plaintiffs in both actions are seeking an unspecified amount of damages and attorneys’ fees and costs. On January 17, 2017, these two actions and all related actions that subsequently may be filed in, or transferred to, the District Court were consolidated into a single case entitled ~~In re Dynavax Technologies Securities Litigation~~. On January 31, 2017, the court appointed lead plaintiff and lead counsel. Lead plaintiff filed a consolidated amended complaint on March 17, 2017. Defendants’ filed a motion to dismiss the consolidated amended complaint on May 1, 2017. On September 12, 2017, the District Court granted Defendants’ motion to dismiss, but gave lead plaintiff an opportunity to amend his complaint. On October 3, 2017, plaintiff filed a Second Amended Complaint. Defendants’ motion to dismiss is due on November 3, 2017.

~~On January 18, 2017, the Company was made~~not currently aware of ~~a derivative complaint that a purported stockholder of~~any material legal proceedings involving the ~~Company intended to file in the Superior Court of California for the County of Alameda against certain of the Company’s current executive officers and directors (the “McDonald~~ ~~Complaint”). The~~ ~~McDonald~~ ~~Complaint was apparently filed on February 16, 2017, although the Company was not provided a copy of it until March 15, 2017.~~ Additionally, on January 19, 2017, another purported stockholder of the Company filed a separate derivative complaint in the Superior Court of California for the County of Alameda against the same officers and directors who were named in the ~~McDonald~~ ~~Complaint (the “Shumake~~ ~~Complaint”). Both complaints generally~~ ~~allege that the defendants caused or allowed the Company to issue materially misleading statements and/or omit material information regarding HEPLISAV-B~~ ~~and the clinical trial related thereto and otherwise mismanaged the clinical trial related to HEPLISAV-B~~. The complaints seek unspecified monetary damages, including restitution from defendants, corporate governance changes, attorneys’ fees and costs, and other relief. Defendants were never served with the ~~Shumake~~ ~~Complaint. On June 23, 2017, the plaintiff voluntarily dismissed the~~ ~~Shumake~~ ~~Complaint without prejudice. Defendants filed a demurrer in the~~ ~~McDonald~~ ~~case seeking to dismiss the lawsuit on June 19, 2017. On July 26, 2017, pursuant to a stipulation between the parties, the state court stayed the~~ ~~McDonald~~ ~~case pending the final resolution of the 2016 securities class action,~~ ~~In re Dynavax Technologies Securities Litigation~~.Company.

The Company believes that it has meritorious defenses and intends to defend these lawsuits vigorously. However, the lawsuits are subject to inherent uncertainties, the actual costs may be significant, and we may not prevail. We believe we are entitled to coverage under our relevant insurance policies with respect to these lawsuits, but coverage could be denied or prove to be insufficient.ITEM 1A. RISK FACTORS

~~ITEM 1A.~~

R~~ISK FACTORS~~

Various statements in this Quarterly Report on Form 10-Q are forward-looking statements, including, but not limited to, statements concerning the direct and indirect impact of the ongoing COVID-19 pandemic on our business, our future efforts to obtain regulatory approval, ~~timing of development activities,~~advance our collaborations and our pipeline, manufacture and commercialize approved products, or expectations about our anticipated expenses, revenues, liquidity and cash needs, as well as our plans and strategies. These forward-looking statements are based on current expectations and we assume no obligation to update this information. Numerous factors could cause our actual results to differ significantly from the results described in these forward-looking statements, including those in the ~~following~~ risk ~~factors.~~factors that follow. We have marked with an asterisk (*) those risks described below that reflect ~~substantive~~material changes from, or additions to, the risks described under Part 1, Item 1A “Risk Factors” included in our Annual Report on Form 10-K for the year ended December 31, ~~2016~~ 2022that was filed with the Securities and Exchange Commission on ~~March 13, 2017.~~February 23, 2023.

RISK FACTOR SUMMARY

Below is a summary of material factors that make an investment in our securities speculative or risky. Importantly, this summary does not address all of the risks and uncertainties that we face. Additional discussion of the risks and uncertainties summarized in this risk factor summary, as well as other risks and uncertainties that we face, can be found in the more detailed discussion that follows this summary, and the below summary is qualified in its entirety by that more complete discussion of such risks and uncertainties. You should carefully consider the risks and uncertainties described herein as part of your evaluation of an investment in our securities:

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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.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.

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Our financial results may vary significantly from quarter to quarter or may fall below the expectations of investors or securities analysts, each of which may adversely affect our stock price.

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We have incurred annual net losses in most years since our inception and anticipate that we could continue to incur significant losses if we do not successfully commercialize HEPLISAV-B, launch new products and/or significant sales of our CpG 1018 adjuvant do not resume. Until we are able to generate significant revenues or achieve profitability through product sales on a consistent basis, we may require substantial additional capital to finance our operations.

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Many of our competitors have greater financial resources and expertise than we do. If we are unable to successfully compete with existing or potential competitors as a result of these disadvantages, we may be unable to generate sufficient, or any, revenues and our business will be harmed.

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We rely on our facility in Düsseldorf, Germany and third parties to supply materials or perform processes necessary to manufacture our products and our product candidates. We rely on a limited number of suppliers to produce the oligonucleotides we require for development and commercialization. Additionally, we have limited experience in manufacturing our products or product candidates in commercial quantities. With respect to HEPLISAV-B, we use a pre-filled syringe presentation of the vaccine and our ability to meet future demand will depend on our ability to manufacture or have manufactured sufficient supply in this presentation.

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As we continue to focus on the commercialization of our HEPLISAV-B vaccine and our CpG 1018 adjuvant, we may encounter difficulties in managing our commercial growth and expanding our operations successfully.

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As we continue to grow as a commercial organization and enter into supply agreements with customers, those supply agreements will have obligations to deliver product that we are reliant upon third parties to manufacture on our behalf.

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We have entered into collaborative relationships to develop vaccines utilizing our CpG 1018 adjuvant, including collaborations to develop vaccines for COVID-19. These collaborations may not be successful. If the combination of patents, trade secrets and other proprietary rights that we rely on to protect our intellectual property rights in CpG 1018 adjuvant or otherwise are inadequate, we may be unable to realize recurring commercial benefit from the development of any vaccines containing CpG 1018 adjuvant.

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Our business and operations have been, and may continue to be, adversely affected by the ongoing COVID-19 global pandemic.

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We face uncertainty regarding coverage, pricing and reimbursement and the practices of third-party payors, which may make it difficult or impossible to sell certain of our products or product candidates on commercially reasonable terms.

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We are subject to ongoing United States Food and Drug Administration (“FDA”), EU and comparable foreign post-marketing obligations concerning HEPLISAV-B, which may result in significant additional expense, and we may be subject to penalties if we fail to comply with regulatory requirements or experience unanticipated regulatory issues with HEPLISAV-B. If HEPLISAV-B or any products we develop are not accepted by the market or if regulatory agencies limit our labeling indications, require labeling content that diminishes market uptake of HEPLISAV-B or any other products we develop, or limit our marketing claims, we may be unable to generate significant revenues, if any.

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HEPLISAV-B and all of our clinical programs rely on oligonucleotide toll-like receptor (“TLR”) agonists. 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.

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HEPLISAV-B is subject to regulatory obligations and continued regulatory review, and if we receive regulatory approval for our other product candidates, we will be subject to ongoing FDA and foreign regulatory obligations and continued regulatory review for such products.

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Regulatory authorities may require more clinical trials for our product candidates than we currently expect or are conducting before granting regulatory approval, if regulatory approval is granted at all. Our clinical trials may be extended which may lead to substantial delays in the regulatory approval process for our product candidates and may impair our ability to generate revenues.

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Clinical trials for our commercial product and product candidates are expensive and time consuming, may take longer than we expect or may not be completed at all, and have uncertain outcomes.

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A key part of our business strategy for products in development is to establish collaborative relationships to help fund or manage development and commercialization of our product candidates and research programs. We may not succeed in establishing and maintaining collaborative relationships, which may significantly limit our ability to continue to develop and commercialize those products and programs, if at all.

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As we plan for the broader commercialization of our HEPLISAV-B vaccine and for the requisite capacity to manufacture our CpG 1018 adjuvant, our financial commitments for manufacturing and supply capacity might outpace actual demand for our products.

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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. 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.

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We rely on clinical research organizations (“CROs”) and clinical sites and investigators for our clinical trials. If these third parties do not fulfill their contractual obligations or meet expected deadlines, our planned clinical trials may be delayed and we may fail to obtain the regulatory approvals necessary to commercialize our product candidates.

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As a biopharmaceutical company, we engage CROs to conduct clinical studies, and failure by us or our CROs to conduct a clinical study in accordance with good clinical practices (“GCP”) standards and other applicable regulatory requirements could result in disqualification of the applicable clinical trial from consideration in support of approval of a potential product.

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If third parties assert that we have infringed their patents and proprietary rights or challenge our patents and proprietary rights, we may become involved in intellectual property disputes and litigation that would be costly, time consuming and delay or prevent development or commercialization of our product candidates.

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Our stock price is subject to volatility, and your investment may suffer a decline in value.

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Future sales of our common stock or the perception that such sales may occur in the public market could cause our stock price to fall.

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Servicing our debt requires a significant amount of cash, and we may not have sufficient cash flow from our business to pay our substantial debt. Conversion of the Convertible Notes (defined below) may dilute the ownership interest of our stockholders or may otherwise depress the price of our common stock.

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The loss of key personnel could delay or prevent achieving our objectives. In addition, our continued growth to support commercialization may result in difficulties in managing our growth and expanding our operations successfully.

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. 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. Successful commercialization of HEPLISAV-B in those countries or elsewhere will require significant resources and time, and there can be no certainty that we will succeed in these efforts. We have also received approval from the European Union and Great Britain for HEPLISAV-B. While our personnel are ~~dependent~~experienced with respect to marketing of healthcare products, because

HEPLISAV-B is our first marketed product, the potential uptake of the product through distribution, and the timing, trajectory, rate and sustainability for growth in sales is unpredictable, and we may not be successful in commercializing HEPLISAV-B in the long term. In particular, successful commercialization of HEPLISAV-B will require that we continue to negotiate and enter into contracts with wholesalers, distributors, group purchasing organizations, and other parties, and that we maintain those contractual relationships. There is a risk that we may fail to complete or maintain some or all of these important contracts on favorable terms or at all, or that in a potentially evolving reimbursement environment, our efforts may fail to overcome established competition at favorable pricing, or at all.

In 2021, we significantly expanded our field sales force. It will take time for this expanded team to generate significant sales momentum, if it does so at all. Although we have had some success growing and developing our field sales force following the ~~success~~launch of HEPLISAV-B, there is no guarantee that we will be able to generate sales at the same or improved rates going forward, if at all. In addition, retention of capable sales personnel may be more difficult for us compared to our competitors, as we focus on a single product offering. We must retain our sales force in order for HEPLISAV-B to maintain or expand its commercial presence.

Moreover, we expect that we will need to invest significant resources in order to successfully market, sell and distribute HEPLISAV-B for use with dialysis patients, one of our ~~product candidates, especially~~targeted patient populations. We do not yet have approval to market the regimen for dialysis. Although the Centers for Disease Control and Prevention (“CDC”) and the CDC’s Advisory Committee on Immunization Practices (“ACIP”) recommend that all adults aged 19-59, including patients on dialysis, receive hepatitis B vaccinations, we are unable to predict how many of those patients may actually receive HEPLISAV-B.

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:

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whether we are able to recruit and ~~SD-101, which depend on regulatory approval. The FDA or foreign regulatory agencies~~retain adequate numbers of effective sales and marketing personnel;

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whether we are able to access key health care providers to discuss HEPLISAV-B;

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whether we can compete successfully as a relatively new entrant in established distribution channels for vaccine products; and

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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.

If we are not successful, we may determine our clinical trials or other data regarding safety, efficacy, consistency of manufacture or compliance with GMP regulations are insufficient for regulatory approval. Failure to obtain regulatory approvals or the delay and additional costs that would be required to ~~obtain regulatory approvals could require us~~collaborate or partner HEPLISAV-B with a third-party pharmaceutical or biotechnology company with existing products. 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 discontinue operations.*

~~None~~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 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. In that event, our product revenues may be lower than if we marketed and sold our products directly with the highest priority, and we may be required to reduce or eliminate much of our commercial infrastructure and personnel as a result of such collaboration or partnership.

As a result of the COVID-19 pandemic, many healthcare and contracting professionals at hospitals and other medical institutions with whom our field-based personnel interact began conducting a greater proportion of their working schedule from home. The increased electronic communication, as compared to in-person interactions, and the reduced quantity of interactions may impact the effectiveness of our sales personnel and our overall product ~~candidates~~sales of HEPLISAV-B. While in-person interactions have increased since the peak of the COVID-19 pandemic, any rise in new variants and related precautions could impact our and our collaborators’ customer procurement activities. In 2020, we implemented a mandatory work from home policy for employees who can perform their jobs offsite. With the rise of new variants and related precautions, our customers’ procurement activities and those of our collaborators could continue to be impacted which could negatively affect our overall product sales. It is possible that we may have to limit in-person engagement again the in future.

Governments influence the price of medicinal products in the European Union through their pricing and reimbursement rules and control of national healthcare systems that fund a large part of the cost of those products to consumers. Even though we have been granted a marketing authorization in the European Union for HEPLISAV-B, we have yet to obtain broad reimbursements and pricing approval in any European Union member state and rely on our distributor to do so, who currently only markets in Germany. Some jurisdictions operate positive and negative list systems under which products may only be marketed once a reimbursement price has been ~~approved for sale by any regulatory agency. Any~~agreed. To obtain reimbursement or pricing approval, some of these countries may require the completion of clinical trials that compare the cost-effectiveness of a particular product candidate ~~we develop is subject~~ to ~~extensive regulation by federal, state~~currently available therapies. Other European Union member states

allow companies to fix their own prices for medicines, but monitor and ~~local governmental authorities~~control company profits. Any delay in being able to market our products in the ~~U.S., including~~European Union or elsewhere will 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 ~~FDA, and foreign regulatory agencies. Our success is primarily dependent on our ability~~infrastructure to ~~obtain regulatory approvals for our most advanced product candidates. Approval processes~~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.

Our financial results may vary significantly from quarter to quarter or may fall below the expectations of investors or securities analysts, each of which may adversely affect our stock price.*

Numerous factors, many of which are outside our control, may cause or contribute to significant fluctuations in our quarterly and annual operating results. For example, during the year ended December 31, 2022, sales of CpG 1018 adjuvant accounted for $587.7 million. However, our CpG 1018 adjuvant supply agreements expired at the end of 2022, and we are not expecting these customers to place substantial new orders for CpG 1018 adjuvant during 2023. As a result, we currently expect minimal to no CpG 1018 adjuvant revenue for 2023, which will cause our future revenue and cash flow to decrease materially relative to prior periods. Similarly, if demand for HEPLISAV-B decreases from recent trends for any reason, that could also cause unexpected fluctuations in our quarterly and annual operating results.

The occurrence and timing of any transfer of control of product sold to customers can also be difficult to predict, and the recognition of revenue can vary widely depending on timing of product deliveries and satisfaction of other ~~countries~~obligations. As an example, any revenue we do receive from sales of our CpG 1018 adjuvant has been and will continue to be difficult to predict, if it materializes at all. We generally require customers to place orders for CpG 1018 adjuvant with at least six months lead time and to make an advance payment toward the finished order. Where we receive such advance payments, we record such payments as deferred revenue until we have delivered the adjuvant and met all criteria to recognize revenue. In accordance with our stated revenue policy, we recorded revenue for these contracts upon meeting all of the criteria for revenue recognition under Accounting Standards Codification 606, which includes, among other criteria, the transfer of control for CpG 1018 adjuvant to our customer. During the six months ended June 30, 2023, we did not receive any advanced payments from any of our customers to purchase CpG 1018 adjuvant. Our COVID collaborators in many cases have purchase agreements with government agencies. If our collaborators do not receive payment from these agencies for any past or future adjuvant orders, our ability to collect our own receivables may be adversely affected.To this end, as of June 30, 2023, we recorded an allowance for doubtful accounts of $12.3 million in connection with our accounts receivable balance due from Bio E, which was determined by assessing changes in Bio E’s credit risk, contemplation of ongoing negotiations relating to an amendment to the supply agreement with Bio E, and Bio E’s dependence on cash collections from the Government of India, which have been delayed significantly by the Government of India. In April 2023, we entered into the CEPI-Bio E Assignment Agreement, which as of June 30, 2023, has resulted in an accounts receivable balance of $1.0 million (net of the allowance for doubtful accounts of $12.3 million) which we expect to collect in August 2023, and the derecognition of $47.4 million CEPI accrual in connection with the Bio E CEPI Advance Payments.

We 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. For example, in August and October 2022, we entered into amendments 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. In January 2023, we entered into another amendment to the Clover Supply Agreement to modify the price per dose of CpG 1018 adjuvant paid by Clover for adjuvant used in finished vaccine doses sold through government procurement programs relating to the booster program promoted by the China National Health Commission.

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. Accordingly, comparing our operating results on a period-to-period basis may not be meaningful, and investors should not rely on any particular past results as an indication of our future performance. If such fluctuations occur or if our operating results deviate from our expectations or the expectations of investors or securities analysts, our stock price may be adversely affected.

We have generated limited revenue from the sale of products and, prior to January 1, 2021, had incurred losses in each year since we commenced operations in 1996. While we recognized net income of $3.4 million for the three months ended June 30, 2023, we recognized net loss of $20.9 million for the six months ended June 30, 2023. As of June 30, 2023, we had an accumulated deficit of $945.1 million.

With our investment in the launch and commercialization of HEPLISAV-B in the United States and Germany, we have in the past, and could in the future, incur operating losses. 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. We are ~~uncertain, can take many years~~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 ~~require~~shingles, and a Phase 2 clinical trial in plague in collaboration with and fully funded by the ~~expenditure~~U.S. Department of ~~substantial resources,~~Defense (“DoD”). We expect research and development costs to increase further if we add additional programs to our pipeline.

While new sales of CpG 1018 adjuvant generated significant revenue during the COVID-19 pandemic, we do not expect that such revenues will continue in the long term at the same scale, and we currently expect minimal to no CpG 1018 adjuvant revenue in 2023. The timing for uptake of our products in the U.S. and abroad may further affect costs or losses related to commercialization. Due to the numerous risks and uncertainties associated with developing and commercializing vaccine products or other products we may choose to offer in the future, we are unable to predict the ~~timing~~extent of any future losses or when, ~~regulatory approval~~if ever, we will become profitable on an annual recurring basis, or, that if we are able to reach consistent profitability that it will be sustainable for any period of time.

Many of our competitors have greater financial resources and expertise than we do. If we are unable to successfully compete with existing or potential competitors as a result of these disadvantages, we may be ~~received, if ever,~~unable to generate sufficient, or any, revenues and our business will be harmed.*

We compete with pharmaceutical companies, biotechnology companies, academic institutions and research organizations, in ~~any jurisdiction.~~

developing and marketing vaccines and adjuvants. For example, HEPLISAV-B competes in the U.S. with established hepatitis B vaccines marketed by Merck, GlaxoSmithKline plc (“GSK”) and VBI Vaccines Inc. ("VBI"), and with vaccines from those companies as well as several additional established pharmaceutical companies who market abroad. 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 ~~most advanced product,~~success or the success of our distributor in that market as well. In addition, HEPLISAV-B ~~on July 28, 2017 the FDA’s Vaccines and Related Biological Products Advisory Committee (“VRBPAC”) voted 12 to 1 (with 3 abstentions) that the safety data~~competes against Twinrix, a bivalent vaccine marketed by GSK for ~~HEPLISAV-B support licensure for immunization~~protection against hepatitis B ~~infection~~and hepatitis A.

We are also in ~~adults 18 years~~competition with companies developing vaccines and vaccine adjuvants, generally including, among others, GSK, Pfizer, Inc., Sanofi S.A., Merck, Bavarian Nordic A/S, Emergent BioSolutions, Inc., Novavax, Inc., Medicago Inc., Valneva, AstraZeneca plc, Moderna, Inc., Johnson & Johnson, VBI, Biontech SE and Curevo Vaccine. We will likely compete with several of ~~age~~these companies in the hepatitis space, Tdap space, shingles space and ~~older.~~ ~~A prior VRBPAC panel voted 13~~other spaces occupied by any other product candidates we ultimately choose to 1advance 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. Existing and potential competitors or other market participants may also compete with us for qualified commercial, scientific and management personnel, as well as for technology that ~~the immunogenicity data for HEPLISAV-B support approval~~would otherwise be advantageous to our business. Our success in developing marketable products and ~~thus the July 2017 VRBPAC was only asked to vote~~achieving a competitive position will depend, in part, on safety. The FDA is not bound by VRBPAC’s recommendations regarding safety and efficacy, but takes its advice into consideration when reviewing marketing applications. HEPLISAV-B has a Prescription Drug User Fee Act (“PDUFA”) date of November 9, 2017. There can be no assurance that the FDA will complete its review by that date and the review period could be further extended~~. In addition, unless we reach an agreement on the post-marketing study our BLA may not be approved or the study may result in a cost that restricts~~ our ability to ~~justify further investment~~attract and retain qualified personnel in the ~~product.~~ ~~Finally,~~ ~~despite the favorable VRBPAC vote, there can be no assurance that the FDA will~~near-term, particularly with respect to HEPLISAV-B commercialization. If we do not ~~issue a Complete Response Letter (“CRL”)~~succeed in ~~reconsidering~~attracting new personnel and retaining and motivating existing personnel, our ~~submission or otherwise further delay the review period.~~

~~In the U.S., our BLA must be approved by the FDA and corresponding applications to foreign regulatory agencies must be approved by those agencies before we~~operations may ~~sell the product in their respective geographic area. Obtaining approval of a BLA and corresponding foreign applications is highly uncertain~~suffer and we may ~~fail~~be unable to properly manage our business, obtain ~~approval. The BLA review process is extensive, lengthy, expensive~~financing as needed, enter into collaborative arrangements, advance or sell our product candidates or generate revenues.

We rely on our facility in Düsseldorf, Germany and ~~uncertain,~~third parties to supply materials or perform processes necessary to manufacture our products and our product candidates. We rely on a limited number of suppliers to produce the oligonucleotides we require for development and commercialization. Additionally, we have limited experience in manufacturing our products or product candidates in commercial quantities. With respect to HEPLISAV-B, we use a pre-filled syringe presentation of the vaccine and our ability to meet future demand will depend on our ability to manufacture or have manufactured sufficient supply in this presentation.

We rely on our facility in Düsseldorf and third parties to perform the multiple processes involved in manufacturing HEPLISAV-B surface antigens, the combination of the oligonucleotide and the ~~FDA or foreign regulatory agencies~~antigens, and formulation, fill and finish. We may ~~delay, limit or deny approval~~continue to do the same for any additional products we might add in the future through natural internal expansion of our ~~application~~pipeline, or in transactions

with an external third-party or parties. The FDA approved our pre-filled syringe presentation of HEPLISAV-B in 2018 and we expect such presentation will be the sole presentation for many reasons, including: whether the data from our clinical trials, including the Phase 3 results, or the development program are satisfactory to the FDA or foreign regulatory agency; disagreement with the number, design, size, conduct or implementation of our clinical trials or proposed post-marketing study, or a conclusion that the data fails to meet statistical or clinical significance or safety requirements; acceptability of data generated at our clinical trial sites that are monitored by third party contract research organizations (“CROs”); or a decision by the FDA not to approve our BLA despite an advisory committee recommendation of approval; and deficiencies in our manufacturing processes or facilities or those of our third party contract manufacturers and suppliers, if any. For example, we received two CRLs from the FDA previously in 2013 and 2016, respectively.HEPLISAV-B going forward. We have ~~responded~~limited experience in manufacturing and supplying this presentation ourselves, and rely on a contract manufacturer to ~~each CRL, but~~do so. 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. If our contract manufacturer is unable to source components needed to complete fill and finish of our pre-filled syringes, we may be required to identify a second source which would have ~~addressed~~associated costs and regulatory requirements. Qualifying a second source could take more than a year to accomplish. If we are unable to do all this, on a timely basis or at all, our HEPLISAV-B sales could be materially and adversely impacted.

Historically, we have also relied on a limited number of suppliers to produce oligonucleotides for clinical trials and a single supplier to produce (i) our CpG 1018 adjuvant for manufacture of HEPLISAV-B and for sale to our collaborators and (ii) our pre-filled syringe presentation. In 2021, we qualified a second supplier to manufacture CpG 1018 adjuvant for our COVID business, but we have a limited operating relationship with them. 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. We or other third parties may not be able to produce product at a cost, quantity and quality that are available from our current third-party suppliers, or at all.

In countries outside of the ~~outstanding~~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. Noncompliance with these regulations or other problems with our manufacturing process may limit or disrupt the commercialization of our products or our and our collaborators’ product candidates and could result in significant expense.

As we continue to focus on the commercializationof our HEPLISAV-B vaccine and our CpG 1018 adjuvant, we may encounter difficulties in managing our commercial growth and expanding our operations successfully.

As our commercial operations expand, we expect that we will also need to manage additional relationships with various third parties, including sole source suppliers, distributors, collaboration partners, wholesalers and hospital customers. Future growth will impose significant added responsibilities on our organization, in particular on management. 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. To that end, we may not be able to manage our growth efforts effectively, and hire, train, retain and integrate additional management, administrative and sales and marketing personnel, or secure sufficient or timely supply from third party service and product providers. Any failure to accomplish any of these activities could prevent us from successfully increasing or maintaining the same level of commercial growth as we have seen in the past.

If HEPLISAV-B or any products we develop are not accepted by the market or if regulatory agencies limit our labeling indications, require labeling content that diminishes market uptake of HEPLISAV-B or any other products we develop, or limit our marketing claims, we may be unable to generate significant future revenues, if any.*

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.

The degree of market acceptance of HEPLISAV-B and any of our future approved products will depend upon a number of factors, including:

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the indication for which the product is approved and its approved labeling;

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the presence of other competing approved products;

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the potential advantages of the product over existing and future treatment methods;

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the relative convenience and ease of administration of the product;

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the strength of our sales, marketing and distribution support;

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the price and cost-effectiveness of the product; and

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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 FDA ~~questions~~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. If we are unable to achieve approval or successfully market any of our products or product candidates, or marketing efforts are restricted by regulatory limits, our ability to generate revenue could be significantly impaired.

As our commercial business begins to expand in connection with commercial sales of HEPLISAV-B and 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. If, for any reason, whether due to reliance on third-party manufacturers or otherwise, we are unable to deliver timely, compliant products to our customers in quantities that meet our contractual obligations, we could be subject to lost revenue, contractual penalties, suits for damages, harm to our reputation or other problems that could materially and adversely affect our business. To the extent we add new products in the future, these risks could be exacerbated by the added complexity of managing multiple product lines.

As part of our business, we are working to develop our CpG 1018 adjuvant as a premier vaccine adjuvant through research collaborations, partnerships and supply arrangements. Current relationships and efforts are focused on adjuvanted vaccines for COVID-19, plague, Tdap, seasonal influenza, universal influenza and shingles. There are risks and uncertainties inherent in vaccine research and development, including the timing of completing vaccine development, the results of clinical trials, whether a vaccine will be approved for use, the extent of competition, government actions and whether a vaccine can be successfully manufactured and commercialized. As a result, these internal or collaborative efforts may not be as successful as we expect, or at all.

In addition, our collaborators have primary responsibility for the development, conduct of clinical trials, and for seeking and obtaining regulatory approval of potential vaccines, including any potential vaccine for COVID-19 containing our adjuvant. We have limited or no control over our collaborators’ decisions, including the amount and timing of resources that any of these collaborators will dedicate to such activities. In circumstances where our collaborators do not purchase as much adjuvant as we anticipate or they delay placing orders or taking certain deliveries, there can be a negative impact on our revenue recognition. If a collaborator fails to conduct collaborative activities successfully, the development and commercialization of a vaccine could be delayed, and may not occur at all. For example, as of June 30, 2023, all five of our collaborators have received emergency use authorization and one of them has received full approval from an applicable regulatory authority for a vaccine for COVID-19 containing our adjuvant. Even with approvals being received by our collaborators, whether for emergency use or full authorization, their ability to deliver, sell and collect on receivables is not guaranteed. This could, in turn, impact our own ability to collect receivables.

Furthermore, restrictive government actions related to potential waivers of intellectual property rights in the case of national emergencies or in other circumstances, such as imposition of compulsory licenses related to COVID-19 vaccines, as well as other regulatory initiatives, may result in a general weakening of our or our collaborators’ intellectual property protection or otherwise diminish or eliminate our or our collaborators’ ability to realize any commercial benefit from the development of a COVID-19 vaccine containing CpG 1018 adjuvant. This could, in turn, adversely impact the demand for CpG 1018 adjuvant over the long term, which could have a material adverse effect on our business, results of operations, and financial condition.

Our business and operations have been, and may continue to be, adversely affected by the ongoing COVID-19 global pandemic.

The COVID-19 pandemic, and government measures taken in response, have had a significant impact, both direct and indirect, on businesses and commerce, as it caused significant reductions in business-related activities. Supply chains have been disrupted, and manufacturing and clinical development activities have been curtailed or suspended. The principal purchasers of HEPLISAV-B, including independent hospitals and clinics, integrated delivery networks, public health clinics and prisons, the Departments of Defense and Veterans Affairs and retail pharmacies, all curtailed their day-to-day activities to some extent and at times ceased allowing or significantly reduced access to their facilities for non-COVID-19 related business. Thus, our field sales and medical

science employees are working a greater proportion of their working schedule from home and are facing additional demands on their time during the COVID-19 pandemic. The different quality of electronic interactions as compared with in-person interactions, as well as the reduced quantity of interactions during the COVID-19 pandemic, may reduce the effectiveness of our sales personnel, our customers’ procurement activities, as well as those of our collaborators.

During the peak of the COVID-19 pandemic, there was also a significant reduction in the utilization of adult vaccines (other than COVID-19 vaccines), including a reduced utilization of HEPLISAV-B which impacted sales of HEPLISAV-B. Even if utilization rates return to normal, as the COVID-19 pandemic continues to evolve and if new variants of the virus emerge, there may be future disruptions to demand for HEPLISAV-B. The overall magnitude of the disruption to our business will depend, in part, on the length and ongoing severity of any restrictions and other limitations on our ability to conduct our business in the ordinary course. Prolonged disruptions would likely materially and negatively impact our business, operating results and financial condition.

The COVID-19 pandemic continues to rapidly evolve, and new variants of the virus continue to emerge. While some vaccines have been approved, it is not clear whether, which, or to what extent these vaccines will protect against current or future variants of the virus in the long term. The extent to which the COVID-19 pandemic impacts our business, our future sales of HEPLISAV-B and our total revenue will depend on future developments that are highly uncertain and cannot be predicted with confidence, such as the ultimate geographic spread of the disease, the duration and severity of the outbreak including current and future variants, travel restrictions, quarantines, social distancing requirements and business closures in the United States and elsewhere, business or supply chain disruptions and the effectiveness of actions taken in the U.S. and elsewhere to contain and treat the disease. Accordingly, we do not yet know the full extent of potential delays or impacts on our business, operations or the global economy as a whole. However, these impacts could continue to adversely impact our business, financial condition, results of operations and growth prospects. In addition, to the extent the ongoing COVID-19 pandemic adversely affects our business and results of operations, it may also have the effect of heightening many of the other risks and uncertainties described elsewhere in this “Risk Factors” section.

In both domestic and foreign markets, our ability to achieve profitability will depend in part on the negotiation of a favorable price, as well as the availability of coverage and adequate reimbursement, from third-party payors, in particular for HEPLISAV-B, where existing products are already marketed. In the U.S., pricing for hepatitis B vaccines is currently stable and reimbursement is favorable as we believe private and public payors recognize the value of prophylaxis in this setting given the high costs of potential morbidity and mortality, and we have achieved coverage with most third-party payors. However, there is a risk that some payors may limit coverage to specific products on an approved list, also known as a formulary, which might not include HEPLISAV-B. Reimbursement or pricing in jurisdictions outside the U.S. may be less favorable. Thus, there can be no assurance that HEPLISAV-B will achieve and sustain stable pricing and favorable reimbursement. Even if favorable coverage and reimbursement status is attained for one or more products for which we or our collaborators receive regulatory approval, less favorable coverage policies and reimbursement rates may be implemented in the future. Our ability to successfully obtain and retain market share and achieve and sustain profitability will be significantly dependent on the market’s acceptance of a price for HEPLISAV-B sufficient to achieve profitability, and future acceptance of such pricing.

Third-party payors are increasingly challenging the price and cost-effectiveness of medical products and services, and pricing, as well as coverage and reimbursement decisions, may not allow our future products to compete effectively with existing competitive products. Because we intend to offer products, if approved, that involve new technologies, the willingness of third-party payors to reimburse for our products is uncertain. We will have to charge a price for HEPLISAV-B or any other products we commercialize that is sufficient to enable us to recover our considerable investment in product development and our operating costs. Further, coverage policies and third‑party reimbursement rates may change at any time. Therefore, even if favorable coverage and reimbursement status is attained, less favorable coverage policies and reimbursement rates may be implemented in the future. Adequate third-party payor reimbursement may not be available to enable us to maintain price levels sufficient to achieve profitability, and such unavailability could harm our future prospects and reduce our stock price.

The United Kingdom ("UK") and many EU Member States periodically review their reimbursement procedures for medicinal products, which could have an adverse impact on reimbursement status. 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. Moreover, in order to obtain reimbursement for our products in some European countries, including some EU Member States, we may be required to compile additional data comparing the cost-effectiveness of our products to other available therapies. 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. The outcome of an HTA will often influence the pricing and reimbursement status granted to these medicinal products by the competent authorities of individual EU Member States. The extent to which pricing and reimbursement decisions are influenced by the HTA of the specific medicinal product currently varies between EU Member States.

In December 2021, Regulation No 2021/2282 on HTA amending Directive 2011/24/EU, was adopted in the EU. This Regulation, which entered into force in January 2022 and will apply as of January 2025, is intended to boost cooperation among EU Member States in assessing health technologies, including new medicinal products, and providing the basis for cooperation at EU level for joint clinical assessments in these areas. The Regulation foresees a three-year transitional period and will permit EU Member States to use common HTA tools, methodologies, and procedures across the EU, working together in four main areas, including joint clinical assessment of the innovative health technologies with the most potential impact for patients, joint scientific consultations whereby developers can seek advice from HTA authorities, identification of emerging health technologies to identify promising technologies early, and continuing voluntary cooperation in other areas. Individual EU Member States will continue to be responsible for assessing non-clinical (e.g., economic, social, ethical) aspects of health technologies, and making decisions on pricing and reimbursement. If we are unable to maintain favorable pricing and reimbursement status in EU Member States for product candidates that we may successfully develop and for which we may obtain regulatory approval, any anticipated revenue from and growth prospects for those products in the EU could be negatively affected. In light of the fact that the United Kingdom has left the EU, Regulation No 2021/2282 on HTA will not apply in the United Kingdom. However, the UK Medicines and Healthcare products Regulation Agency (“MHRA”) is working with UK HTA bodies and other national organizations, such as the Scottish Medicines Consortium (“SMC”), the National Institute for Health and Care Excellence (“NICE”), and the All-Wales Medicines Strategy Group,to introduce new pathways supporting innovative approaches to the safe, timely and efficient development of medicinal products. For example, in March 2021, the UK introduced the Innovative Licensing and Access Pathways (“ILAP”) which brings together the MHRA, NICE, SMC and the All Wales Therapeutics and Toxicology Centre, to accelerate time to market for certain innovative products.

Legislators, policymakers and healthcare insurance funds in the EU and the United Kingdom may continue to propose and implement cost-containing measures to keep healthcare costs down, particularly due to the financial strain that the COVID-19 pandemic has placed on national healthcare systems of European countries. These measures could include limitations on the prices we would be able to charge for product candidates that we may successfully develop and for which we may obtain regulatory approval or the level of reimbursement available for these products from governmental authorities or third-party payors. Further, an increasing number of EU and other foreign countries use prices for medicinal products established in other countries as “reference prices” to help determine the price of the product in their own territory. Consequently, a downward trend in prices of medicinal products in some countries could contribute to similar downward trends elsewhere.

We are subject to ongoing FDA, EU and comparable foreign post-marketing obligations concerning HEPLISAV-B, which may result in significant additional expense, and we may be subject to penalties if we fail to comply with regulatory requirements or experience unanticipated regulatory issues with HEPLISAV-B.*

Our HEPLISAV-B regulatory approval in the United States is subject to certain post-marketing obligations and commitments to the FDA. For example, we were required to conduct an observational comparative study of HEPLISAV-B to Engerix-B to assess occurrence of acute myocardial infarction (“AMI”). This post-marketing study was initiated in August 2018 and concluded in November 2020. 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. Also, we received data from the autoimmune portion of our observational study, and the data indicated no association between HEPLISAV-B and any of the studied autoimmune diseases. We are also conducting a pregnancy registry study to provide information on outcomes following pregnancy exposure to HEPLISAV-B. This study requires significant effort and resources, and failure to timely conduct and/or complete the study to the satisfaction of the FDA could result in withdrawal of our biologics license application approval, which would have a material adverse effect on our business, results of operations, financial condition and prospects. As we advance our pipeline, similar studies may be required for other candidates. 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.

Similar post-marketing obligations and commitments exist in the European Union and the United Kingdom. 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. In addition, in accordance with our EU marketing authorization for HEPLISAV-B, HEPLISAV-B is subject to additional monitoring, meaning that it is monitored more intensively than other medicinal products. We may have similar obligations for future products if and when approved. Non-compliance with European Union or United Kingdom requirements regarding safety monitoring or pharmacovigilance can result in significant financial penalties.

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 (“cGMP”), good clinical practices (“GCP”), International Conference on Harmonization guidelines, and good laboratory practices (“GLP”). 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. 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. If any of our product candidates in clinical trials or similar products from competitors produce serious adverse event data, we may be required to delay, discontinue or modify our clinical trials or our clinical trial strategy, or significantly reevaluate strategic alternatives. If a safety risk based on mechanism of action or the molecular structure were identified, it may hinder our ability to develop our product candidates or enter into potential collaboration or commercial arrangements. Rare diseases and a numerical imbalance in cardiac adverse events have been observed in patients in our clinical trials. If adverse event data are found to apply to our TLR agonist as a whole, we may be required to significantly reduce or discontinue our operations.

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. Manufacturers and suppliers of key components and materials must be named in a Biologics License Application (“BLA”) submitted to the FDA for any product candidate for which we are seeking FDA approval. Additionally, third-party manufacturers and suppliers and any manufacturing facility must undergo a pre-approval inspection before we can obtain marketing authorization for any of our product candidates. Even after a manufacturer has been qualified by the FDA, the manufacturer must continue to expend time, money and effort in the area of production and quality control to ensure full compliance with GMP. Manufacturers are subject to regular, periodic inspections by the FDA following initial approval. Further, to the extent that we contract with third parties for the manufacture of our products or product candidates, our ability to control third-party compliance with FDA requirements will be limited to contractual remedies and rights of inspection.

If, as a result of the FDA’s inspections, it determines that the equipment, facilities, laboratories or processes do not comply with applicable FDA regulations and conditions of product approval, the FDA may not approve the product or may suspend the manufacturing operations. If the manufacturing operations of any of the suppliers for our products or product candidates are suspended, we may be unable to generate sufficient quantities of commercial or clinical supplies of product to meet market demand, which would harm our business. In addition, if delivery of material from our suppliers is interrupted for any reason, we might be unable to ship our approved product for commercial supply or to supply our products in development for clinical trials. Significant and costly delays can occur if the qualification of a new supplier is required.

Failure to comply with regulatory requirements could prevent or delay marketing approval or require the expenditure of money or other resources to correct. Failure to comply with applicable requirements may also result in warning letters, fines, injunctions, civil penalties, recall or seizure of products, total or partial suspension of production, refusal of the government to renew marketing applications and criminal prosecution, any of which could be harmful to our ability to generate revenues and to our stock price.

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. Any such requirements or requests could:

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adversely affect our ability to timely and successfully commercialize or market these product candidates;

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result in significant additional costs;

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potentially diminish any competitive advantages for those products;

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potentially limit the markets for those products;

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adversely affect our ability to enter into collaborations or receive milestone payments or royalties from potential collaborators;

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cause us to abandon the development of the affected product candidate; or

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limit our ability to obtain additional financing on acceptable terms, if at all.

Clinical trials for our commercial product and product candidates are expensive and time consuming, may take longer than we expect or may not be completed at all, and have uncertain outcomes.

Clinical trials, including post-marketing studies, to generate sufficient data to meet FDA and other regulatory agency requirements are expensive and time consuming, may take more time to complete than expected or may not be completed, and may not have favorable outcomes if they are completed. In addition, results from smaller, earlier stage clinical studies may not be representative of larger, controlled clinical trials that would be required in order to obtain regulatory approval of a product candidate.

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. Participant enrollment is a function of many factors, including the size of the relevant population, the proximity of participants to clinical sites, the eligibility criteria for the trial, the existence of competing clinical trials and the availability of alternative or new treatments. 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.

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. 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. 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:

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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;

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our perceived shortage of capital resources may impact the willingness of companies to collaborate with us;

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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;

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our partners may choose to pursue alternative technologies, including those of our competitors;

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we may have disputes with a partner that could lead to litigation or arbitration;

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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;

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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;

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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;

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our partners may not devote sufficient capital or resources towards our product candidates; and

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our partners may not comply with applicable government regulatory requirements.

Supporting diligence activities conducted by potential collaborators and negotiating the financial and other terms of a collaboration agreement are long and complex processes with uncertain results. Even if we are successful in entering into one or more collaboration agreements, collaborations may involve greater uncertainty for us, as we may have less control over certain aspects of our collaborative programs than we do over our proprietary development and commercialization programs, and the financial terms upon which collaborators may be willing to enter into such an arrangement cannot be certain.

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. Despite our efforts, we may be unable to secure collaborative arrangements. If we are unable to establish and maintain collaborative relationships on acceptable terms or to successfully transition terminated collaborative agreements, we may have to delay or discontinue further development of one or more of our product candidates, undertake development and commercialization activities at our own expense or find alternative sources of capital.

Until we are able to generate significant revenues or achieve profitability through product sales on a consistent basis, we may require substantial additional capital to finance our operations.*

As of June 30, 2023, we had $681.5 million in cash and cash equivalents, and marketable securities. Prior to January 1, 2021, we incurred net losses in each year since our inception. While we recorded net income of $3.4 million for the three months ended June 30, 2023, we recorded net loss of $20.9 million for the six months ended June 30, 2023. As of June 30, 2023, we had an accumulated deficit of $945.1 million. We cannot be certain that sales of our products, and the revenue from our other activities will sustainable and past results are not a reliable indicator of future performance. 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. If we cannot generate a sufficient amount of revenue from product sales, we may need to finance our operations through strategic alliance and licensing arrangements and/or future public or private debt and equity financings. Raising additional funds through the issuance of equity or debt securities could result in dilution to our existing stockholders, increased fixed payment obligations, or both. In addition, these securities may have rights senior to those of our common stock and could include covenants that restrict our operations.

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

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. Because of minimum or advance purchase commitments and uncertainty about the expected demand for HEPLISAV-B or CpG 1018 adjuvant, the financial commitments we make to our CMOs to support manufacturing may not be recovered in their entirety, or at all, if our customers do not ultimately purchase from us at expected volumes, or other concessions are made by us. As a result, we could end up making financial commitments that we never recover if demand for HEPLISAV-B or CpG 1018 adjuvant does not materialize in the volumes we are expecting or at all. This may require us to record certain charges or write-offs in one or more fiscal periods, which in turn could result in significant, unexpected fluctuations in our quarterly and annual operating results, and potentially have a material adverse effect on our results of operations, and financial condition.

As we maintain the requisite capacity to manufacture our CpG 1018 adjuvant to support potential vaccine collaborations in response to COVID-19 and other initiatives, we have been in the past, and in the future may be, required to make significant financial commitments to reserve manufacturing capacity at our CMOs. 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.

As a result of the foregoing, we could end up making financial commitments that we never recover if demand for our products do not materialize in the volumes we are expecting, or at all. This may require us to record certain charges or write-offs in one or more fiscal periods, which in turn could result in significant, unexpected fluctuations in our quarterly and annual operating results, and potentially have a material adverse effect on our results of operations, and financial condition. For example, in August and October 2022, we entered into amendments 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 that we originally intended to deliver in accordance with a purchase order previously issued by Clover. As a result of the concessions made in the amendments to the Clover Supply Agreement, prior financial commitments made to certain CMOs to manufacture quantities of CpG 1018 adjuvant to fulfill the original Clover purchase order, and reduced demand for CpG 1018 adjuvant, in 2022, we recorded write-offs of $13.9 million of CpG 1018 adjuvant raw materials inventory and $20.4 million of finished goods inventory during the year ended December 31, 2022. Relating to our Bio E Supply Agreement, we entered into an amendment and an assignment agreement in April 2023, pursuant to which (i) CEPI has forgiven the entirety of remaining amounts outstanding relating to the Bio E CEPI Advance Payments for CpG 1018 Materials allocated to Bio E and has assumed our previous rights to collect $47.4 million of Bio E accounts receivable, (ii) we collected $13.5 million from Bio E and (iii) there is an accounts receivable balance of $1.0 million (net of allowance for doubtful accounts of $12.3 million) as of June 30, 2023, which we expect to collect in August 2023, and we booked the derecognition of $47.4 million CEPI accrual in connection with the Bio E CEPI Advance Payments. It is possible we may have similar write-offs in the future.

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. Developing, seeking regulatory approval for and marketing our product candidates outside of the U.S., the European Union and Great Britain 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. International operations are subject to risk, including:

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the difficulty of managing geographically distant operations, including recruiting and retaining qualified employees, locating adequate facilities and establishing useful business support relationships in the local community;

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compliance with varying international regulatory requirements, laws and treaties;

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securing international distribution, marketing and sales capabilities upon favorable terms;

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adequate protection of our intellectual property rights;

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obtaining regulatory and pricing approvals at a level sufficient to justify commercialization;

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legal uncertainties and potential timing delays associated with tariffs, export licenses and other trade barriers;

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foreign tax compliance and diverse tax consequences;

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the fluctuation of conversion rates between foreign currencies and the U.S. dollar; and

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regional and geopolitical risks.

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. In addition, there is the risk that we may not receive approval in one or more jurisdictions, even if we undertake these efforts.

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 ~~U.S.~~

~~In February 2014,~~United States, the European Union and Great Britain. If we ~~announced~~are unable to successfully manage our ~~withdrawal~~international operations, we may incur significant unanticipated costs and delays in regulatory approval or commercialization of our ~~Marketing Authorization Application~~products or product candidates, which would impair our ability to generate revenues.

We rely on clinical research organizations (“~~MAA”~~CROs”) and clinical sites and investigators for our clinical trials. If these third parties do not fulfill their contractual obligations or meet expected deadlines, our planned clinical trials may be delayed and we may fail to obtain the regulatory approvals necessary to commercialize our product candidates.

We rely on CROs, clinical sites and investigators for our clinical trials. If these third parties do not perform their obligations or meet expected deadlines our planned clinical trials may be extended, delayed, modified or terminated. While we maintain oversight over our clinical trials and conduct regular reviews of the data, we are dependent on the processes and quality control efforts of our third-party contractors to ensure that clinical trials are conducted properly and that detailed, quality records are maintained to support the results of the clinical trials that they are conducting on our behalf. Any extension, delay, modification or termination of our clinical trials or failure to ensure adequate documentation and the quality of the results in the clinical trials could delay or otherwise adversely affect our ability to commercialize our product candidates and could have a material adverse effect on our business and operations.

As a biopharmaceutical company, we engage CROs to conduct clinical studies, and failure by us or our CROs to conduct a clinical study in accordance with GCP standards and other applicable regulatory requirements could result in disqualification of the applicable clinical trial from consideration in support of approval of ~~HEPLISAV-B~~a potential product.

We are responsible for conducting our clinical trials consistent with GCP standards and for oversight of our vendors to ensure that they comply with such standards. We depend on medical institutions and CROs to conduct our clinical trials in compliance with GCP. To the ~~EMA,~~extent that we or they fail to comply with GCP standards, fail to enroll participants for our clinical trials, or are delayed for a significant time in ~~part because~~ the ~~required time frame for response~~execution of our trials, including achieving full enrollment, we may be affected by increased costs, program delays or both, which may harm our business.

Clinical trials must be conducted in accordance with FDA or other applicable foreign government guidelines and are subject to oversight by the FDA, other foreign governmental agencies, IRBs and the Ethics Committees at the medical institutions where the clinical trials are conducted. In addition, clinical trials must be conducted with supplies of our product candidates produced under ~~the MAA procedure was not long enough to permit the collection~~GMP and other requirements in foreign countries and may require large numbers of ~~the necessary clinical data.~~participants.

In addition, we obtain guidance from regulatory authorities on certain aspects of our clinical development activities and seek to comply with written guidelines provided by the authorities. These discussions and written guidelines are not binding obligations on the part of the regulatory authorities and the regulatory authorities may require additional patient data or studies to be conducted. Regulatory authorities may revise or retract previous guidance during the course of a clinical trial or after completion of the trial. 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.

~~Failure to receive approval or significant~~ additional delay in obtaining an FDA approval decision by the anticipated new November 9, 2017 PDUFA date for HEPLISAV-B would have a material adverse effect on our business and results of operations, including possible termination of HEPLISAV-B development and ~~focusing~~ our business on our earlier stage clinical and research immuno-oncology programs. During the pendency of an FDA decision on approval, we expect to increase expenditures relating to HEPLISAV-B in anticipation of potential approval. Even if HEPLISAV-B is approved, the labeling approved by the relevant regulatory authority may negatively impact the potential commercial opportunity for this product, including restricting how and to whom we and our potential partners, if any, may market the product or the manner in which our HEPLISAV-B product may be administered and sold, which could limit the potential for entering into a partnership and commercial opportunity for such product.

Before granting product approval, the FDA must determine that our or our third party contractors’ manufacturing facilities meet GMP requirements before we can use them in the commercial manufacture of our products. We and all of our contract manufacturers are required to comply with the applicable GMP regulations. Manufacturers of biological products must also comply with the FDA’s general biological product standards. In addition, GMP regulations require quality control and quality assurance as well as the corresponding maintenance of records and documentation sufficient to ensure the quality of the approved product. Failure to comply with the statutory and regulatory requirements subjects the manufacturer to possible legal or regulatory action, such as delay of approval, suspension of manufacturing, seizure of product or voluntary recall of a product.

The FDA may require more clinical trials for our product candidates than we currently expect or are conducting before granting regulatory approval, if regulatory approval is granted at all. Our clinical trials may be extended which may lead to substantial delays in the regulatory approval process for our product candidates, which will impair our ability to generate revenues.

Our registration and commercial timelines depend on further discussions with the FDA and corresponding foreign regulatory agencies and requirements and requests they may make for additional data or completion of additional clinical trials. Any such requirements or requests could:

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~~adversely affect our ability to timely and successfully commercialize or market these product candidates;~~

~~result in significant additional costs;~~

~~potentially diminish any competitive advantages for those products;~~

~~potentially limit the markets for those products;~~

~~adversely affect our ability to enter into collaborations or receive milestone payments or royalties from potential collaborators;~~

~~cause us to abandon the development of the affected product candidate; or~~

~~limit our ability to obtain additional financing on acceptable terms, if at all.~~

Clinical trials for our product candidates are expensive and time consuming, may involve combinations with other agents, may take longer than we expect or may not be completed at all, and their outcomes are uncertain.*

Clinical trials, including post-marketing studies, to generate sufficient data to meet FDA requirements can be expensive and time consuming. With respect to HEPLISAV-B, the FDA has requested additional information regarding our proposed post-marketing study. Unless we reach an agreement on the post-marketing study, our BLA may not be approved or the study may result in a cost that restricts our ability to justify further investment in the product.

~~We are currently undertaking clinical trials of SD-101 and DV281, including combination studies with other oncology agents,~~ and expect to commence clinical trials for other product candidates in our immuno-oncology pipeline in the future. Our strategy with respect to development of SD-101 and DV281 involves combination studies with other oncology agents. While we believe that this combination agent approach increases the potential for success, these clinical trials are dependent on continuing access to the other oncology agents, and for combination studies that are pursuant to a collaboration they are contingent on agreement with our combination agent study partners regarding the use of the other agents, concurrence on a protocol and supply of clinical materials. Most of our combination agent study partners, such as Merck, are significantly larger than we are and are conducting various other combination studies with other immuno-oncology agents and collaborators. We are not certain these clinical trials will be successful, or that even if successful we would be able to reach agreement to conduct larger, more extensive clinical trials required to achieve regulatory approval for a combination product candidate regimen. In addition, results from smaller, earlier stage clinical studies may not be representative of larger, controlled clinical trials that would be required in order to obtain regulatory approval of a product candidate or a combination of product candidates.

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”) or regulatory approval to conduct a clinical trial at a prospective site, unexpected adverse events and shortages of available drug supply. Participant enrollment is a function of many factors, including the size of the relevant population, the proximity of participants to clinical sites, the eligibility criteria for the trial, the existence of competing clinical trials and the availability of alternative or new treatments.

Failure by us or our CROs to conduct a clinical study in accordance with GCP standards and other applicable regulatory requirements could result in disqualification of the clinical trial from consideration in support of approval of a potential product.

We are responsible for conducting our clinical trials consistent with GCP standards and for oversight of our vendors to ensure that they comply with such standards. We depend on medical institutions and CROs to conduct our clinical trials in compliance with GCP. To the extent that they fail to comply with GCP standards, fail to enroll participants for our clinical trials, or are delayed for a significant time in the execution of our trials, including achieving full enrollment, we may be affected by increased costs, program delays or both, which may harm our business.

Clinical trials must be conducted in accordance with FDA or other applicable foreign government guidelines and are subject to oversight by the FDA, other foreign governmental agencies and IRBs at the medical institutions where the clinical trials are conducted. In addition, clinical trials must be conducted with supplies of our product candidates produced under GMP and other requirements in foreign countries, and may require large numbers of participants.

The FDA or other foreign ~~governmental~~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;~~

•

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;~~

•

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;~~

•

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 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;~~

•

the inability to produce or obtain sufficient quantities of a product candidate to complete the trials;

•

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;~~

•

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 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 therapy, lack of efficacy or personal issues, or who are lost to further follow-up.

•

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.

In addition, we may experience significant setbacks in advanced clinical trials, even after promising results in earlier trials, such as unexpected adverse events that occur when our product candidates are ~~combined with other therapies and drugs or~~ given to larger patient populations, which often occur in later-stage clinical trials, or less favorable clinical outcomes. ~~In addition,~~Moreover, clinical results are frequently susceptible to varying interpretations that may delay, limit or prevent regulatory approvals. Also, patient advocacy groups and parents of trial participants may demand additional clinical trials or continued access to drug even if our interpretation of clinical results received thus far leads us to determine that additional clinical trials or continued access are unwarranted. Any disagreement with patient advocacy groups or parents of trial participants may require management’s time and attention and may result in legal proceedings being instituted against us, which could be expensive, time-consuming and distracting, and may result in delay of the program.

Negative or inconclusive results or adverse medical events, including participant fatalities that may be attributable to our product candidates, during a clinical trial may necessitate that it be redesigned, repeated or terminated. Further, some of our clinical trials may be overseen by a Data Safety Monitoring Board (“DSMB”), and the DSMB may determine to delay or suspend one or more of these trials due to safety or futility findings based on events occurring during a clinical trial. Any such delay, suspension, termination or request to repeat or redesign a trial could increase our costs and prevent or significantly delay our ability to commercialize our product candidates. Even if we complete all such activities without issue, final results may not actually support approval of a particular product candidate.

~~HEPLISAV-B, SD-101~~

Our ability to use our net operating loss carryforwards and ~~most of our earlier stage programs rely on oligonucleotide TLR agonists. Serious adverse event data relating to TLR agonists may require us to reduce the scope of or discontinue our operations.~~

Most of our programs, including our most advanced such as HEPLISAV-B and SD-101, incorporate TLR9 agonist CpG oligonucleotides. If any of our product candidates in clinical trials or similar products from competitors produce serious adverse event data, weother tax attributes may be required to delay, discontinue or modify many of our clinical trials or our clinical trial strategy. If a safety risk based on mechanism of action or the molecular structure were identified, it may hinder our ability to develop our product candidates or enter into potential collaboration or commercial arrangements. Rare diseases and a numerical imbalance in cardiac adverse events have been observed in patients in our clinical trials. If adverse event data are found to apply to our TLR agonist and/or inhibitor technology as a whole, we may be required to significantly reduce or discontinue our operations.limited.*

We have ~~no commercialization experience,~~incurred significant net operating losses ("NOLs") during our history, and the time and resources to reinstitute manufacturing and develop sales, marketing and distribution capabilities for HEPLISAV-B are significant. If we fail to achieve and sustain commercial success for HEPLISAV-B, either independently or with a partner, our business would be harmed.*

If our most advanced product candidate, HEPLISAV-B, is approved by the FDA, we will need to establish sales, marketing and distribution capabilities, or make arrangements with third parties to perform these services. These efforts will require resources and time and wedespite recent profitability, may not be able to achieve ~~these capabilities~~sustained profitability over the long term. Unused U.S. federal NOLs for taxable years beginning before January 1, 2018 may be carried forward to offset future taxable income, if any, until such unused NOLs expire. Under legislation enacted in 2017, as modified by legislation enacted in 2020, U.S. federal NOLs incurred in taxable years beginning after December 31, 2017 can be carried forward indefinitely, but the deductibility of such U.S. federal NOLs in taxable years beginning after December 31, 2020 is limited to 80% of taxable income. It is uncertain if and to what extent various states will conform to the aforementioned U.S. tax law provisions.

In addition, under Section 382 of the Internal Revenue Code of 1986, as amended, and corresponding provisions of state law, if a corporation undergoes an “ownership change,” which is generally defined as one or ~~enter into these arrangements on acceptable terms~~more stockholders or groups of stockholders who own at least 5% of our stock increasing their ownership by more than 50 percentage points over their lowest ownership percentage within a rolling three-year period, the corporation’s ability to use its pre-change NOL carryforwards to offset its post-change income or taxes may be limited. We have experienced ownership changes as a result of shifts in our stock ownership in the past, and in ~~a timely manner. In particular, significant resources~~the future it is possible that we may be ~~necessary~~deemed to ~~successfully market, sell and distribute HEPLISAV-B to patients with diabetes,~~have experienced additional ownership changes as a ~~group recommended by the Centers for Disease Control (“CDC”) and Advisory Committee on Immunization Practices (“ACIP”) to receive hepatitis B vaccination.~~

~~Factors that may inhibit~~result of shifts in our ~~efforts to commercialize HEPLISAV-B include:~~

~~our inability to recruit and retain adequate numbers~~stock ownership, some of ~~effective sales and marketing personnel;~~

~~the inability of sales personnel to obtain access to or persuade adequate numbers of physicians to prescribe our products;~~

~~the lack of complementary products to be offered by sales personnel,~~ which may ~~put us at a competitive disadvantage relative to companies with more extensive product lines; and~~

~~unforeseen costs and expenses associated with creating and sustaining an independent sales and marketing organization.~~

To the extent we rely on other pharmaceutical or biotechnology companies with established sales, marketing and distribution systems to market HEPLISAV-B, we will need to establish and maintain partnership arrangements, and we may not be ~~able to enter into these arrangements on acceptable terms. To the extent that we enter into co-promotion or other arrangements, any revenues we receive will depend upon the efforts~~outside of ~~third parties, which may not be successful and are only partially in~~ our control. ~~In that event, our product revenues would likely be lower than if we marketed and sold our products directly.~~

Moreover, our pricing and reimbursement strategies with respect to our initial approval plans for HEPLISAV-B may significantly impact our ability to achieve commercial success in this potential patient population. Our ability to successfully obtain any market share and obtain profitability will be significantly dependent on our ability to invest appropriate resources inThis could limit the ~~marketing and launch~~amount of ~~our product as well as the market’s acceptance of a sufficient price for HEPLSIAV-B to achieve profitability.~~

In addition, although we currently believe that we have sufficient inventory of HEPLISAV-B to launch the product, since we previously reduced our manufacturing efforts with respect to HEPLISAV-B following the 2016 CRL, we will have to restart production for the manufacture HEPLISAV-B in order to continue to supply product for use following launch. There can be no assurances that our estimates regarding product necessary to launch HEPLISAV-B will be sufficient orNOLs that we can ~~successfully manufacture sufficient quantities~~utilize annually to offset future taxable income or tax liabilities. Subsequent ownership changes and changes to the U.S. tax rules in ~~compliance with GMP~~respect of the utilization of NOLs may further affect the limitation in ~~order to meet market demand.~~ future years. In addition, at the state level, there may be periods during which the use of NOLs is suspended or otherwise limited, which could accelerate or permanently increase state taxes owed.

If we, or our partners, if any, are not successful in setting our marketing, pricing and reimbursement strategy, recruiting sales and marketing personnel or in building a sales and marketing infrastructure, we will have difficulty commercializing HEPLISAV-B, which would

Tax law changes could adversely affect our business and financial condition. ~~To the extent we rely on other pharmaceutical or biotechnology companies with established~~

New income, sales, marketing and distribution systems to market HEPLISAV-B, we will need to establish and maintain partnership arrangements, and we may not be able to enter into these arrangements on acceptable terms or at all. To the extent that we enter into co-promotionuse or other ~~arrangements,~~tax laws, statutes, rules, regulations or ordinances could be enacted at any time, which could adversely affect our business operations and financial performance. Further, existing tax laws, statutes, rules, regulations or ordinances could be interpreted, changed, modified or applied adversely to us. For example, legislation informally titled the Tax Cuts and Jobs Act of 2017, the 2020 Coronavirus Aid, Relief, and Economic Security Act, and the 2022 Inflation Reduction Act enacted many significant changes to the U.S. tax laws. Future guidance from the Internal Revenue Service and other tax authorities with respect to such legislation may affect us, and certain ~~revenues we receive will depend upon the efforts of third parties, which may not be successful and are only partially in our control.~~

~~We rely on our facility in Düsseldorf, Germany~~and third parties to supply materials or perform processes necessary to manufacture our product candidates. We rely on a limited number of suppliers to produce the oligonucleotides we require for development and commercialization. Additionally, we have limited experience in manufacturing our product candidates in commercial quantities.*

~~We rely on our facility in Düsseldorf and third parties to perform the multiple processes involved in manufacturing our product candidates, including 1018 and SD-101, certain antigens, the combination~~aspects of the ~~oligonucleotide~~foregoing tax legislation could be repealed or modified in future legislation. In addition, it is uncertain if and to what extent various states will conform to such legislation or any newly enacted federal tax legislation. Changes in corporate tax rates, the realization of net deferred tax assets relating to our operations, the taxation of foreign earnings, and the ~~antigens, and~~deductibility of expenses under past or future reform legislation could have a material impact on the ~~formulation, fill and finish. In connection with~~value of our restructuring in January 2017, we elected to retain, but furlough, the majority of the workforce in Düsseldorf supporting the manufacture of HEPLISAV-B and utilize the existing stockpiled inventory of HEPLISAV-B to meet expected initial demand if the product is approved. If HEPLISAV-B is approved, we will need to re-activate and qualify our facility in Düsseldorf. If expected initial demand exceeds our estimates, this may result in a shortage until we can begin manufacturing. Regulatory or other limitations on our ability to re-activate our manufacturing facility, or the termination or interruption of relationships with key suppliers may result in higher cost or delays in our product development or commercialization efforts.

We have also relied on a limited number of suppliers to produce oligonucleotides for clinical trials and a single supplier to produce our 1018 for HEPLISAV-B. To date, we have manufactured only small quantities of oligonucleotides ourselves for development purposes. If we were unable to maintain our existing suppliers for 1018 and SD-101, we would have to establish an alternate qualified manufacturing capability, which would result in significant additional operating costs and delays in developing and commercializing our product candidates, particularly HEPLISAV-B. We or other third parties may not be able to produce product at a cost, quantity and quality that are available from our current third-party suppliers or at all.

We utilize our facility in Düsseldorf to manufacture rHBsAg for HEPLISAV-B. The commercial manufacturing of biological products is a time-consuming and complex process, which must be performed in compliance with GMP regulations. There ~~can be no assurance that the FDA will find our manufacturing controls and facilities to be acceptable to support the approval of HEPLISAV-B.~~

In addition, 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. Noncompliance with these regulations or other problems with our manufacturing process may limit, delay or disrupt the commercialization of HEPLISAV-B or our other product candidates anddeferred tax assets, could result in significant one-time charges, and could increase our future U.S. tax expense.

~~If we receive regulatory approval for our product candidates, we will be~~

We are subject to ~~ongoing FDA~~stringent and ~~foreign regulatory~~changing obligations related to data privacy and ~~continued regulatory review.~~

~~We and our third party manufacturers and suppliers are required~~security. Our actual or perceived failure to comply with ~~applicable GMP~~such obligations could lead to regulatory investigations or actions; litigation; fines and penalties; disruptions of our business operations; reputational harm; loss of revenue or profits; loss of customers or sales; and other adverse business consequences.

In the ordinary course of business, we process personal data and other sensitive information, including our proprietary and confidential business data, trade secrets, intellectual property, data we may collect about trial participants in connection with clinical trials, and other sensitive data. Our data processing activities subject us to numerous data privacy and security obligations, such as various laws, regulations, guidance, industry standards, external and internal privacy and security policies, contracts, and other obligations that govern the processing of personal data by us and on our behalf.

In the United States, federal, state, and local governments have enacted numerous data privacy and security laws, including data breach notification laws, personal data privacy laws, consumer protection laws (e.g., Section 5 of the Federal Trade Commission Act), and other similar laws (e.g., wiretapping laws). For example, the California Consumer Privacy Act of 2018 (“CCPA”) requires businesses to provide specific disclosures in privacy notices and honor requests of California residents to exercise certain privacy rights. The CCPA provides for civil penalties of up to $7,500 per violation and allows private litigants affected by certain data breaches to recover significant statutory damages. In addition, the California Privacy Rights Act of 2020 (“CPRA”), which became operative January 1, 2023, will expand the CCPA’s requirements, including applying to personal information of business representatives and employees and establishing a new regulatory agency to implement and enforce the law. Other states, such as Virginia and Colorado, have also passed comprehensive privacy laws, and similar laws are being considered in several other states, as well as at the federal and local levels. These developments may further complicate compliance efforts and may increase legal risk and compliance costs for us and the third parties upon whom we rely.

Outside the United States, an increasing number of laws, regulations, and industry standards may govern data privacy and security. For example, the European Union’s General Data Protection Regulation (“EU GDPR”), the United Kingdom’s General Data Protection Regulation (“UK GDPR”), Brazil’s General Data Protection Law (Lei Geral de Proteção de Dados Pessoais, or “LGPD”) (Law No. 13,709/2018), and China’s Personal Information Protection Law (“PIPL”) impose strict requirements for processing personal data. For example, under the EU GDPR, companies may face temporary or definitive bans on data processing and other ~~international regulatory requirements. The regulations require that our product candidates be manufactured and records maintained in a prescribed manner with respect~~corrective actions; fines of up to ~~manufacturing, testing and quality control/quality assurance activities.~~ ~~Manufacturers and suppliers~~20 million Euros or 4% of ~~key components and materials must be named in a BLA submitted~~annual global revenue, whichever is greater; or private litigation related to ~~the FDA for any product candidate for which we are seeking FDA approval. Additionally, third party~~ ~~manufacturers and suppliers and any manufacturing facility must undergo a pre-approval inspection before we can obtain marketing authorization for any~~processing of ~~our product candidates. Even after a manufacturer has been qualified~~personal data brought by ~~the FDA, the manufacturer must continue~~classes of data subjects or consumer protection organizations authorized at law to expend time, money and effort in the area of production and quality control to ensure full compliance with GMP. Manufacturers are subject to regular, periodic inspections by the FDA following initial approval. Further, to the extent that we contract with third parties for the manufacture of our products, our ability to control third-party compliance with FDA requirements will be limited to contractual remedies and rights of inspection.represent their interests.

If, as a result of the FDA’s inspections, it determines that the equipment, facilities, laboratories or processes do not comply with applicable FDA regulations and conditions of product approval, the FDA may not approve the product or may suspend the manufacturing operations. If the manufacturing operations of any of the suppliers for our product candidates are suspended,In addition, we may be unable to ~~generate sufficient quantities of commercial or clinical supplies of product~~transfer personal data from the EEA and other jurisdictions to meet market demand, which would harm our business. In addition, if delivery of material from our suppliers were interrupted for any reason, we might be unable to ship our approved product for commercial supply or to supply our products in development for clinical trials. Significant and costly delays can occur if the ~~qualification of a new supplier is required.~~

~~Failure to comply with regulatory requirements could prevent or delay marketing approval or require the expenditure of money~~United States or other ~~resources~~countries due to ~~correct. Failure to comply with applicable~~data localization requirements ~~may also result in warning letters, fines, injunctions, civil penalties, recall~~ or seizure of products, total or partial suspension of production, refusal of the government to renew marketing applications and criminal prosecution, any of which could be harmful to our ability to generate revenues and our stock price.

~~Any regulatory approvals~~limitations on cross-border data flows. Although there are various mechanisms that ~~we receive for our product candidates are likely to contain requirements for post-marketing follow-up studies, which~~ may be ~~costly. Product approvals, once granted, may be modified based on~~used in some cases to lawfully transfer personal data ~~from subsequent studies~~to the United States or ~~commercial use. As a result, limitations on labeling indications or marketing claims, or withdrawal from the market may be required if problems occur after approval~~other countries, these mechanisms are subject to

legal challenges and ~~commercialization.~~

We face uncertainty regarding coverage, pricing and reimbursement and the practices of third party payors, which may make it difficult or impossible to sell our product candidates on commercially reasonable terms.*

In both domestic and foreign markets, our ability to achieve profitability will depend in part on the negotiation of a favorable price or the availability of appropriate reimbursement from third party payors, in particular for HEPLISAV-B, where existing products are already marketed. While in the U.S., pricing for hepatitis B vaccines is currently stable and reimbursement is favorable as private and public payors recognize the value of prophylaxis in this setting given the high costs of potential morbidity and mortality, there can be no assurance that HEPLISAV-B would launch with stable pricing and favorable reimbursement.

Existing laws affecting the pricing and coverage of pharmaceuticals and other medical products by government programs and other third party payors may change before any of our product candidates are approved for marketing. In addition, third party payors are increasingly challenging the price and cost-effectiveness of medical products and services, and pricing and reimbursement decisions may not allow our products to compete effectively with existing or competitive products. Because we intend to offer products, if approved, that involve new technologies and new approaches to treating disease, the willingness of third party payors to reimburse for our products is uncertain. We will have to charge a price for our products that is sufficient to enable us to recover our considerable investment in product development and our operating costs. Adequate third-party reimbursement may not be available to ~~enable us~~us. An inability or material limitation on our ability to ~~maintain price levels sufficient~~transfer personal data to ~~achieve profitability~~the United States or other countries could materially impact our business operations.

In the ordinary course of business, we may transfer personal data from the EEA and ~~could harm our future prospects and reduce our stock price.~~

other jurisdictions to the United States or other countries. We may ~~develop, seek regulatory approval for~~be unable to transfer personal data from Europe and ~~market our product candidates outside~~other jurisdictions to the ~~U.S.,~~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 ~~a significant commitment~~data to be localized or limiting the transfer of ~~resources. Failure~~personal data to ~~successfully manage our international operations could result~~other countries. In particular, the EEA and the United Kingdom have significantly restricted the transfer of personal data to the United States and other countries whose privacy laws it believes are inadequate. Other jurisdictions may adopt similarly stringent interpretations of their data localization and cross-border data transfer laws.

Although there are currently various mechanisms that may be used to transfer personal data from the EEA and UK to the United States in ~~significant unanticipated costs~~compliance with law, such as the EEA and ~~delays in regulatory approval or commercialization of our product candidates.~~

We may seek to introduce certain of our product candidates, including HEPLISAV-B, in various markets outside the U.S. Developing, seeking regulatory approval for and marketing our product candidates outside the U.S. could impose substantial burdens on our resources and divert management’s attention from domestic operations. International operationsUK’s standard contractual clauses, these mechanisms are subject to ~~risk, including:~~

legal challenges, and there is no assurance that we can satisfy or rely on these measures to lawfully transfer personal data to the ~~difficulty~~United States.

If there is no lawful manner for us to transfer personal data from the EEA, the UK, or other jurisdictions to the United States, or if the requirements for a legally-compliant transfer are too onerous, we could face significant adverse consequences, including the interruption or degradation of ~~managing geographically distant~~our operations, ~~including recruiting~~the need to relocate part of or all of our business or data processing activities to other jurisdictions at significant expense, increased exposure to regulatory actions, substantial fines and ~~retaining qualified employees, locating adequate facilities~~penalties, the inability to transfer data and ~~establishing useful business support relationships~~work with partners, vendors and other third parties, and injunctions against our processing or transferring of personal data necessary to operate our business. Additionally, companies that transfer personal data out of the EEA and UK to other jurisdictions, particularly to the United States, are subject to increased scrutiny from regulators, individual litigants, and activist groups. Some regulators in the ~~local community;~~

~~compliance with varying international regulatory requirements, laws and treaties;~~

~~securing international distribution, marketing and sales capabilities;~~

~~adequate protection~~EEA have ordered certain companies to suspend or permanently cease certain transfers of ~~our intellectual property rights;~~data out of Europe for allegedly violating the GDPR’s cross-border data transfer limitations.

~~obtaining regulatory and pricing approvals at~~

On October 7, 2022, President Biden signed an Executive Order on “Enhancing Safeguards for United States Signals Intelligence Activities,” which implements into United States law the agreement in principle announced in March 2022 on a ~~level sufficient to justify commercialization;~~

~~legal uncertainties~~new EU-U.S. Data Privacy Framework. However, if this new transatlantic data transfer framework is not adopted and ~~potential timing delays associated with tariffs, export licenses and other trade barriers;~~

~~diverse tax consequences;~~

~~the fluctuation of conversion rates between foreign currencies and the U.S. dollar; and~~

~~regional and geopolitical risks.~~

We have withdrawn our MAA for HEPLISAV-B in Europe and we may not be able to provide sufficient data or respond to other comments to our previously filed MAA sufficient to obtain regulatory approvals in Europe in a reasonable time period or at all.

~~Any failure or delay in obtaining regulatory approval in one jurisdiction may have a negative effect on the regulatory approval process in other jurisdictions. If~~ we are unable to ~~successfully manage~~continue to rely on standard contractual clauses or alternative mechanisms of data transfers from the EEA to the United States, this may materially and adversely affect our ~~international operations,~~business, financial condition, and results of operations.

Additional privacy advocates and industry groups have proposed, and may propose in the future, standards with which we ~~may incur significant unanticipated costs~~are legally or contractually bound to comply.

In addition to data privacy and ~~delays in regulatory approval or commercialization of our product candidates, which would impair our ability to generate revenues.~~

If any products we develop are not accepted by the market or if regulatory agencies limit our labeling indications, require labeling content that diminishes market uptake of our products or limits our marketing claims,security laws, we may be ~~unable~~contractually subject to ~~generate significant revenues, if any.~~

~~Even if we obtain regulatory approval for~~industry standards adopted by industry groups and may become subject to such obligations in the future. We may be subject to contractual obligations and policies related to data privacy and security. We may also be bound by other contractual obligations related to data privacy and security, and our ~~product candidates and are able~~efforts to ~~commercialize them, our products~~comply with such obligations may not ~~gain market acceptance among physicians, patients, healthcare payors~~be successful. For example, certain privacy laws, such as the EU GDPR and ~~the medical community.~~UK GDPR, require our customers to impose specific contractual restrictions on their service providers.

~~The degree of market acceptance of~~

Data privacy and security laws are quickly changing, and compliance (and any ~~of our approved products will depend upon a number of factors, including:~~

~~the indication for which the product~~perceived non-compliance) is ~~approved~~costly. Although we endeavor to comply with all applicable data privacy and ~~its approved labeling;~~

~~the presence of other competing approved therapies;~~

~~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~~

~~sufficient third-party reimbursement.~~

~~The FDA or other regulatory agencies could limit the labeling indication for which our product candidates~~security obligations, these obligations are quickly changing in an increasingly stringent fashion, creating some uncertainty as to how to comply. Additionally, these obligations may be ~~marketed~~subject to differing applications and interpretations, which may be inconsistent or ~~could otherwise limit marketing efforts for our products.~~conflict among jurisdictions. If we or the third parties on which we rely fail, or are ~~unable~~perceived to ~~achieve approval~~have failed, to address or ~~successfully market any of our product candidates, or marketing efforts are restricted by regulatory limits, our ability to generate revenues could be significantly impaired.~~

A key part of our business strategy is to establish collaborative relationships to commercialize and fund development of our product candidates. We may not succeed in establishing and maintaining collaborative relationships, which may significantly limit our ability to develop and commercialize our products successfully, if at all.*

We may need to establish collaborative relationships to obtain domestic and international sales, marketing and distribution capabilities for our product candidates, in particular with respect to the commercialization of HEPLISAV-B, if approved. Failure to obtain a collaborative relationship for HEPLISAV-B, particularly in markets requiring extensive sales efforts, may significantly impair the potential for this product and we may be required to raise additional capital. The process of establishing and maintaining collaborative relationships is difficult, time-consuming and involves significant uncertainty, including:

~~our 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;~~

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 our drug candidates, obtain regulatory approvals and successfully manufacture and achieve market acceptance of products developed from our drug candidates;

•

~~our partners may not devote sufficient capital or resources towards our product candidates; and~~

~~our partners may not~~ comply with applicable data privacy and security obligations, we could face significant consequences, including but not limited to, government ~~regulatory requirements.~~

~~If any collaborator fails~~enforcement actions (e.g., investigations, fines, penalties, audits, inspections, and similar); litigation (including class-related claims); additional reporting requirements and/or oversight; bans on processing personal data; orders to ~~fulfill its responsibilities in a timely manner,~~destroy 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 responsibilitynot use personal data; and imprisonment of our collaborator. If we are unable to establish and maintain collaborative relationships on acceptable terms or to successfully transition terminated collaborative agreements, we may have to delay or discontinue further development of one or more of our product candidates, undertake development and commercialization activities at our own expense or find alternative sources of capital.company officials.

~~Many of our competitors have greater financial resources and expertise than we do. If we are unable to successfully compete with existing or potential competitors as a result~~

Any of these ~~disadvantages we may be unable to generate revenues and our business will be harmed.~~

We compete with pharmaceutical companies, biotechnology companies, academic institutions and research organizations, in developing therapies to prevent or treat cancer and infectious and inflammatory diseases. For example, if it is approved in the future, HEPLISAV-B will compete in the U.S. with established hepatitis B vaccines marketed by Merck and GSK and outside the U.S. with vaccines from those companies and several additional established pharmaceutical companies. The field of oncology therapeutics is extremely competitive, with numerous biotechnology and pharmaceutical companies developing therapies for all of the targets we are pursuing. Competitors may develop more effective, more affordable or more convenient products or may achieve earlier patent protection or commercialization of their products. These competitive products may render our product candidates obsolete or limit our ability to generate revenues from our product candidates.

Existing and potential competitors may also compete with us for qualified scientific and management personnel, as well as for technology that would be advantageous to our business. Although certain of our employees have commercialization experience, as a company we currently have limited sales, marketing and distribution capabilities. Our success in developing marketable products and achieving a competitive position will depend, in part, on our ability to attract and retain qualified personnel. 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 obtain financing, enter into collaborative arrangements, sell our product candidates or generate revenues.

We rely on CROs and Clinical Sites and Investigators for our clinical trials. If these third parties do not fulfill their contractual obligations or meet expected deadlines, our planned clinical trials may be delayed and we may fail to obtain the regulatory approvals necessary to commercialize our product candidates.

We rely on CROs, Clinical Sites and Investigators for our clinical trials. If these third parties do not perform their obligations or meet expected deadlines our planned clinical trials may be extended, delayed, modified or terminated. While we maintain oversight over our clinical trials and conduct regular reviews of the data, we are dependent on the processes and quality control efforts of our third party contractors to ensure that clinical trials are conducted properly and that detailed, quality records are maintained to support the results of the clinical trials that they are conducting on our behalf. Any extension, delay, modification or termination of our clinical trials or failure to ensure adequate documentation and the quality of the results in the clinical trials could delay or otherwise adversely affect our ability to commercialize our product candidates andevents could have a material adverse effect on our reputation, business, or financial condition, including but not limited to: loss of customers; interruptions or stoppages in our business operations, including our clinical trials; expenditure of time and resources to defend any claim or inquiry; adverse publicity; or revision or restructuring of our operations.

As we evolve from a company primarily involved in research and development to a company potentially involved in commercialization, we may encounter difficulties in managing our growth and expanding our operations successfully.*

If we are successful in advancing HEPLISAV-B through approval and commercialization, we will need to expand our organization, including adding marketing and sales capabilities or contracting with third parties to provide these capabilities for us. As our operations expand, we expect that we will also need to manage additional relationships with various collaborative partners, suppliers and other third parties. Future growth will impose significant added responsibilities on our organization, in particular on management. Our future financial performance and our ability to commercialize HEPLISAV-B and to compete effectively will depend, in part, on our ability to manage any future growth effectively. To that end, we may not be able to manage our growth efforts effectively, and hire, train and integrate additional management, administrative and sales and marketing personnel, and our failure to accomplish any of these activities could prevent us from successfully growing our company.

If we fail to comply with the extensive requirements applicable to biopharmaceutical manufacturers and marketers under the healthcare fraud and abuse, anticorruption, privacy, transparency and other laws of the jurisdictions in which we conduct our business, we may be subject to significant liability.

Our activities, and the activities of our agents, including some contracted third parties, are subject to extensive government regulation and oversight both in the U.S. and in foreign jurisdictions. ~~If we obtain approval for and commercialize a vaccine or other product, our~~Our interactions with physicians and others in a position to prescribe or purchase our products ~~will be~~are subject to a legal

regime designed to prevent healthcare fraud and abuse and off-label promotion. We also are subject to laws pertaining to transparency of transfers of value to healthcare providers; privacy and data protection; compliance with industry voluntary compliance guidelines; and prohibiting the payment of bribes. Relevant U.S. laws include:

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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;

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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;

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the ~~federal,~~Federal Food, Drug and Cosmetic Act and governing regulations which, among other things, prohibit off-label promotion of prescription drugs;

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~~laws that require transparency regarding financial arrangements with health care professionals, such as~~ the ~~reporting and disclosure requirements imposed by~~federal Physician Payments Sunshine Act created under the Patient Protection and Affordable Care Act ~~(“PPACA”~~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 ~~state laws;~~

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;

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the federal Health Insurance Portability and Accountability Act of ~~1997~~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 ~~statements relating to~~statement, in connection with the delivery of, or payment for, healthcare ~~matters;~~

benefits, items or services;

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HIPAA, as amended by the Health Information Technology for Economic and ~~Criminal~~Clinical Health Act, and ~~its~~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;

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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 ~~the company’s~~our transactions; and

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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~~third-party payor, including commercial insurers; ~~and~~ 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.~~

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~~

In the U.S., the Office of Inspector General for the Department of Health and Human Services, the Department of Justice, states’ Attorneys General and other governmental authorities actively enforce the laws and regulations discussed above. These entities also coordinate extensively with the FDA, using legal theories that connect violations of the Federal Food, Drug and Cosmetic Act (such as off-label promotion) to the eventual submission of false claims to government healthcare programs. Prosecution of such promotion cases under the ~~healthcare fraud and abuse laws~~False Claims Act provides the potential for private parties (qui tam relators, or “whistleblowers”) to initiate cases on behalf of the government and provides for significantly higher penalties upon conviction.

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.

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, ~~and/or~~ civil ~~sanctions,~~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. Additionally, whether or not we have complied with the law, an investigation into alleged unlawful conduct may cause us to incur significant expense, cause reputational damage, divert management time and attention, and otherwise adversely affect our business. While we have developed and instituted a corporate compliance program, we cannot guarantee that we, our employees, our consultants, contractors, or other agents are or will be in compliance with all applicable U.S. or foreign laws.

We have applied for, and in some cases have received, grants that, if and when received, may involve pricing or other restrictions.

We have applied for, and in some cases have received, grants from various charitable, philanthropic and other organizations that, if and when received, may come with certain pricing requirements, global access requirements, reporting requirements or other covenants that require us to make the funded product available worldwide and on a nondiscriminatory basis. For example, we received such an initial grant from the Bill and Melinda Gates Foundation in 2020 to help fund the potential scale-up of production of our CpG 1018 adjuvant that may be required in the event the CpG 1018 adjuvant is included in any approved and commercially available vaccine, whether a COVID-19 vaccine or otherwise. Covenants in these types of grants may limit the price we can charge for any funded product and may involve a license to use technology we own that is included in the funded products if we do not comply. Such price limitations or licenses, if invoked, could serve to limit the prices we charge, or our control over the manufacturing and distribution of grant-funded products. Failure to agree to such requirements, may result in us not receiving some or all of the grant.

Enacted or future legislation, including potentially unfavorable pricing regulations or other healthcare reform initiatives, may have an adverse effect on our operations and business.

We expect there will continue to be federal and state laws and/or regulations, proposed and implemented, that could impact our operations and business. For example, the ACA, among other things, imposes a significant annual fee on companies that manufacture or import branded prescription drug products. It also contains substantial provisions intended to broaden access to health insurance, reduce or constrain the growth of healthcare spending, and impose additional health policy reforms, any or all of which may affect our business. There have been executive, legal and political challenges to certain aspects of ACA. For example, President Trump signed several executive orders and other directives designed to delay, circumvent, or loosen certain requirements mandated by ACA. Concurrently, Congress considered legislation that would repeal or repeal and replace all or part of ACA. While Congress has not passed comprehensive repeal legislation, several bills affecting the implementation of certain taxes under the ACA have been signed into law. The Tax Cuts and Jobs Act of 2017 included a provision repealing, effective January 1, 2019, the tax-based shared responsibility payment imposed by ACA on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the “individual mandate.” In addition, the 2020 federal spending package permanently eliminated, effective January 1, 2020, the ACA-mandated “Cadillac” tax on high-cost employer-sponsored health coverage and medical device tax and, effective January l, 2021, also eliminated the health insurer tax. The Bipartisan Budget Act of 2018 among other things, amended the ACA, effective January 1, 2019, to increase from 50 percent to 70 percent the point-of-sale discount that is owed by pharmaceutical manufacturers who participate in Medicare Part D and close the coverage gap in most Medicare drug plans, commonly referred to as the “donut hole.” On June 17, 2021, the U.S. Supreme Court dismissed a challenge on procedural grounds that argued the ACA is unconstitutional in its entirety because the “individual mandate” was repealed by Congress. In addition, the ACA has been subject to various health reform measures. For example, on August 16, 2022, President Biden signed the Inflation Reduction Act of 2022 (“IRA”) into law, which among other things, extends enhanced subsidies for individuals purchasing health insurance coverage in ACA marketplaces through plan year 2025. The IRA also eliminates the “donut hole” under the Medicare Part D program beginning in 2025 by significantly lowering the beneficiary maximum out-of-pocket cost and through a newly established manufacturer discount program. It is unclear how any such challenges and additional healthcare reform measures by the Biden administration will impact the ACA and our business.

Other legislative changes have also been proposed and adopted since the ACA was enacted. 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. 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. In addition, the American Taxpayer Relief Act of 2012, among other things, reduced Medicare payments to several types of providers and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. Such laws, and others that may affect our business that have been recently enacted or may in the future be enacted, may result in additional reductions in Medicare and other healthcare funding.

Also, there has been heightened governmental scrutiny recently in the U.S. over pharmaceutical pricing practices in light of the rising cost of prescription drugs and biologics. Such scrutiny has resulted in several recent Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for products. At the federal level, in July 2021, the Biden administration released an executive order, “Promoting Competition in the American Economy,” with multiple provisions aimed at prescription drugs. In response to Biden’s executive order, on September 9, 2021, the U.S. Department of Health and Human Services (“HHS”) released a Comprehensive Plan for Addressing High Drug Prices that outlines principles for drug pricing reform and sets out a variety of potential legislative policies that Congress could pursue to advance these principles. In addition, the IRA, among other things, (i) directs HHS to negotiate the price of certain drugs and biologics covered under Medicare, and subjects drug manufacturers to civil monetary penalties and a potential excise tax by offering a price that is not equal to or less than the negotiated “maximum fair price” under the law, and (ii) imposes rebates under Medicare Part B and Medicare Part D to penalize price increases that outpace inflation. The IRA permits HHS to implement many of these provisions through guidance, as opposed to regulation, for the initial years. These provisions will take effect progressively starting in 2023, although they may be subject to legal challenges. It is currently unclear how the IRA will be effectuated but is likely to have a significant impact on the pharmaceutical industry. Further, in response to the Biden administration’s October 2022 executive order, on February 14, 2023, HHS released a report outlining three new models for testing by the Centers for Medicare & Medicaid Services ("CMS") Innovation Center which will be evaluated on their ability to lower the cost of drugs, promote accessibility, and improve quality of care. It is unclear whether the models will be utilized in any health reform measures in the future.

At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, and restrictions on certain product access. In some cases, such legislation and regulations have been designed to encourage importation from other countries and bulk purchasing.

Many EU Member States periodically review their reimbursement procedures for medicinal products, which could have an adverse impact on reimbursement status. 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. Moreover, in order to obtain reimbursement for our products in some European countries, including some EU Member States, we may be required to compile additional data comparing the cost-effectiveness of our products to other available therapies. 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. The outcome of an HTA will often influence the pricing and reimbursement status granted to these medicinal products by the competent authorities of individual EU Member States. The extent to which ~~future legislation~~pricing and reimbursement decisions are influenced by the HTA of the specific medicinal product currently varies between EU Member States.

that we may successfully develop and for which we may obtain regulatory approval, any anticipated revenue from and growth prospects for those products in the EU could be negatively affected.

Legislators, policymakers and healthcare insurance funds in the EU may continue to propose and implement cost-containing measures to keep healthcare costs down, particularly due to the financial strain that the COVID-19 pandemic has placed on national healthcare systems of the EU Member States. These measures could include limitations on the prices we would be able to charge for product candidates that we may successfully develop and for which we may obtain regulatory approval or ~~regulations, if any, relating~~the level of reimbursement available for these products from governmental authorities or third-party payors. Further, an increasing number of EU and other foreign countries use prices for medicinal products established in other countries as “reference prices” to ~~health care fraud and abuse laws and/or enforcement,~~help determine the price of the product in their own territory. Consequently, a downward trend in prices of medicinal products in some countries could contribute to similar downward trends elsewhere.

We cannot predict the initiatives that may be ~~enacted~~adopted in the future or ~~what~~the effect any such ~~legislation or regulation would~~initiatives may have on our ~~business remains uncertain.~~

~~The loss~~business. However, in the future, there will likely continue to be additional proposals relating to the reform of ~~key personnel,~~the U.S. healthcare system, and other equivalent foreign systems, some of which could further limit coverage and reimbursement of products, including our ~~Chief Executive Officer, could delay~~product candidates. Any reduction in reimbursement from Medicare or ~~prevent achieving our objectives. In addition, our continued growth in anticipation of commercialization~~other government programs may result in ~~difficulties~~a similar reduction in ~~managing~~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 ~~growth~~products.

In connection with our work with the U.S. Department of Defense, we have become a defense contractor, and expanding our operations successfully.*are therefore subject to additional administrative burdens and control requirements in connection with the maintenance of that relationship.

~~We depend on our senior executive officers,~~

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. In connection with this agreement, we became subject to new administrative and control requirements, including certain reporting obligations as well as ~~key scientific~~a requirement to develop, implement and maintain an International Traffic in Arms Regulations compliance program, among other ~~personnel. Our research, product development~~things. Further, if our efforts result in an improved plague vaccine and ~~business efforts could be adversely affected by~~we enter into a supply agreement for finished plague vaccines with the ~~loss of one or more key members of our scientific or management staff, including our Chief Executive Officer. We currently have no key person insurance on any of our employees.~~

As we advance HEPLISAV-B to commercialization, we will need to expand our regulatory, manufacturing, administrative, marketing and sales capabilities or contract with third parties to provide these capabilities for us. As our operations expand,DoD, we expect that ~~we will need to manage~~such a supply contract would impose additional ~~relationships with various vendors, partners, suppliers~~administrative, control, compliance and other ~~third parties. Future growth~~obligations. We have limited experience developing and administering such programs. Development and maintenance of such programs can be burdensome and costly and there can be no guarantee that we will impose significant added responsibilities on members of management. Our future financial performance and our ability to commercialize HEPLISAV-B and to compete effectively will depend, in part, on our ability to manage any future growth effectively. To that end, we must be able to ~~effectively manage~~maintain compliance with all of the terms of such an agreement. Failure to comply with these requirements could have a significant reputational or financial impact on our ~~commercialization efforts, research efforts~~business and ~~clinical trials and hire, train and integrate additional regulatory, manufacturing, administrative, and sales and marketing personnel. We may not be able to accomplish these tasks, and~~on our ~~failure to accomplish any of them could prevent us from successfully growing our company and achieving profitability.~~stock price.

We face product liability exposure, which, if not covered by insurance, could result in significant financial liability.

While we have not experienced any product liability claims to date, the use of any of our product candidates in clinical trials and the sale of any approved products, including HEPLISAV-B, will subject us to potential product liability claims and may raise questions about a product’s safety and efficacy. As a result, we could experience a delay in our ability to commercialize one or more of our product candidates or reduced sales of any approved product candidates. In addition, a product liability claim may exceed the limits of our insurance policies and exhaust our internal resources. We have obtained limited clinical trial liability and umbrella insurance coverage for our clinical trials. This coverage may not be adequate or may not continue to be available in sufficient amounts, at an acceptable cost, or at all. While we have obtained product liability insurance coverage for HEPLISAV-B, there is a risk that this coverage may not be adequate or may not continue to be available in sufficient amounts, at an acceptable cost or at all. We also may not be able to obtain commercially reasonable product liability insurance for any product approved for marketing in the future. A product liability claim, product recalls or other claims, as well as any claims for uninsured liabilities or in excess of insured liabilities, would divert our management’s attention from our business and could result in significant financial liability.

~~We are~~

Risks Related to our Intellectual Property

If third parties assert that we have infringed their patents and proprietary rights or challenge our patents and proprietary rights, we may become involved in ~~legal actions~~intellectual property disputes and litigation that ~~are expensive and~~would be costly, time consuming and delay or prevent development or commercialization of our product candidates.

We may be exposed to future litigation or other dispute with third parties based on claims that our products, product candidates or proprietary technologies infringe their intellectual property rights, or we may be required to enter into litigation to enforce patents issued or licensed to us or to determine the ownership, scope or validity of our or another party’s proprietary rights, including a challenge as to the validity and scope of our issued and pending claims. From time to time, we have been, and in the future may become, involved in various administrative proceedings related to our intellectual property which can cause us to incur certain legal expenses. If we become involved in any litigation and/or other administrative proceedings related to our intellectual property or the

intellectual property of others, we will incur substantial additional expenses and it will divert the efforts of our technical and management personnel.

If we or our collaborators are unsuccessful in defending or prosecuting our issued and pending claims or in defending potential claims against our products, for example, as may arise in connection with the commercialization of HEPLISAV-B or any similar or other product candidate, we or our collaborators could be required to pay substantial damages or be unable to commercialize our product candidates or use our proprietary technologies without a license from such third party. A license may require the payment of substantial fees or royalties, require a grant of a cross-license to our intellectual property or technologies or may not be available on acceptable terms, if ~~resolved~~at all. Any of these outcomes could require us to change our business strategy and could materially impact our business, operations or financial condition.

If the combination of patents, trade secrets and contractual provisions that we rely on to protect our intellectual property is inadequate, the value of our products or product candidates may decrease, and we may be unable to realize any commercial benefit from the development of our vaccine candidates.

Our success depends on our ability to:

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obtain and protect commercially valuable patents or the rights to patents both domestically and abroad;

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operate without infringing upon the proprietary rights of others; and

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prevent others from successfully challenging or infringing our proprietary rights.

We will be able to protect our proprietary rights from unauthorized use only to the extent that these rights are covered by valid and enforceable patents for a commercially sufficient term or are otherwise effectively maintained as trade secrets. We try to protect our proprietary rights by filing and prosecuting U.S. and foreign patent applications. However, in certain cases such protection may be limited, depending in part on existing patents held by third parties, or other disclosures which impact patentability, which may only allow us to obtain relatively narrow patent protection, if any at all. In the U.S., and worldwide, legal standards relating to the validity and scope of patent claims in the biopharmaceutical field can be highly uncertain, are still evolving and involve complex legal and factual questions for which important legal principles remain unresolved.Changes in U.S. patent and ex-U.S. patent laws could diminish the value of patents in general, thereby impairing us and our collaborators’ ability to protect our products.

Our HEPLISAV-B vaccine and CpG 1018 adjuvant have no composition of matter patent protection in the United States or elsewhere. We must therefore rely primarily on the protection afforded by method of use patent claims relating to HEPLISAV-B vaccine and the use of CpG 1018 adjuvant in vaccines, and trade secret protection and confidentiality and other agreements to protect our interests in proprietary know-how related to HEPLISAV-B vaccine and CpG 1018 adjuvant. We have three issued U.S. patents relating to certain uses of HEPLISAV-B that are projected to expire in 2032. We have filed patent applications claiming compositions and methods of use of CpG 1018 adjuvant for COVID-19 and other vaccines, but we cannot provide any assurances that we will receive an issued patent for any of these patent applications or that, if issued, any of these patents will provide adequate protection for any intended use of CpG 1018 adjuvant in vaccines. In addition, we are or may be subject to co-ownership of the underlying intellectual property with our collaborators and, therefore, may not be the sole owner and be in a position to diligently control patent prosecution, or enforce our rights. If we are unable to adequately obtain patent protection or enforce our other proprietary rights relating to CpG 1018 adjuvant, we may be unable to realize any recurring commercial benefit from the development of a vaccine containing CpG 1018 adjuvant, and we may not have the ability to prevent others from developing or commercializing a vaccine containing CpG 1018 adjuvant. We also rely on trade secret protection and confidentiality and other agreements to protect our interests in proprietary know-how related to CpG 1018 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. Disputes or litigation may also arise with our collaborators (with us and/or with one or more third parties), including disputes over ownership rights to intellectual property, know-how or technologies developed with our collaborators. 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. 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. 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.

The risks and uncertainties that we face with respect to our patents and other proprietary rights include the following:

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we may not receive an issued patent for any of our patent applications or for any patent applications that we may have exclusively licensed, now or in the future;

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the pending patent applications we have filed or to which we have exclusive rights may take longer than we expect to result in issued patents;

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the claims of any patents that are issued may not provide meaningful protection or may not be valid or enforceable;

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we might not be able to develop additional proprietary technologies that are patentable;

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the patents licensed or issued to us or our collaborators may not provide a competitive advantage;

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patents issued to other parties may limit our intellectual property protection or harm our ability to do business;

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other parties may independently develop similar or alternative technologies or duplicate our technologies and commercialize discoveries that we attempt to patent;

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other parties may design around technologies we have licensed, patented or developed;

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pending patent applications or issued patents may be challenged by third parties in litigation or other proceedings, such as inter partes reviews, pre- and post-grant oppositions, reexaminations, derivation proceedings and post-grant review, in the U.S or abroad;

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we may be subject to claims that our employees or consultants have used or disclosed trade secrets or other proprietary information of their former employers or clients, thus putting our intellectual property at risk;

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our reliance on trade secret protection and confidentiality and other agreements may not be sufficient to protect our interests and proprietary know-how related to our products and processes; and

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it may be found that we or our collaborators have not complied with various procedural, document submission, fee payment and other requirements imposed by patent offices, and our patent protection could be reduced or eliminated.

We also rely on trade secret protection and confidentiality agreements to protect our interests in proprietary know-how that may not be directed to what is considered to be patentable subject matter, and for processes for which patents are difficult to enforce. We cannot be certain that we will be able to protect our trade secrets or other proprietary know-how adequately. Any disclosure of confidential data in the public domain or to third parties could allow our competitors to learn our trade secrets. If we are unable to adequately obtain or enforce proprietary rights, we may be unable to commercialize or continue to commercialize our products, enter into or maintain collaborations, generate revenues or maintain any advantage we may have with respect to existing or potential competitors.

We have in the past, and may in the future, rely on licenses to intellectual property from third parties. Impairment of these licenses or our inability to obtain or maintain them could severely harm our business.

Our current or future research and development efforts may depend in part upon our license arrangements for certain intellectual property owned by or co-owned with third parties. Our dependence on these licenses could subject us to numerous risks, such as disputes regarding the use of the licensed intellectual property and the creation and ownership of new discoveries under such license agreements. In addition, these license arrangements could require us to make timely payments to maintain our licenses and typically contain diligence or milestone-based termination provisions. Our failure to meet any obligations pursuant to such agreements could allow licensors to terminate our agreements or undertake other remedies such as converting exclusive to non-exclusive licenses if we are unable to cure or obtain waivers for such failures or amend such agreements on terms acceptable to us or at all. In addition, license agreements may be terminated or may expire by their terms, and we may not be able to maintain the exclusivity of these licenses or any rights to the underlying intellectual property. If we cannot obtain and maintain licenses that are advantageous or necessary to the development or the commercialization of our products or product candidates, we may be required to expend significant time and resources to develop or license similar technology or to find other alternatives to maintaining the competitive position of our products or product candidates. If such alternatives are not available to us in a timely manner or on acceptable terms, we may be unable to develop or commercialize certain of our products or product candidates. In the absence of a current license, we may be required to redesign our technology so it does not infringe a third-party’s intellectual property (including patents), which may not be possible or could require substantial funds and time.

We may be subject to claims that we or our employees or consultants have wrongfully used or disclosed alleged trade secrets of our employees’ or consultants’ former employers or their clients. These claims may be costly to defend and if we do not successfully do so, we may be required to pay monetary damages and may lose valuable intellectual property rights or personnel.

Many of our employees or consultants may have been previously employed in other biopharmaceutical companies, including our competitors or potential competitors. Some of these individuals executed proprietary rights, non-disclosure and non-competition agreements in connection with such previous employment or engagements. Although no claims against us are currently pending, we may be subject to claims that these employees or consultants or we have inadvertently or otherwise used or disclosed trade secrets or other proprietary information of their former employers or clients. Litigation may be necessary to defend against these claims. If we fail in defending such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. A loss of key research personnel or their work product could hamper our ability to develop and ultimately commercialize, or prevent us from developing and commercializing, our product candidates, which could severely harm our business. Even if we are successful in defending against these claims, litigation could result in substantial costs and be a distraction to management.

We may rely, in some circumstances, on trade secrets and confidentiality agreements to protect our technology. Although trade secrets are difficult to protect, wherever possible, we use confidential disclosure agreements to protect the proprietary nature of our technology. 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. However, there can be no assurance that these agreements will not be breached, that we will have adequate remedies for any breach, or that our trade secrets and/or proprietary information will not otherwise become known or be independently discovered by competitors. To the extent that our employees, consultants or contractors use intellectual property owned by others in their work for us, disputes may also arise as to the rights in related or resulting know-how and inventions, which could result in substantial costs which could severely harm our business.

Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.

Periodic maintenance fees, renewal fees, annuity fees and various other governmental fees on patents and/or applications are due to be paid to the United States Patent and Trademark Office and various governmental patent agencies outside of the United States in several stages over the lifetime of the patents and/or applications. We employ reputable law firms and other professionals to help us comply, and in many cases an inadvertent lapse can be cured by payment of a late fee or by other means in accordance with the applicable rules. However, there are situations in which non-compliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdictions, and in such an event, our competitors might be able to enter the market.

Risks Related to our Common Stock

Our stock price is subject to volatility, and your investment may suffer a decline in value.

The market prices for securities of biopharmaceutical companies have in the past been, and are likely to continue in the future to be, very volatile. 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 stock markets in general, and the markets for biotechnology and pharmaceutical stocks in particular, have historically experienced significant volatility that has often been unrelated or disproportionate to the operating performance of particular companies. Changes in the broader macroeconomic condition, including historically high inflation, changes in interest rates, ongoing effects of the COVID-19 pandemic and instances of geopolitical instability, such as that resulting from the conflict between Russia and Ukraine, can and have caused changes in market prices, notwithstanding a lack of fundamental change in the underlying business models or prospects of companies. These broad market fluctuations have adversely affected and may in the future adversely affect the market price of our common stock. In this regard, worsening economic conditions, interest rate increases and/or other tapering policies from the government, and other adverse effects or developments relating to the ongoing COVID-19 pandemic or general economic environment, may negatively affect the market price of our common stock, regardless of our actual operating performance.

One or more of these factors could cause a substantial decline in the price of our common stock. In addition, securities class action and shareholder derivative litigation have often been brought against a company following a decline in the market price of its securities. We have in the past been, and we may in the future be, the target of such litigation. Securities and shareholder derivative litigation could result in substantial costs, and divert management’s attention and resources, which could harm our business, operating results and financial condition.

Future sales of our common stock or the perception that such sales may occur in the public market could cause our stock price to fall.*

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. As of June 30, 2023, we had approximately $120.0 million of our common stock remaining available for future issuance under our sales agreement with Cowen & Company, LLC. The sale or issuance of our securities, including those issuable upon exercise of the outstanding warrants or conversion of the preferred stock, as well as the existence of outstanding options and shares of common stock reserved for issuance under our option and equity incentive plans also may adversely affect the terms upon which we are able to obtain additional capital through the sale of equity securities.

Risks Related to Our Outstanding Convertible Notes

Servicing our debt requires a significant amount of cash, and we may not have sufficient cash flow from our business to pay our substantial debt.

Our ability to make scheduled payments of the principal of, to pay interest on or to refinance our indebtedness, including the $225.5 million in 2.50% convertible senior notes due 2026 (“Convertible Notes”), depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control. Our business may not continue to generate cash flow

from operations in the future sufficient to service our debt and make necessary capital expenditures. If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as selling assets, restructuring debt or obtaining additional equity capital on terms that may be onerous or highly dilutive. Our ability to refinance our indebtedness will depend on the capital markets and our financial condition at such time. We may not be able to engage in any of these activities or ~~results of operations.~~

~~Securities class action lawsuits against us are pending and purported stockholder derivative complaints have been brought against us. Any negative outcome from such lawsuits~~engage in these activities on desirable terms, which could result in a default on our debt obligations.

We may not have the ability to generate or raise the funds necessary to settle conversions of the Convertible Notes in cash or to repurchase the notes for cash upon a fundamental change, and our future debt may contain limitations on our ability to pay cash upon conversion or repurchase of the Convertible Notes.

Holders of the Convertible Notes will have the right, subject to certain conditions and limited exceptions, to require us to repurchase all or a portion of their Convertible Notes upon the occurrence of a fundamental change at a fundamental change repurchase price equal to 100% of the principal amount of the Convertible Notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the fundamental change repurchase date. 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 ~~monetary damages~~the Convertible Notes being converted. Moreover, we will be required to repay the Convertible Notes in cash at their maturity unless earlier converted, redeemed or ~~fines,~~repurchased. However, we may not have enough available cash or be able to obtain financing at the time we are required to make repurchases of Convertible Notes surrendered therefore or pay cash with respect to Convertible Notes being converted. In addition, our ability to repurchase the Convertible Notes or to pay cash upon conversions of the Convertible Notes may be limited by law, by regulatory authority or by agreements governing our future indebtedness. 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. A default under the indenture governing the Convertible Notes or the occurrence of a fundamental change itself could also lead to a default under agreements governing our future indebtedness. Moreover, the occurrence of a fundamental change under the indenture governing the Convertible Notes could constitute an event of default under any agreements governing our future indebtedness. If the repayment of the related indebtedness were to be accelerated after any applicable notice or grace periods, we may not have sufficient funds to repay the indebtedness and repurchase the Convertible Notes or make cash payments upon conversions thereof.

The conditional conversion feature of the Convertible Notes may adversely affect our financial condition and operating results.

From January 1 through June 30, 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. If one or more holders elect to convert their Convertible Notes, unless we elect to satisfy our conversion obligation by delivering solely shares of our common stock (other than paying cash in lieu of delivering any fractional share), we would be required to settle a portion or all of our conversion obligation through the payment of cash, which could adversely affect our liquidity. In addition, even if holders do not elect to convert their Convertible Notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the Convertible Notes as a current rather than long-term liability, which would result in a material reduction of our net working capital.

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 June 30, 2023, the conditions allowing holders to convert all or any portion of their Convertible Notes have not been met. In the event the conditional conversion feature of the Convertible Notes is triggered, the conversion of some or all of the Convertible Notes to shares of common stock may dilute the ownership interests of our stockholders. Upon conversion of the Convertible Notes, we have the option to pay or deliver, as the case may be, cash, shares of our common stock, or a combination of cash and shares of our common stock. If we elect to settle our conversion obligation in shares of our common stock or a combination of cash and shares of our common stock, any sales in the public market of our common stock issuable upon such conversion could adversely affect prevailing market prices of our common stock. In addition, the existence of the Convertible Notes may encourage short selling by market participants because the conversion of the Convertible Notes could be used to satisfy short positions, or anticipated conversion of the Convertible Notes into shares of our common stock could depress the price of our common stock.

Certain provisions in the indenture governing the Convertible Notes may delay or prevent an otherwise beneficial takeover attempt of us.

Certain provisions in the indenture governing the Convertible Notes may make it more difficult or expensive for a third party to acquire us. For example, the indenture governing the Convertible Notes will require us, subject to certain exceptions, to repurchase the Convertible Notes for cash upon the occurrence of a fundamental change and, in certain circumstances, to increase the conversion rate for a holder that converts its Convertible Notes in connection with a make-whole fundamental change. A takeover of us may trigger the requirement that we repurchase the Convertible Notes and/or increase the conversion rate, which could make it more costly for a potential acquirer to engage in such takeover. Such additional costs may have the effect of delaying or preventing a takeover of us that would otherwise be beneficial to investors.

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 cover, subject to customary adjustments under the terms of the Capped Calls, the number of shares of common stock that initially underlie the Capped Calls. 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.

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. In addition, the option counterparties and/or their respective affiliates may modify their hedge positions by entering into or unwinding various derivatives with respect to our common stock and/or purchasing or selling our common stock or other securities of ours in secondary market transactions following the pricing of the Convertible Notes and prior to the maturity of the Convertible Notes (and are likely to do so on each exercise date of the Capped Calls, which are expected to occur during the 30 trading day period beginning on the 31st scheduled trading day prior to the maturity date of the Convertible Notes, or following any termination of any portion of the Capped Calls in connection with any repurchase, redemption or early conversion of the Convertible Notes). This activity could also cause or avoid an increase or a decrease in the market price of our common stock or the Convertible Notes.

We are subject to counterparty risk with respect to the capped call transactions.

The option counterparties are financial institutions, and we will be subject to the risk that any or all of them might default under the Capped Calls. Our exposure to the credit risk of the option counterparties will not be secured by any collateral.

If an option counterparty becomes subject to insolvency proceedings, we will become an unsecured creditor in those proceedings with a claim equal to our exposure at that time under the Capped Calls with such option counterparty. Our exposure will depend on many factors but, generally, an increase in our exposure will be correlated to an increase in the market price and in the volatility of our common stock. In addition, upon a default by an option counterparty, we may suffer adverse tax consequences and more dilution than we currently anticipate with respect to our common stock. We can provide no assurances as to the financial stability or viability of the option counterparties.

General Risk Factors

We depend on our senior executive officers, as well as other key scientific personnel. Our commercial and business efforts could be adversely affected by the loss of one or more key members of our commercial or management staff, including our senior executive officers. We currently have no key person insurance on any of our employees.

As our operations expand, we expect that we will need to manage additional relationships with various vendors, partners, suppliers and other third parties. Future growth will impose significant added responsibilities on members of management. Our future financial performance and our ability to successfully commercialize HEPLISAV-B, or other future products we may attempt to commercialize, and ~~accordingly~~to compete effectively will depend, in part, on our ability to manage any future growth effectively. To that end, we must be able to effectively manage our commercialization efforts, research efforts and clinical trials and hire, train and integrate

additional regulatory, manufacturing, administrative, and sales and marketing personnel. We may not be able to accomplish these tasks, and our failure to accomplish any of them could prevent us from successfully growing and achieving profitability.

Our business operations are vulnerable to interruptions by natural disasters, health epidemics and other catastrophic events beyond our control, the occurrence of which could materially harm our manufacturing, distribution, sales, business operations and financial results.

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. We have not undertaken a systematic analysis of the potential consequences to our business that might result from any such natural disaster or other catastrophic event and have limited recovery plans in place. 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 ~~condition,~~results could be adversely affected. We cannot presently predict the scope and severity of any potential business shutdowns or ~~results~~disruptions resulting from these events, but if we or any of ~~operations~~the third parties with whom we engage, including the suppliers, contract manufacturers, distributors and other third parties with whom we conduct business, were to experience shutdowns or other business disruptions, our ability to conduct our business in the manner and on the timelines presently planned could be materially and adversely ~~affected.~~affected in a number of ways, some of which are not predicable.

~~There can~~

Our business could be ~~no assurance that~~adversely affected by health epidemics in regions where we have manufacturing facilities, sales activities or other business operations. 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, during the peak of the COVID-19 pandemic there was a ~~favorable final outcome will~~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 ~~obtained in these cases,~~adversely affected. A pandemic or similar health challenge could severely impact the U.S. healthcare system, which may have an adverse effect on usage and ~~defending~~sales of HEPLISAV-B. In addition, any ~~lawsuit is costly and can impose a significant burden on management and employees. Any litigation to which we are a party may~~such event could result in widespread global health crisis that could adversely affect global economies and financial markets resulting in an ~~onerous~~economic downturn that could affect the demand for HEPLISAV-B and future revenue and operating results and our ability to raise additional capital when needed on acceptable terms, if at all.

Additionally, our corporate headquarters in Emeryville, California, is located in a seismically active region that also is subject to possible electrical shutdowns and wildfires. Because we do not carry earthquake insurance for earthquake-related losses and significant recovery time could be required to resume operations, our financial condition and operating results could be materially adversely affected in the event of a major earthquake or ~~unfavorable judgment~~catastrophic event. We carry only limited business interruption insurance that would compensate us for actual losses from interruption of our business that may ~~not be reversed upon appeal~~occur, and any losses or damages incurred by us in ~~payments~~excess of ~~monetary damages or fines not covered by insurance, or we may decide to settle lawsuits on unfavorable terms, which~~insured amounts could adversely affect our business ~~financial conditions, or results of~~and operations.

We use hazardous materials and controlled substances in our business. Any claims or liabilities relating to improper handling, storage or disposal of these materials and substances could be time consuming and costly to resolve.

Our research and product development activities involve the controlled storage, use and disposal of hazardous and radioactive materials and biological waste, and controlled substances. We are subject to federal, state and local laws and regulations governing the use, manufacture, storage, handling and disposal of these materials, substances, and certain waste products. We believe we are currently in compliance with all government permits that are required for the storage, use and disposal of these materials and controlled substances. However, we cannot eliminate the risk of accidental contamination or injury to persons or property from these materials, or that controlled substances will be accidentally stored or used in violation of relevant federal, state and local requirements. In the event of an accident related to hazardous materials or a violation of requirements pertaining to controlled substances, we could be held liable for damages, cleanup costs or penalized with fines, and this liability could exceed the limits of our insurance policies and exhaust our internal resources. We may have to incur significant costs to comply with future environmental laws and regulations, and laws and regulations pertaining to the storage and use of controlled substances.

Significant disruptions of information technology systems or breaches of data security could adversely affect our business.

Our business is increasingly dependent on critical, complex and interdependent information technology systems, including ~~Internet‑based~~internet-based systems, to support business processes as well as internal and external communications. In addition, the COVID-19 pandemic has intensified our dependence on information technology systems as many of our critical business activities are currently being conducted remotely. The size and complexity of our

computer systems make them potentially vulnerable to breakdown, malicious intrusion and computer viruses that may result in the impairment of key business processes.

In addition, our systems, along with those of our customers, suppliers, or third-party service providers which operate critical business systems to process sensitive information in a variety of contexts are potentially vulnerable to a variety of evolving threats and data security breaches—whether by employees or others—that may expose sensitive data to unauthorized persons. 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 ~~security breaches could~~or other information technology assets, adware, telecommunications failures, earthquakes, fires, floods, and other similar threats. Such threats are prevalent and continue to rise, are increasingly difficult to detect, and come from a variety of sources, including traditional computer “hackers,” threat actors, “hacktivists,” organized criminal threat actors, personnel (such as through theft or misuse), sophisticated nation states, and nation-state-supported actors.

Ransomware attacks, including by organized criminal threat actors, nation-states, and nation-state-supported actors, are becoming increasingly prevalent and severe and can lead to significant interruptions in our operations, loss of data and income, reputational harm, and diversion of funds. Extortion payments may alleviate the negative impact of a ransomware attack, but we may be unwilling or unable to make such payments due to, for example, applicable laws or regulations prohibiting such payments. 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). If our third-party service providers experience a security incident or other interruption, we could experience adverse consequences. While we may be entitled to damages if our third-party service providers fail to satisfy their privacy or security-related obligations to us, any award may be insufficient to cover our damages, or we may be unable to recover such award.

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 ~~could lead to~~(b) the public exposure of personally identifiable information (including sensitive personal information) of our employees, collaborators, clinical trial patients, and ~~others.~~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. A data security breach or privacy violation that leads to disclosure or modification of or prevents access to patient information, including personally identifiable information or protected health information, could harm our reputation, compel us to comply with federal, state and/or ~~state~~international data breach notification laws, subject us to mandatory corrective action, require us to verify the correctness of database contents and otherwise subject us to liability under laws and regulations that protect personal data, including, but not limited to, HIPAA, similar state data protection regulations, and the EU GDPR and UK GDPR, resulting in significant penalties; increased ~~costs or~~costs; loss of ~~revenue.~~revenue; expenses of computer or forensic investigations; material fines and penalties; compensatory, special, punitive or statutory damages; litigation; consent orders regarding our privacy and security practices; requirements that we provide notices, credit monitoring services and/or credit restoration services or other relevant services to impacted individuals; adverse actions against our licenses to do business; or injunctive relief. News reports have also highlighted COVID research-specific hacking and phishing attempts. Because we and our collaborators are working on vaccines, including COVID vaccines, we may be at higher-than-average risk for such attempts.

Compliance with these and any other applicable privacy and data security laws and regulations is a rigorous and time-intensive process, and we may be required to put in place additional mechanisms ensuring compliance with the new data protection rules. If we fail to comply with any such laws or regulations, we may face significant fines and penalties that could adversely affect our business, financial condition and results of operations. Furthermore, the laws are not consistent, and compliance in the event of a widespread data breach is costly.

U.S. and equivalent foreign authorities and international authorities have been warning businesses of increased cybersecurity threats from actors seeking to exploit the COVID-19 pandemic. In 2020, we experienced a cybersecurity incident known as a phishing e-mail scam, and although we do not consider its impact on us to be material, if we are unable to prevent this or other such data security breaches or privacy violations or implement satisfactory remedial measures, our operations could be disrupted, and we may suffer loss of reputation, financial loss and other regulatory penalties because of lost or misappropriated information, including sensitive patient data. Moreover, failure to maintain effective internal accounting controls related to data security breaches and cybersecurity in general could impact our ability to produce timely and accurate financial statements and could subject us to regulatory scrutiny. In addition, these breaches and other inappropriate access can be difficult to detect, and any delay in identifying them may lead to increased harm of the type described above. Moreover, the prevalent use of mobile devices that access confidential information increases the risk of data security breaches, which could lead to the loss of confidential information, trade secrets or other intellectual property. While we have implemented security measures that are intended to protect our data security and information technology systems, such measures may not prevent such events.

Such disruptions and breaches of security could have a material adverse effect on our business, financial condition and results of operations.

~~Risks Related to our Finances and Capital Requirements~~

WeAdverse developments affecting the financial services industry may have ~~incurred substantial losses since inception and do not have any commercial products that generate revenue.~~

We have experienced significant net losses in each year since our inception. Our accumulated deficit was $879.9 million as of September 30, 2017. To date, our revenue has resulted from collaboration agreements, government and private agency grants and services and license fees from our customers, including the customers of our wholly-owned subsidiary Dynavax GmbH. We anticipate that we will incur substantial additional net losses in future years as a result of our continuing investment in research and development activities and to commercialize HEPLISAV-B if it is approved by the FDA.

We do not have any products that generate revenue. There can be no assurance whether HEPLISAV-B or any of our other product candidates can be successfully developed, financed or commercialized in a timely manner basedadverse consequences on our ~~current plans.~~ business, financial condition and stock price.*

We ~~will not be able~~regularly maintain cash balances at third-party financial institutions in excess of the FDIC insurance limit. Although we assess our banking relationships as we believe necessary or appropriate, our access to ~~achieve approval~~funding sources in amounts adequate to finance or generate meaningful sales without significant additional resources. Our ability to generate revenue depends upon obtaining regulatory approvals for our product candidates, generating product sales and entering into and maintaining successful collaborative relationships.

~~If we are unable to generate significant revenues or achieve profitability, we may be required to reduce or discontinue~~capitalize our current and ~~planned~~projected future business operations ~~enter into a transaction that constitutes a change in control of the company or raise additional capital on less than favorable terms.~~

If we are unable to generate significant revenues or achieve profitability, we will require substantial additional capital to continue development of our product candidates and if our most advanced candidate, HEPLISAV-B, is approved, to commence manufacturing, sales and marketing activities.

To continue development of our product candidates and, if it is approved, to launch HEPLISAV-B, we will need significant additional funds. Addressing this need may occur through strategic alliance and licensing arrangements and/or future public or private financings. We expect to continue to spend substantial funds in connection with:

~~development, manufacturing and, if approved, commercialization of our product candidates, particularly HEPLISAV-B;~~

~~various human clinical trials for our product candidates, including significant costs for post-marketing study obligations to maintain approval; and~~

~~protection of our intellectual property.~~

~~The cash requirements of our current operations will~~could be significantly ~~impacted~~impaired by factors that affect us, the FDA decision regarding potential approval for HEPLISAV-B. Although we believe we have current funds for at least the next twelve months based on our current operational plans, cash, cash equivalents and marketable securities on hand, we expect that if HEPLISAV-B is approved by the FDA, we will require additional capital following approval, in particular if we fail to enter into a third party collaboration following approval.

Sufficient additional financing through future public or private financings, strategic alliance and licensing arrangements or other financing sources may not be available on acceptable terms or at all. Our ability to raise additional capital in the equity and debt markets is dependent on a number of factors, including, but not limited to, the market demand for our common stock, which itself is subject to a number of development and business risks and uncertainties, as well as the uncertainty that we would be able to raise such additional capital at a price or on terms that are favorable to us. Equity or other financings, if completed, could result in significant dilution or otherwise adversely affect the rights of existing stockholders. If adequate funds are not available in the future, we may need to delay, reduce the scope of, or put on hold the HEPLISAV-B program or other development programs while we seek strategic alternatives.

~~Risks Related to our Intellectual Property~~

~~We rely on licenses to intellectual property from third parties. Impairment of these licenses or our inability to maintain them would severely harm our business.~~

Our current research and development efforts depend in part upon our license arrangements for intellectual property owned by third parties. Our dependence on these licenses subjects us to numerous risks, such as disputes regarding the use of the licensed intellectual property and the creation and ownership of new discoveries under such license agreements. In addition, these license arrangements require us to make timely payments to maintain our licenses and typically contain diligence or milestone-based termination provisions. Our failure to meet any obligations pursuant to these agreements could allow our licensors to terminate our agreements or undertake other remedies such as converting exclusive to non-exclusive licenses if we are unable to cure or obtain waivers for such failures or amend such agreements on terms acceptable to us. In addition, our license agreements may be terminated or may expire by their terms, and we may not be able to maintain the exclusivity of these licenses. If we cannot obtain and maintain licenses that are advantageous or necessary to the development or the commercialization of our product candidates, we may be required to expend significant time and resources to develop or license similar technology or to find other alternatives to maintaining the competitive position of our products. If such alternatives are not available to us in a timely manner or on acceptable terms, we may be unable to continue development or commercialize our product candidates. In the absence of a current license, we may be required to redesign our technology so it does not infringe a third party’s patents, which may not be possible or could require substantial funds and time.

If third parties successfully assert that we have infringed their patents and proprietary rights or challenge our patents and proprietary rights, we may become involved in intellectual property disputes and litigation that would be costly, time consuming and delay or prevent development or commercialization of our product candidates.

We may be exposed to future litigation by third parties based on claims that our product candidates or proprietary technologies infringe their intellectual property rights, or we may be required to enter into litigation to enforce patents issued or licensed to us or to determine the ownership, scope or validity of our or another party’s proprietary rights, including a challenge as to the validity of our issued and pending claims. From time to time we are involved in various interference and other administrative proceedings related to our intellectual property which has caused us to incur certain legal expenses. If we become involved in any litigation and/or other significant interference proceedings related to our intellectual property or the intellectual property of others, we will incur substantial additional expenses and it will divert the efforts of our technical and management personnel.

Two of our potential competitors, Merck and GSK, are exclusive licensees of broad patents covering methods of production of rHBsAg, a component of HEPLISAV-B. In addition, the Institut Pasteur also owns or has exclusive licenses to patents relating to aspects of production of rHBsAg in the U.S. While some of these patents have expired or will soon expire outside the U.S., they remain in force in the U.S. To the extent we are able to commercialize HEPLISAV-B in the U.S. while these patents remain in force, Merck, GSK or their respective licensors or the Institut Pasteur may bring claims against us.

~~If we or our collaborators are unsuccessful in defending or prosecuting our issued and pending claims or in defending potential claims against our products, for example, as may arise in connection~~financial institutions with the commercialization of HEPLISAV-B or any similar product candidate, we or our collaborator could be required to pay substantial damages or be unable to commercialize our product candidates or use our proprietary technologies without a license from such third party. A license may require the payment of substantial fees or royalties, require a grant of a cross-license to our technology or may not be available on acceptable terms, if at all. Any of these outcomes could require us to change our business strategy and could materially impact our business and operations.

One of our potential competitors, Pfizer, has issued patent claims, as well as patent claims pending with the PTO and foreign patent offices, that may be asserted against our TLR agonist products and our TLR inhibitor products. We may need to obtain a license to one or more of these patent claims held by Pfizer by paying fees or royalties or offering rights to our own proprietary technologies to commercialize one or more of our formulations other than with respect to HEPLISAV-B, for which we have ~~a license. A license for other uses may not be available to us on acceptable terms, if at all, which~~arrangements directly, or the financial services industry or economy in general. These factors could ~~preclude~~involve financial institutions or ~~limit our ability to commercialize our products.~~

~~If the combination of patents, trade secrets and contractual provisions that we rely on to protect our intellectual property is inadequate, the value of our product candidates will decrease.~~

~~Our success depends on our ability to:~~

•

~~obtain and protect commercially valuable patents or the rights to patents both domestically and abroad;~~

~~operate without infringing upon the proprietary rights of others; and~~

~~prevent others from successfully challenging or infringing our proprietary rights.~~

We will be able to protect our proprietary rights from unauthorized use only to the extent that these rights are covered by valid and enforceable patents or are effectively maintained as trade secrets. We try to protect our proprietary rights by filing and prosecuting U.S. and foreign patent applications. However, in certain cases such protection may be limited, depending in part on existing patents held by third parties, which may only allow us to obtain relatively narrow patent protection. In the U.S., legal standards relating to the validity and scope of patent claims in the biopharmaceutical field can be highly uncertain, are still evolving and involve complex legal and factual questions for which important legal principles remain unresolved.

The biopharmaceutical patent environment outside the U.S. is even more uncertain. We may be particularly affected by this uncertainty since several of our product candidates may initially address market opportunities outside the U.S., where we may only be able to obtain limited patent protection.

~~The risks and uncertainties that we face~~financial services industry companies with ~~respect to our patents and other proprietary rights include the following:~~

~~we may not receive an issued patent for any of our patent applications or for any patent applications that we have exclusively licensed;~~

~~the pending patent applications we have filed or to~~ which we have ~~exclusive rights may take longer than we expect to result~~financial or business relationships, but could also include factors involving financial markets or the financial services industry generally.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

None.

ITEM 5. OTHER INFORMATION

Trading Arrangements

During our last fiscal quarter, our directors and officers (as defined in ~~issued patents;~~

Rule 16a-1(f) under the ~~claims of any patents that are issued may not provide meaningful protection~~Exchange Act) adopted or ~~may not be valid~~terminated the contracts, instructions or ~~enforceable;~~

~~we might not be able to develop additional proprietary technologies that are patentable;~~

~~the patents licensed or issued to us or our collaborators may not provide a competitive advantage;~~

~~patents issued to other parties may limit our intellectual property protection or harm our ability to do business;~~

~~other parties may independently develop similar or alternative technologies or duplicate our technologies and commercialize discoveries that we attempt to patent; and~~

~~other parties may design around technologies we have licensed, patented or developed.~~

We also rely on trade secret protection and confidentiality agreements to protect our interests in proprietary know-how that is not patentable and for processes for which patents are difficult to enforce. We cannot be certain that we will be able to protect our trade secrets adequately. Any disclosure of confidential data in the public domain or to third parties could allow our competitors to learn our trade secrets. If we are unable to adequately obtain or enforce proprietary rights, we may be unable to commercialize our products, enter into collaborations, generate revenues or maintain any advantage we may have with respect to existing or potential competitors.

~~Risks Related to an Investment in our Common Stock~~

~~Our stock price is subject to volatility, and your investment may suffer a decline in value.~~

The market prices for securities of biopharmaceutical companies have in the past been, and are likely to continue in the future, to be, very volatile. The market price of our common stock is subject to substantial volatility depending upon many factors, many of which are beyond our control, including:

•

~~our ability to receive timely regulatory approval for our~~ ~~product candidates;~~

~~our ability to establish and maintain collaborations~~written plans for the ~~development and commercialization of our product candidates;~~

~~our ability to raise additional capital to fund our operations;~~

•

~~the success or failure of clinical trials involving our immuno-oncology product candidates and the product candidates of third party collaborators in combination studies;~~

~~technological innovations, new commercial products~~purchase 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 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;~~

~~issuance of new or changed securities analysts’ reports or recommendations;~~

~~actual or anticipated fluctuations in our quarterly financial and operating results; and~~

~~the volume of trading in our common stock.~~

One or more of these factors could cause a substantial decline in the price of our common stock. In addition, securities class action and shareholder derivative litigation has often been brought against a company following a decline in the market price of its securities. We are currently the target of such litigation, resulting from the decline in our common stock following the disclosure in November 2016 of the FDA’s 2016 CRL related to HEPLISAV-B. We may in the future be the target of additional such litigation. Securities and shareholder derivative litigation could result in substantial costs, and divert management’s attention and resources, which could harm our business, operating results and financial condition.

The anti-takeover provisions of our certificate of incorporation, our bylaws, Delaware law and our share purchase rights plan may prevent or frustrate a change in control, even if an acquisition would be beneficial to our stockholders, which could affect our stock price adversely and prevent attempts by our stockholders to replace or remove our current management.

Provisions of our certificate of incorporation and bylaws may delay or prevent a change in control, discourage bids at a premium over the market price of our common stock and adversely affect the market price of our common stock and the voting or other rights of the holders of our common stock. These provisions include:

~~authorizing our Board of Directors to issue additional preferred stock with voting rights to be determined by the Board of Directors;~~

~~limiting the persons who can call special meetings of stockholders;~~

~~prohibiting stockholder actions by written consent;~~

~~creating a classified board of directors pursuant to which our directors are elected for staggered three year terms;~~

~~providing that a supermajority vote of our stockholders is required for amendment to certain provisions of our certificate of incorporation and bylaws; and~~

~~establishing advance notice requirements for nominations for election to our Board of Directors or for proposing matters that can be acted on by stockholders at stockholder meetings.~~

Our share purchase rights plan may have certain anti-takeover effects. Specifically, the rights issued pursuant to the plan will cause substantial dilution to a person or group that attempts to acquire the Company on terms not approved by our Board of Directors. Although the rights should not interfere with any merger or other business combination approved by the Board of Directors since the rights issued may be amended to permit such acquisition or redeemed by the Company at $0.001 per right prior to the earliest of (i) the time that a person or group has acquired beneficial ownership of 20% or more of our common stock or (ii) the final expiration date of the rights, the effect of the rights plan may deter a potential acquisition of the Company. In addition, we remain subject to the provisions of the Delaware corporation law that, in general, prohibit any business combination with a beneficial owner of 15% or more of our common stock for three years unless the holder’s acquisition of our stock was approved in advance by our Board of Directors.

~~We will continue to incur increased costs and demands upon management as a result of complying with the laws and regulations affecting public companies, which could affect our operating results.~~

As a public company, we will continue to incur legal, accounting and other expenses associated with reporting requirements and corporate governance requirements, including requirements under the Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, as well as new rules implemented by the Securities and Exchange Commission and the NASDAQ Stock Market LLC. We may need to continue to implement additional financial and accounting systems, procedures and controls to accommodate changes in our business and organization and to comply with new reporting requirements. There can be no assurance that we will be able to maintain a favorable assessment as to the adequacy of our internal control over financial reporting. If we are unable to reach an unqualified assessment, or our independent registered public accounting firm is unable to issue an unqualified attestation as to the effectiveness of our internal control over financial reporting as of the end of our fiscal year, investors could lose confidence in the reliability of our financial reporting which could harm our business and could impact the price of our common stock.

Future sales of our common stock or the perception that such sales may occur in the public market could cause our stock price to fall.*

Sales of a substantial number of shares of our common stock in the public market, or the perception that these sales might occur, could depress the market price of our common stock and could impair our ability to raise capital through the sale ~~of additional equity securities. As of September 30, 2017~~ we had 60,587,000 shares of common stock outstanding, all of which shares were eligible for sale in the public market, subject in some cases to the volume limitations and manner of sale requirements under Rule 144 of the Securities Act of 1933, as amended.

Under our universal shelf registration statement filed by us in August 2017, we may sell any combination of common stock, preferred stock, debt securities and warrants in one or more offerings, including pursuant to our ~~2017 At the Market Agreement with Cowen under which we can offer and sell our common stock from time to time up to aggregate sales proceeds of $150,000,000.~~ ~~The sale or issuance~~ of our securities ~~as well as~~set forth in the existence of outstanding options and shares of common stock reserved for issuance under our option and equity incentive plans also may adversely affect the terms upon which we are able to obtain additional capital through the sale of equity securities.table below.


~~ITEM 2.~~	~~UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS~~

~~None.~~

~~ITEM 5.~~

~~OTHER INFORMATION~~

On November 3, 2017, we entered into an At the Market issuance (“ATM”) Sales Agreement (the “Agreement”) with Cowen and Company, LLC (“Cowen”) under which we may offer and sell from time to time at our sole discretion shares of our common stock having an aggregate offering price of up to $150,000,000 through Cowen as our sales agent.

Cowen may sell the common stock by any method permitted by law deemed to be an “at the market” offering as defined in Rule 415 of the Securities Act of 1933, as amended (the “Act”), including without limitation sales made by means of ordinary brokers’ transactions on The NASDAQ Capital Market or otherwise at market prices prevailing at the time of sale, in block transactions, or as otherwise directed by us. Cowen will use commercially reasonable efforts to sell the common stock from time to time, based upon instructions from us (including any price, time or size limits or other customary parameters or conditions we may impose). We will pay Cowen a commission of up to 3.0% of the gross sales proceeds of any common stock sold through Cowen under the Agreement. We have also provided Cowen with customary indemnification rights under the Agreement.

We are not obligated to make any sales of common stock under the Agreement. The offering of shares of our common stock pursuant to the Agreement will terminate upon the earlier of (i) the sale of all common stock subject to the Agreement, or (ii) termination of the Agreement in accordance with its terms.

The foregoing description of the Agreement is not complete and is qualified in its entirety by reference to the full text of the Agreement, a copy of which is filed herewith as Exhibit 10.1 to this report and is incorporated herein by reference. ~~A copy of the opinion of Cooley LLP relating to the legality of the issuance and sale of the securities under the Agreement is filed as Exhibit 5.1 to this report.~~

~~ITEM 6.~~

E~~XHIBITS~~

Incorporated by Reference

Exhibit
Number
Document
Exhibit Number
Filing
Filing Date
File No.
Filed Herewith
3.1
Sixth Amended and Restated Certificate of Incorporation
3.1
S-1/A
February 5, 2004
333-109965

3.2
Certificate of Amendment of Amended and Restated Certificate of Incorporation
3.1
8-K
January 4, 2010
001-34207

3.3
Certificate of Amendment of Amended and Restated Certificate of Incorporation
3.1
8-K
January 5, 2011
001-34207

3.4
Certificate of Amendment of Amended and Restated Certificate of Incorporation
3.6
8-K
May 30, 2013
001-34207

3.5
Certificate of Amendment of the Sixth Amended and Restated Certificate of Incorporation
3.1
8-K
November 10, 2014
001-34207

3.6
Certificate of Amendment of the Sixth Amended and Restated Certificate of Incorporation
3.1
8-K
June 2, 2017
001-34207

3.7
Certificate of Amendment of the Sixth Amended and Restated Certificate of Incorporation
3.1
8-K
July 31, 2017
001-34207

3.8
Amended and Restated Bylaws
3.2
S-1/A
February 5, 2004
333-109965

3.9
Form of Certificate of Designation of Series A Junior Participating Preferred Stock
3.3
8-K
November 6, 2008
000-50577

4.1
Reference is made to Exhibits 3.1, 3.2, 3.3, 3.4, 3.5, 3.6, 3.7, 3.8 and 3.9 above

4.2
Form of Specimen Common Stock Certificate
4.2
S-1/A
January 16, 2004
333-109965

4.3
Rights Agreement, dated as of November 5, 2008, by and between the Company and Mellon Investor Services LLC
4.4
8-K
November 6, 2008
000-50577

4.4
Form of Right Certificate
4.5
8-K
November 6, 2008
000-50577

4.5
Form of Restricted Stock Unit Award Agreement under the 2004 Stock Incentive Plan
4.6
10-K
March 6, 2009
001-34207

5.1
Opinion of Cooley LLP

X
10.1
Sales Agreement, dated November 3, 2017, by and between the Company and Cowen and Company, LLC

X
10.2
License Agreement, dated June 26, 2007, between Coley Pharmaceuticals Group, Inc. and the Company

X

Type of Trading Arrangement

~~Incorporated by Reference~~

Exhibit
NumberName and Position

~~Document~~Action

~~Exhibit Number~~Adoption/ Termination

Date

~~Filing~~Rule 10b5-1*

~~Filing Date~~Non-

Rule 10b5-1**

~~File No.~~Total Shares of Common Stock to be Sold

~~Filed Herewith~~Total Shares of Common Stock to be Purchased

Expiration Date

~~31.1~~David Novack,

President and Chief Operating Officer

~~Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002~~Adoption

May 5, 2023

191,000 shares of common stock underlying stock options

February 6, 2024, unless earlier terminated by Mr. Novack, or on the first date on which all trades under Mr. Novack’s plan have been executed or are expired

~~31.2~~

~~Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002~~

32.1*

~~Certification~~* Contract, instruction or written plan intended to satisfy the affirmative defense conditions of ~~Chief Executive Officer pursuant to Section 906 of~~Rule 10b5-1(c) under the ~~Sarbanes-Oxley Act of 2002~~

XExchange Act.

32.2*** “Non-Rule 10b5-1 trading arrangement” as defined in Item 408(c) of Regulation S-K under the Exchange Act.

ITEM 6. EXHIBITS


		Incorporated by Reference
Exhibit Number	Document	Exhibit Number	Filing	Filing Date	File No.	Filed Herewith
3.1	Sixth Amended and Restated Certificate of Incorporation	3.1	S-1/A	February 5, 2004	333-109965
3.2	Certificate of Amendment of Amended and Restated Certificate of Incorporation	3.1	8-K	January 4, 2010	001-34207
3.3	Certificate of Amendment of Amended and Restated Certificate of Incorporation	3.1	8-K	January 5, 2011	001-34207
3.4	Certificate of Amendment of Amended and Restated Certificate of Incorporation	3.6	8-K	May 30, 2013	001-34207
3.5	Certificate of Amendment of the Sixth Amended and Restated Certificate of Incorporation	3.1	8-K	November 10, 2014	001-34207
3.6	Certificate of Amendment of the Sixth Amended and Restated Certificate of Incorporation	3.1	8-K	June 2, 2017	001-34207
3.7	Certificate of Amendment of the Sixth Amended and Restated Certificate of Incorporation	3.1	8-K	July 31, 2017	001-34207
3.8	Certificate of Amendment of the Sixth Amended and Restated Certificate of Incorporation	3.1	8-K	May 29, 2020	001-34207
3.9	Amended and Restated Bylaws	3.8	10-Q	November 6, 2018	001-34207
4.1	Reference is made to Exhibits 3.1, 3.2, 3.3, 3.4, 3.5, 3.6, 3.7, 3.8, and 3.9
4.2	Form of Specimen Common Stock Certificate	4.2	S-1/A	January 16, 2004	333-109965
4.3	Indenture between Company and U.S. Bank National Association, as trustee, dated May 13, 2021	4.1	8-K	May 13, 2021	001-34207
4.4	Form of Global Note, representing Dynavax Technologies Corporation’s 2.50% Convertible Senior Notes due 2026	4.2	8-K	May 13, 2021	001-34207
10.1^	Amendment No. 3 to Supply Agreement, dated effective as of April 26, 2023, by and between Company and Biological E. Limited					X
10.2^	Waiver and Second Amendment to Agreement, dated effective as of April 27, 2023, by and between Company and Coalition for Epidemic Preparedness Innovations					X
10.3+	Form of Management Continuity and Severance Agreement between Company and certain of its executive officers					X
31.1	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002					X
31.2	Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002					X
32.1*	Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002					X
32.2*	Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002					X


EX—101.INS	~~Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002~~					X

~~EX—101.INS~~	Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
EX—101.SCH	Inline XBRL Taxonomy Extension Schema Document
EX—101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document
EX—101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase
EX—101.LAB	Inline XBRL Taxonomy Extension Labels Linkbase Document
EX—101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document
EX—104	Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)


+	Indicates management contract, compensatory plan or ~~arrangement~~arrangement.

Pursuant to Item 601(b)(10) of Regulation S-K, certain portions of this exhibit have been omitted by means of marking such

portions with asterisks because the Company has determined that the information is both not material and is the type that the

Company treats as private or confidential.

The certifications attached as Exhibits 32.1 and 32.2 that accompany this Quarterly Report on Form 10-Q, are not deemed filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of this Form 10-Q), irrespective of any general incorporation language contained in such filing.

4166

S~~IGNATURES~~

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of ~~Berkeley,~~Emeryville, State of California.


	DYNAVAX TECHNOLOGIES CORPORATION

Date: ~~November~~August 3, ~~2017~~2023	By:	/s/ ~~EDDIE GRAY~~RYAN SPENCER
		~~Eddie Gray~~Ryan Spencer
		Chief Executive Officer and Director
		(Principal Executive Officer)

Date: ~~November~~August 3, ~~2017~~2023	By:	/s/ ~~MICHAEL OSTRACH~~KELLY MACDONALD
		~~Michael Ostrach~~Kelly MacDonald
		Chief Financial Officer
		(Principal Financial Officer)

Date: ~~November~~August 3, ~~2017~~2023	By:	/s/ ~~DAVID JOHNSON~~JUSTIN BURGESS
		~~David Johnson~~Justin Burgess
		~~Vice President,~~Controller, Chief Accounting Officer
		(Principal Accounting Officer)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Revenues:
Collaboration revenue	$	-		$	-		$	-		$	2,578
Grant revenue		53			162			306			289
Service and license revenue		-			-			-			884
Total revenues		53			162			306			3,751
Operating expenses:
Research and development		16,417			23,234			47,576			66,051
General and administrative		6,027			11,766			18,111			29,086
Restructuring		-			-			2,783			-
Total operating expenses		22,444			35,000			68,470			95,137
Loss from operations		(22,391	)		(34,838	)		(68,164	)		(91,386	)
Other income (expense):
Interest income		429			170			809			615
Other (expense) income, net		(166	)		(26	)		(378	)		68
Net loss	$	(22,128	)	$	(34,694	)	$	(67,733	)	$	(90,703	)
Basic and diluted net loss per share	$	(0.38	)	$	(0.90	)	$	(1.36	)	$	(2.36	)
Weighted average shares used to compute basic and diluted net loss per share		57,650			38,512			49,785			38,493

	Amortized Cost		Unrealized Gains		Unrealized Losses			Estimated Fair Value
September 30, 2017
Cash and cash equivalents:
Cash	$	2,972	$	-	$	-		$	2,972
Money market funds		14,124		-		-			14,124
Corporate debt securities		3,000		-		-			3,000
Total cash and cash equivalents		20,096		-		-			20,096
Marketable securities available-for-sale:
U.S. Treasuries		33,664		-		(15	)		33,649
U.S. government agency securities		95,748		-		(17	)		95,731
Corporate debt securities		42,200		4		-			42,204
Total marketable securities available-for-sale		171,612		4		(32	)		171,584
Total cash, cash equivalents and marketable securities	$	191,708	$	4	$	(32	)	$	191,680
December 31, 2016
Cash and cash equivalents:
Cash	$	3,557	$	-	$	-		$	3,557
Money market funds		18,981		-		-			18,981
U.S. government agency securities		1,751		-		-			1,751
Total cash and cash equivalents		24,289		-		-			24,289
Marketable securities available-for-sale:
U.S. Treasuries		3,499		-		-			3,499
U.S. government agency securities		28,685		3		(2	)		28,686
Corporate debt securities		24,938		5		(2	)		24,941
Total marketable securities available-for-sale		57,122		8		(4	)		57,126
Total cash, cash equivalents and marketable securities	$	81,411	$	8	$	(4	)	$	81,415

Years ending December 31,
2017 (remaining)	$	544
2018		2,349
2019		2,552
2020		2,614
2021		2,542
Thereafter		9,130
Total	$	19,731

	Shares Underlying Outstanding Options (in thousands)			Weighted-Average Exercise Price Per Share		Weighted-Average Remaining Contractual Term (years)		Aggregate Intrinsic Value (in thousands)
Balance at December 31, 2016		3,975		$	21.38
Options granted		329		$	6.99
Options exercised		(50	)	$	11.82
Options cancelled:
Options forfeited (unvested)		(351	)	$	18.43
Options cancelled (vested)		(217	)	$	29.11
Balance at September 30, 2017		3,686		$	20.05		5.79	$	13,420
Vested and expected to vest at September 30, 2017		3,671		$	20.06		5.79	$	13,390
Exercisable at September 30, 2017		2,394		$	22.18		5.40	$	5,948

	Number of Shares (In thousands)			Weighted-Average Grant-Date Fair Value
Non-vested as of December 31, 2016		699		$	12.12
Granted		2,136			4.83
Vested		(171	)		18.62
Forfeited or expired		(221	)		8.44
Non-vested as of September 30, 2017		2,443		$	5.62

	Stock Options						Stock Options						Employee Stock Purchase Plan
	Three Months Ended						Nine Months Ended						Nine Months Ended
	September 30,						September 30,						September 30,
	2017			2016			2017			2016			2017			2016
Weighted-average fair value	$	8.11		$	8.90		$	4.73		$	9.67		$	3.05		$	7.86
Risk-free interest rate		1.9	%		1.1	%		1.9	%		1.4	%		1.0	%		0.6	%
Expected life (in years)		4.5			4.5			4.5			4.9			1.2			1.2
Volatility		0.9			0.7			0.9			0.7			1.0			0.6

	Employee Severance and Other Benefits
Restructuring charges	$	2,783
Cash payments		(2,738	)
Balance at September 30, 2017	$	45

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company