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

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~~May 1, ~~2017,~~2020, the registrant had outstanding ~~60,596,251~~92,184,031 shares of common stock.

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 business and operations, our ability to successfully ~~develop, timely achieve regulatory approval for and~~ commercialize ~~HEPLISAV-B™~~HEPLISAV-B®, our ~~ability to successfully develop~~anticipated market opportunity and ~~obtain regulatory approval~~level of ~~our early stage product candidates, SD-101 and DV281, and our other early stage compounds,~~sales of HEPLISAV-B, our business, collaboration and regulatory strategy, our ~~intellectual property position, our product development efforts, our~~ ability to successfully develop and commercialize other vaccines containing our ~~product candidates, including HEPLISAV-B,~~novel adjuvant CpG 1018, our ability to manufacture commercial supply and meet regulatory requirements, ~~the timing of the introduction of our products,~~ uncertainty regarding our capital needs and future operating results and profitability, anticipated sources of funds, liquidity and cash needs, 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, where appropriate, its ~~subsidiary.~~subsidiary Dynavax GmbH.

	September 30,			December 31,			March 31,			December 31,
	2017			2016			2020			2019
	(unaudited)			(Note 1)			(unaudited)			(Note 1)
Assets
Current assets:
Cash and cash equivalents	$	20,096		$	24,289		$	37,899		$	39,884
Marketable securities available-for-sale		171,584			57,126			91,634			111,171
Accounts and other receivables		783			1,342
Accounts and other receivables, net								8,135			8,886
Inventories, net								48,099			41,332
Prepaid expenses and other current assets		4,633			6,842			8,380			7,380
Total current assets		197,096			89,599			194,147			208,653
Property and equipment, net		16,622			17,174			30,897			32,022
Intangible assets, net								202			2,500
Operating lease right-of-use assets								28,436			30,252
Goodwill		2,213			1,971			2,061			2,081
Restricted cash	626			602				212			216
Other assets		1,270		334				3,301			3,344
Total assets	$	217,827		$	109,680		$	259,256		$	279,068
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	2,243		$	3,796		$	4,557		$	9,278
Accrued research and development		3,079			5,048			3,253			4,120
Accrued liabilities		7,567			11,192			12,268			14,802
Warrant liability								6,250			14,860
Other current liabilities								2,951			9,987
Total current liabilities		12,889			20,036			29,279			53,047
Long-term debt, net								179,583			178,601
Long-term portion of lease liabilities								36,972			37,845
Other long-term liabilities	504			443				1,598			1,285
Total liabilities		13,393			20,479			247,432			270,778
Commitments and contingencies (Note 4)
Commitments and contingencies (Note 6)
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
Authorized: 5,000 shares; Issued and outstanding:								-			-
Series B Convertible Preferred stock ̶ 5 shares at March 31, 2020 and December 31, 2019								-			-
Common stock: $0.001 par value; 139,000 shares authorized at March 31, 2020 and December 31, 2019; 87,599 and 83,871 shares issued and outstanding at March 31, 2020 and December 31, 2019, respectively								88			84
Additional paid-in capital		1,085,433			904,957			1,245,730			1,229,417
Accumulated other comprehensive loss		(1,156	)		(3,624	)		(2,575	)		(2,387	)
Accumulated deficit		(879,904	)		(812,171	)		(1,231,419	)		(1,218,824	)
Total stockholders’ equity		204,434			89,201			11,824			8,290
Total liabilities and stockholders’ equity	$	217,827		$	109,680		$	259,256		$	279,068

	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2017			2016			2017			2016			2020			2019
Revenues:
Collaboration revenue	$	-		$	-		$	-		$	2,578
Grant revenue		53			162			306			289
Service and license revenue		-			-			-			884
Product revenue, net													$	10,514		$	5,627
Other revenue														405			146
Total revenues		53			162			306			3,751			10,919			5,773
Operating expenses:
Cost of sales - product														2,354			1,800
Cost of sales - amortization of intangible assets														2,298			2,273
Research and development		16,417			23,234			47,576			66,051			4,653			21,206
General and administrative		6,027			11,766			18,111			29,086
Restructuring		-			-			2,783			-
Selling, general and administrative														20,926			18,348
Total operating expenses		22,444			35,000			68,470			95,137			30,231			43,627
Loss from operations		(22,391	)		(34,838	)		(68,164	)		(91,386	)		(19,312	)		(37,854	)
Other income (expense):
Interest income		429			170			809			615			590			735
Other (expense) income, net		(166	)		(26	)		(378	)		68
Interest expense														(4,731	)		(2,734	)
Sublease income														1,926			-
Change in fair value of warrant liability														8,610			-
Other income (expense), net														322			181
Net loss	$	(22,128	)	$	(34,694	)	$	(67,733	)	$	(90,703	)		(12,595	)		(39,672	)
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
Basic net loss per share													$	(0.15	)	$	(0.62	)
Weighted average shares used to compute basic net loss per share														85,477			63,778
Diluted net loss per share													$	(0.25	)	$	(0.62	)
Weighted average shares used to compute diluted net loss per share														85,648			63,778

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 March 31,
	2020			2019
Net loss	$	(12,595	)	$	(39,672	)
Other comprehensive income (loss), net of tax:
Unrealized gain on marketable securities available-for-sale		291			67
Foreign currency translation adjustments		(479	)		(483	)
Total other comprehensive loss		(188	)		(416	)
Total comprehensive loss	$	(12,783	)	$	(40,088	)

	Common Stock				Preferred Stock
	Shares		Par Amount		Shares		Par Amount		Additional Paid-In Capital			Accumulated Other Comprehensive (Loss) Income			Accumulated Deficit			Total Stockholders' Equity
Balances at December 31, 2019		83,871	$	84		5	$	-	$	1,229,417		$	(2,387	)	$	(1,218,824	)	$	8,290
Issuance (withholding) of common stock upon exercise of stock options and restricted stock awards, net		728		1		-		-		(2	)		-			-			(1	)
Issuance of common stock under Employee Stock Purchase Plan		91		-		-		-		311			-			-			311
Issuance of common stock, net of issuance costs, in conjunction with an At Market Sales Agreement (see Note 11)		2,909		3		-		-		14,226			-			-			14,229
Stock compensation expense		-		-		-		-		1,778			-			-			1,778
Total other comprehensive loss		-		-		-		-		-			(188	)		-			(188	)
Net loss		-		-		-		-		-			-			(12,595	)		(12,595	)
Balances at March 31, 2020		87,599	$	88		5	$	-	$	1,245,730		$	(2,575	)	$	(1,231,419	)	$	11,824


Balances at December 31, 2018		62,862	$	63		-	$	-	$	1,131,241		$	(2,015	)	$	(1,066,224	)	$	63,065
Issuance (withholding) of common stock upon exercise of stock options and restricted stock awards, net		740		-		-		-		(18	)		-			-			(18	)
Issuance of common stock under Employee Stock Purchase Plan		75		-		-		-		407			-			-			407
Issuance of common stock, net of issuance costs, in conjunction with an At Market Sales Agreement (see Note 11)		1,343		2		-		-		13,621			-			-			13,623
Stock compensation expense		-		-		-		-		6,170			-			-			6,170
Total other comprehensive loss		-		-		-		-		-			(416	)		-			(416	)
Net loss		-		-		-		-		-			-			(39,672	)		(39,672	)
Balances at March 31, 2019		65,020	$	65		-	$	-	$	1,151,421		$	(2,431	)	$	(1,105,896	)	$	43,159

	Nine Months Ended September 30,						Three Months Ended March 31,
	2017			2016			2020			2019
Operating activities
Net loss	$	(67,733	)	$	(90,703	)	$	(12,595	)	$	(39,672	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		2,456			1,574			1,014			1,702
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
Amortization of right-of-use assets								634			1,302
Gain on disposal of property and equipment and from lease termination								(76	)		-
Accretion of discounts on marketable securities								(87	)		(323	)
Change in fair value of warrant liability								(8,610	)		-
Stock compensation expense		10,844			10,030			1,778			6,170
Cost of sales - amortization of intangible assets								2,298			2,273
Non-cash interest expense								1,338			814
Tenant improvements provided by the landlord								908			-
Changes in operating assets and liabilities:
Accounts and other receivables		559			(896	)
Accounts and other receivables, net								751			(2,087	)
Inventories, net								(6,767	)		(8,547	)
Prepaid expenses and other current assets		(1,841	)		804			(1,000	)		154
Other assets		(936	)		(99	)		43			1,872
Accounts payable		(1,499	)		704			(2,095	)		4,424
Accrued liabilities and other long term liabilities		(1,274	)		(286	)
Deferred revenues		-			(2,654	)
Lease liabilities								(672	)		(106	)
Accrued liabilities and other liabilities								(3,728	)		(7,878	)
Net cash used in operating activities		(59,769	)		(80,769	)		(26,866	)		(39,902	)
Investing activities
Acquisition of technology licenses								(7,000	)		(7,000	)
Purchases of marketable securities		(192,684	)		(122,027	)		(17,985	)		(29,205	)
Proceeds from maturities of marketable securities		78,298			186,670
Proceeds from maturities and redemptions of marketable securities								37,900			54,700
Purchases of property and equipment, net		(374	)		(6,516	)		(2,352	)		(3,882	)
Net cash (used in) provided by investing activities		(114,760	)		58,127
Net cash provided by investing activities								10,563			14,613
Financing activities
Proceeds from long-term debt, net								-			74,250
Proceeds from issuance of common stock, net		169,187			-			14,229			13,623
Proceeds from exercise of stock options and restricted stock awards, net		285			131
(Tax withholding) from exercise of stock options and restricted stock awards, net								(1	)		(18	)
Proceeds from Employee Stock Purchase Plan		292			616			311			407
Net cash provided by financing activities		169,764			747			14,539			88,262
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
Effect of exchange rate changes on cash, cash equivalents and restricted cash								(225	)		(192	)
Net (decrease) increase in cash, cash equivalents and restricted cash								(1,989	)		62,781
Cash, cash equivalents and restricted cash at beginning of period								40,100			49,967
Cash, cash equivalents and restricted cash at end of period							$	38,111		$	112,748
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		$	-
Cash paid during the period for interest							$	3,412		$	1,940
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		$	-
Purchases of property and equipment, not yet paid							$	408		$	7,230
Right-of-use assets obtained in exchange for operating lease liabilities							$	-		$	34,807

Dynavax Technologies Corporation (“we,” “our,” “us,” “Dynavax” or the “Company”), is a ~~clinical-stage immunotherapy~~commercial stage biopharmaceutical company ~~focused on leveraging the power~~developing and commercializing novel vaccines. We launched our first product, HEPLISAV-B® [Hepatitis B Vaccine (Recombinant), Adjuvanted], in February 2018, following United States Food and Drug Administration (“FDA”) approval for prevention of the body’s innate 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 for the preventioninfection caused by all known subtypes of hepatitis B virus in adults age 18 years and ~~as a disease modifying therapy for asthma.~~older. We were incorporated in California 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.

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 at December 31, ~~2016~~2019 has been derived from audited financial statements at that date, but excludes disclosures required by GAAP for complete financial statements.

The unaudited condensed consolidated financial statements and these notes should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, ~~2016,~~2019, 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, Dynavax GmbH. All significant intercompany accounts and transactions among these entities have been eliminated from the condensed consolidated financial statements. We operate in ~~one~~1 business segment: ~~the~~ discovery, development and ~~development~~commercialization of ~~biopharmaceutical products.~~novel vaccines.

As of ~~September 30, 2017,~~March 31, 2020, we had cash, cash equivalents and marketable securities of ~~$191.7~~ $129.5 million. ~~During~~As of March 31, 2020, the ~~nine months ended September 30, 2017, we received approximately $169~~principal amount of our term loan was $180.9 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~~including paid-in-kind interest. The term loan has a maturity date of ~~cash in operating activities.~~December 31, 2023, unless earlier prepaid.

~~We have~~The Company has incurred ~~significant operating~~ losses and negative cash flows from operations since ~~our inception. We expect spending~~its inception and expects to ~~increase~~incur operating losses for the foreseeable future as we continue to invest 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~~HEPLISAV-B. If we cannot generate a sufficient amount of revenue from product ~~candidates and additional applications and advancement of our technology. In order to continue these activities,~~sales, we will need ~~additional funding. This may occur~~to 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 payment obligations, or both. In addition, these securities may ~~not~~have rights senior to those of our common stock and could include covenants that would restrict our operations.

We currently anticipate that our cash, cash equivalents and short-term marketable securities as of March 31, 2020, and anticipated revenues from HEPLISAV-B will be ~~available, or if available, may be on terms that significantly dilute or otherwise adversely affect~~sufficient to fund our operations for at least the ~~rights~~next 12 months from the date 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.this filing.

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, ~~as well as~~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, global financial crises and economic downturns, including those cause by widespread public health crises such as the COVID-19 pandemic, may cause extreme volatility and disruptions in capital and credit markets, and may impact our ability to raise additional capital when needed on acceptable terms, if at all. Adequate financing may not be available to us on acceptable terms, or at all.

The preparation of financial statements in conformity with GAAP requires management to make informed estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Management’s estimates are based on historical information available as of the date of the condensed consolidated financial statements and various other assumptions we believe are reasonable under the circumstances. However, the worldwide spread of COVID-19 has resulted in a global slowdown of economic activity which is likely to decrease demand for a broad variety of goods and services, while also disrupting sales channels and marketing activities for an unknown period of time until the disease is contained. We are unable to predict the future effect resulting from the COVID-19 pandemic. Actual results could differ materially from ~~these~~management’s estimates.

We recognize revenue when the customer obtains control of promised goods or services, in an amount that reflects the consideration which we expect to receive in exchange for those goods or services. To determine revenue recognition for arrangements that we determine are within the scope of Accounting Standards Codification (“ASC”) 606, we perform the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) we satisfy a performance obligation. We only apply the five-step model to contracts when it is probable that we will collect the consideration we are entitled to in exchange for the goods or services we transfer to the customer. At contract inception, once the contract is determined to be within the scope of ASC 606, we assess the goods or services promised within each contract and determine those that are performance obligations, and assess whether each promised good or service is distinct. We then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

We sell our product to a limited number of wholesalers and specialty distributors in the U.S. (collectively, our “Customers”). Revenues from product sales are recognized when we have satisfied our performance obligation, which is the transfer of control of our product upon delivery to the Customer. The timing between the recognition of revenue for product sales and the receipt of payment is not significant. Because our standard credit terms are short-term and we expect to receive payment in less than one-year, there is no financing component on the related receivables. Taxes collected from Customers relating to product sales and remitted to governmental authorities are excluded from revenues.

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. The amount of variable consideration is included in the net sales price only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period. If our estimates differ significantly from actuals, we will record adjustments that would affect product revenue, net in the period of adjustment.

Revenues from product sales are recorded at the net sales price, which includes estimates of variable consideration such as product returns, chargebacks, discounts, rebates and other fees that are offered within contracts between us and our Customers, healthcare providers, pharmacies and others relating to our product sales. We estimate variable consideration using either the most likely amount method or the expected value method, depending on the type of variable consideration and what method better predicts the amount of consideration we expect to receive. We take into consideration relevant factors such as industry data, current contractual terms, available information about Customers’ inventory, resale and chargeback data and forecasted customer buying and payment patterns, in estimating each variable consideration. The variable consideration is recorded at the time product sales is recognized, resulting in a reduction in product revenue and a reduction in accounts receivable (if the Customer offsets the amount against its accounts receivable) or as an accrued liability (if we pay the amount through our accounts payable process). Variable consideration requires significant estimates, judgment and information obtained from external sources. The amount of variable consideration is included in the net sales price only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period. If our estimates differ significantly from actuals, we will record adjustments that would affect product revenue, net in the period of adjustment. If we were to change any of these judgments or estimates, it could cause a material increase or decrease in the amount of revenue that we report in a particular period. There have been no material ~~changes~~adjustments to these estimates for the three months ended March 31, 2020 and 2019.

Product Returns: Consistent with industry practice, we offer our Customers a limited right of return based on the product’s expiration date for product that has been purchased from us. We estimate the amount of our product sales that may be returned by our Customers and record this estimate as a reduction of revenue in the period the related product revenue is recognized. We consider several factors in the estimation of potential product returns including expiration dates of the product shipped, the limited product return rights, available information about Customers’ inventory, shelf life of the product and other relevant factors.

Chargebacks: Our Customers subsequently resell our product to healthcare providers, pharmacies and others. In addition to distribution agreements with Customers, we enter into arrangements with qualified healthcare providers that provide for chargebacks and discounts with respect to the purchase of our product. Chargebacks represent the estimated obligations resulting from contractual commitments to sell product to qualified healthcare providers at prices lower than the list prices charged to Customers who directly purchase the product from us. Customers charge us for the difference between what they pay for the product and the ultimate selling price to the qualified healthcare providers. These reserves are established in the same period that the related revenue is recognized, resulting in a reduction of product revenue and accounts receivable. Chargeback amounts are determined at the time of resale to the qualified healthcare providers by Customers, and we issue credits for such amounts generally within a few weeks of the Customer’s notification to us of the resale. Reserves for chargebacks consists of credits that we expect to issue for units that remain in the distribution channel inventories at each reporting period end that we expect will be sold to the qualified healthcare providers, and chargebacks for units that our Customers have sold to the qualified healthcare providers, but for which credits have not been issued.

Trade Discounts and Allowances: We provide our Customers with discounts which include early payment incentives that are explicitly stated in our ~~significant accounting policies during~~contracts, and are recorded as a reduction of revenue in the ~~nine months ended September 30, 2017,~~period the related product revenue is recognized.

Distribution Fees: Distribution fees include fees paid to certain Customers for sales order management, data and distribution services. Distribution fees are recorded as ~~compared with those disclosed~~a reduction of revenue in the period the related product revenue is recognized.

Rebates: Under certain contracts, customers may obtain rebates for purchasing minimum volumes of our ~~Annual Report on Form 10-K for~~product. We estimate these rebates based upon the ~~year ended December 31, 2016.~~ expected purchases and the contractual rebate rate and record this estimate as a reduction in revenue in the period the related revenue is recognized.

~~Our revenues consist of amounts earned from collaborations, grants~~We have entered into collaborative arrangements and ~~fees from~~arrangements to provide manufacturing 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. Ourto other companies. Such arrangements may include ~~one or more~~promises to customers which, if capable 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 bebeing distinct, are accounted for as separate performance obligations. For agreements with multiple performance obligations, we allocate estimated revenue to each performance obligation at contract inception based on the estimated transaction price of each performance obligation. Revenue allocated to each performance obligation is then recognized when we satisfy the performance obligation by transferring control of the promised good or service to the customer. Collaboration and manufacturing service revenue are recorded in other revenue in the condensed consolidated statements of operations.

We determine if an arrangement includes a lease at inception. Operating leases are included in operating lease right-of-use assets, other current liabilities and long-term portion of lease liabilities in our condensed consolidated balance sheets. Right-of-use assets represent our right to use an underlying asset during the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease right-of-use assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. In determining the net present value of lease payments, we use our incremental borrowing rate which represents an estimated rate of interest that we would have to pay to borrow equivalent funds on a collateralized basis at the lease commencement date.

The operating lease right-of-use assets also include any lease payments made and exclude any lease incentives. Our leases may include options to extend or terminate the lease which are included in the lease term when it is reasonably certain that we will exercise any such options. Lease expense is recognized on a straight-line basis over the expected lease term. We have elected not to apply the recognition requirements of ASC 842 for short-term leases. We have also elected the practical expedient to not separate ~~unit~~lease components from non-lease components.

As lessors, we determine if an arrangement includes a lease at inception. We elected the practical expedient to not separate lease components from non-lease components. Rent revenue is recognized on a straight-line basis over the expected lease term and is included in other income (expense) in our condensed consolidated statements of ~~accounting~~operations.

Inventory is stated at the lower of cost or ~~whether it should be combined with other deliverables. In order~~estimated net realizable value, on a first-in, first-out, or FIFO, basis. We primarily use actual costs to ~~account~~determine our cost basis for ~~the multiple-element arrangements, we identify the deliverables included within the arrangement and evaluate which deliverables represent separate units~~inventories. Our assessment of ~~accounting. Analyzing the arrangement to identify deliverables~~market value requires the use of ~~judgment,~~estimates regarding the net realizable value of our inventory balances, including an assessment of excess or obsolete inventory. We determine excess or obsolete inventory based on multiple factors, including an estimate of the future demand for our products, product expiration dates and ~~each deliverable~~current sales levels. Our assumptions of future demand for our products are inherently uncertain and if we were to change any of these judgments or estimates, it could cause a material increase or decrease in the amount of inventory reserves that we report in a particular period. For the three months ended March 31, 2020 and 2019, there was 0 inventory reserve recognized.

We consider regulatory approval of product candidates to be uncertain and product manufactured prior to regulatory approval may not be ~~an obligation~~sold unless regulatory approval is obtained. As such, the manufacturing costs for product candidates incurred prior to ~~deliver services, a right or license~~regulatory approval are not capitalized as inventory but are expensed as research and development costs. We begin capitalization of these inventory related costs once regulatory approval is obtained.

HEPLISAV-B was approved by the FDA on November 9, 2017, at which time we began 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,~~capitalize inventory costs associated with the ~~price is fixed or determinable and collectability is reasonably assured.~~

~~Non-refundable upfront fees~~vial presentation of HEPLISAV-B. In March 2018, we received ~~for license and collaborative agreements and other payments under collaboration agreements where we have continuing performance obligations~~regulatory approval of the pre-filled syringe (“PFS”) presentation of HEPLISAV-B. Prior to FDA approval of HEPLISAV-B, all costs related to the ~~payments are deferred and recognized over~~manufacturing of HEPLISAV-B that could potentially be available to support the commercial launch of 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 expectproducts, were charged to ~~fulfill our performance obligations, which may include clinical development activities. Given the uncertainties of~~ research and development ~~collaborations, significant judgment is required~~expense in the period incurred as there was no alternative future use. Prior to ~~determine~~regulatory approval of PFS, costs associated with resuming operating activities at the ~~duration of the performance period. We recognize revenues for costs that are reimbursed under collaborative agreements as the related~~Düsseldorf manufacturing facility were also included in research and development expense. Subsequent to regulatory approval of PFS, costs ~~are incurred.~~

Contingent consideration received for the achievement of a substantive milestone is recognized in its entirety 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 uncertaintyassociated with resuming manufacturing activities at the ~~date the arrangement is entered into that the event will be achieved, (ii) the event can only be achieved based~~Düsseldorf facility were included in ~~whole or~~cost of sales – product, until commercial production resumed 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.~~

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 achievedmid-2018 at ~~the~~which 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 itemscosts were recorded 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.~~raw materials inventory.

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 costs are comprised of severance costs related to workforce reductions. We recognize restructuring charges when~~for the ~~liability is incurred. Employee termination benefits are accrued at the date management has committed to a plan of termination~~three months ended March 31, 2020 and ~~employees have been notified of their termination dates and expected severance payments.~~2019.

In ~~May 2014,~~June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards ~~Codification~~Update (“~~ASC”~~ASU”) ~~606, Revenue Recognition, Revenue from Contracts with Customers, which amends~~No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses of Financial Instruments. The standard changes the ~~guidance in former ASC 605, Revenue Recognition,~~ ~~which provides~~methodology for measuring credit losses on financial instruments and the timing of when such losses are recorded. As a ~~single comprehensivemodelforentitiesto use in accountingforrevenuearisingfromcontractswith customers~~smaller reporting company, this ASU and ~~will supersedemostcurrentrevenuerecognitionguidance.In July 2015, the FASB deferred the~~its subsequent updates, is effective ~~date~~ for ~~annual reporting periods~~fiscal years beginning after December 15, ~~2017 (including interim periods within those periods), with early application permitted~~. Accordingly, the updated standard is effective for the Company in the first fiscal quarter of 2018. 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. 2022. 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 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~~evaluating the impact of this ~~guidance as we enter into new revenue arrangements and~~standard will ~~continue to review variable consideration, potential disclosures, and the method of adoption in order to complete the evaluation of the impact~~have on ~~the~~our condensed 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.~~

In ~~February 2016,~~December 2019, the FASB issued ASU No. ~~2016-02, Leases~~2019-12, Simplifying the Accounting for Income Taxes (Topic ~~842)~~740). ~~The~~This ASU ~~requires companies to recognize lease right-of-use assets~~simplifies the accounting for income taxes by removing certain exceptions and ~~lease liabilities by lessees for all operating leases with lease terms greater than 12 months.~~improving consistent application in certain areas of Topic 740. 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~~2020 with early adoption permitted. We are currently evaluating the impact this ~~guidance~~standard 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.

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 consolidated financial statements.

In January 2017, 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.

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 ourcondensed consolidated financial statements.

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:

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.

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

	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
September 30, 2017
March 31, 2020
Assets
Money market funds	$	14,124	$	-	$	-	$	14,124	$	26,865	$	-	$	-	$	26,865
U.S. Treasuries		-		33,649		-		33,649
U.S. treasuries										-		6,597		-		6,597
U.S. government agency securities		-		95,731		-		95,731		-		49,692		-		49,692
Corporate debt securities		-		45,204		-		45,204		-		35,345		-		35,345
Total	$	14,124	$	174,584	$	-	$	188,708
Total assets									$	26,865	$	91,634	$	-	$	118,499
Liabilities
Warrant liability									$	-	$	-	$	6,250	$	6,250

	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
December 31, 2016
December 31, 2019
Assets
Money market funds	$	18,981	$	-	$	-	$	18,981	$	27,854	$	-	$	-	$	27,854
U.S. Treasuries		-		3,499		-		3,499
U.S. treasuries										-		6,517		-		6,517
U.S. government agency securities		-		30,437		-		30,437		-		51,273		-		51,273
Corporate debt securities		-		24,941		-		24,941		-		61,373		-		61,373
Total	$	18,981	$	58,877	$	-	$	77,858
Total assets									$	27,854	$	119,163	$	-	$	147,017
Liabilities
Warrant liability									$	-	$	-	$	14,860	$	14,860
Sublicense liability										-		-		6,948		6,948
Total liabilities									$	-	$	-	$	21,808	$	21,808

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~~Warrants were issued in connection with the underwritten public offering in August 2019 and are accounted for as a derivative liability at fair value. See Note 11. The fair value of the warrant liability is estimated using the Black-Scholes model which requires assumptions such as expected term, expected volatility and risk-free interest rate. These assumptions are subjective and require judgement to develop. Expected term is estimated using the full remaining contractual term of the warrants. We determine expected volatility based on our historical common stock price volatility. The warrant liability is classified as a Level 3 instrument as its value is based on unobservable inputs that are supported by little or no ~~transfers between Level 1 and Level 2 during~~market activity.

As of March 31, 2020, we used the ~~nine~~following key assumptions to estimate the fair value of warrant liability:

The following table provides a summary of changes in the fair value warrant liability for the three months ended ~~September 30, 2017.~~March 31, 2020 (in thousands):

The following table provides a reconciliation of cash, 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):

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 6.

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

	Amortized Cost		Unrealized Gains		Unrealized Losses			Estimated Fair Value		Amortized Cost		Unrealized Gains		Unrealized Losses			Estimated Fair Value
September 30, 2017
March 31, 2020
Cash and cash equivalents:
Cash										$	11,034	$	-	$	-		$	11,034
Money market funds											26,865		-		-			26,865
Total cash and cash equivalents											37,899		-		-			37,899
Marketable securities available-for-sale:
U.S. treasuries											6,511		86		-			6,597
U.S. government agency securities											49,439		253		-			49,692
Corporate debt securities											35,321		37		(13	)		35,345
Total marketable securities available-for-sale											91,271		376		(13	)		91,634
Total cash, cash equivalents and marketable securities										$	129,170	$	376	$	(13	)	$	129,533
December 31, 2019
Cash and cash equivalents:
Cash	$	2,972	$	-	$	-		$	2,972	$	4,038	$	-	$	-		$	4,038
Money market funds		14,124		-		-			14,124		27,854		-		-			27,854
Corporate debt securities		3,000		-		-			3,000		7,992		-		-			7,992
Total cash and cash equivalents		20,096		-		-			20,096		39,884		-		-			39,884
Marketable securities available-for-sale:
U.S. Treasuries		33,664		-		(15	)		33,649
U.S. treasuries											6,511		6		-			6,517
U.S. government agency securities		95,748		-		(17	)		95,731		51,235		50		(12	)		51,273
Corporate debt securities		42,200		4		-			42,204		53,353		28		-			53,381
Total marketable securities available-for-sale		171,612		4		(32	)		171,584		111,099		84		(12	)		111,171
Total cash, cash equivalents and marketable securities	$	191,708	$	4	$	(32	)	$	191,680	$	150,983	$	84	$	(12	)	$	151,055
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				March 31, 2020
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Mature in one year or less	$	171,612	$	171,584	$	79,250	$	79,547
Mature after one year through two years		-		-		12,021		12,087
	$	171,612	$	171,584	$	91,271	$	91,634

There were no0 realized gains or losses from the sale of marketable securities during the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2020 and ~~2016.~~2019.

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; 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 securities, with unrealized gains and losses 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 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 whether declines in the fair value of investment securities are other than temporary. In determining whether a decline is other than temporary, management considers the following factors:

To date, there have been no declines in fair value that have been identified as other than temporary.

Intangible assets are related to certain capitalized milestone and sublicense payments. The following table presents intangible assets (in thousands):

We recorded $2.3 million of cost of sales - amortization of intangible assets for each of the three months ended March 31, 2020 and 2019. See Note 7.

We lease our facilities in ~~Berkeley,~~Emeryville, California ~~(“Berkeley Lease”)~~ and Düsseldorf, ~~Germany (“Düsseldorf Lease”~~Germany.

In July 2019, we entered into a sublease for office space located at 2100 Powell Street, Emeryville, California (the “Powell Street Sublease”) ~~under operating leases that expire in December 2025~~ and ~~March 2023, respectively. In May 2017, we amended~~ the lease for our former corporate headquarters at 2929 Seventh Street, Berkeley, ~~Lease to extend~~California was terminated effective August 31, 2019. Under the ~~term~~terms of the ~~lease~~Powell Street Sublease, we are leasing 23,976 square feet at the rate of $3.90 per square foot, paid on a monthly basis. Rent is subject to ~~expire in December 2025~~scheduled annual increases and to terminate the lease of an adjacent building. The early termination of the adjacent building’s lease did not result in a termination fee as 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 provides~~are responsible for ~~periods of escalating rent. The total cash payments over~~certain operating expenses and taxes throughout the life of the ~~Berkeley~~Powell Street Sublease. The Powell Street Sublease will continue until June 30, 2022. There is no option to extend the sublease term.

On September 17, 2018, we entered into a lease (“Horton Street Master Lease”) for office and laboratory space located at 5959 Horton Street, Emeryville, California (“Horton Street Premises”). Under the terms of the Horton Street Master Lease, we are leasing 75,662 square feet at the rate of $4.75 per square foot, paid on a monthly basis, starting on April 1, 2019 (“Commencement Date”). Rent is subject to scheduled annual increases, and ~~Dusseldorf~~we are also responsible for certain operating expenses and taxes throughout the life of Horton Street Master Lease. In connection with the Horton Street Master Lease, we are ~~divided by~~entitled to a tenant improvement allowance of up to $8.3 million, of which $7.9 million has been received through March 31, 2020. The Horton Street Master Lease has an initial term of 12 years, following the ~~total number of months~~Commencement Date with an option to extend the lease for two successive five-year terms. The optional periods were not included in the lease ~~period~~term used in determining the right-of-use asset or the lease liability as we did not consider it reasonably certain that we would exercise the options. The operating lease right-of-use assets and liabilities on our March 31, 2020 condensed consolidated balance sheets primarily relate to the Horton Street Master Lease.

In connection with the organizational restructuring in May 2019, we did not occupy the Horton Street Premises and in July 2019, we entered into an agreement to sublease the Horton Street Premises to a third party (“Horton Street Sublease”). Under the terms of the Horton Street Sublease, we are subleasing the entire 75,662 rentable square feet at the rate of $5.50 per square foot, paid on a monthly basis. Rent is subject to scheduled annual increases and the ~~average~~subtenant (“Subtenant”) is responsible for certain operating expenses and taxes throughout the life of the Horton Street Sublease. The Horton Street Sublease term is until March 31, 2031, unless earlier terminated, concurrent with the term of our Horton Street Master Lease. The Subtenant has no option to extend the sublease term. For the three months ended March 31, 2020, we recognized $1.9 million of sublease income included in other income (expense) in our condensed consolidated statements of operations.

Under the terms of the Horton Street Master Lease, 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 ~~charged to expense each month during~~considered a variable lease payment and the ~~lease period.~~

~~Total net~~total estimated payments are being recognized as additional rent expense ~~related to our operating leases~~on a straight-line basis.

Cash paid for amounts included in the measurement of lease liabilities for the three ~~month periods~~months ended ~~September 30, 2017~~March 31, 2020 and ~~2016, was $0.7 million and $0.6 million, respectively. Total net rent expense related to our operating leases for the nine month periods ended September 30, 2017 and 2016~~2019 was $1.7 million and ~~$1.6~~$0.7 million, ~~respectively. Deferred rent~~respectively, and was ~~$0.5 million and $0.3 million as~~included in operating cash flows in our condensed consolidated statement 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):

At March 31, 2020, the maturities of our sublease income and operating lease liabilities were as follows (in thousands):

Years ending December 31,			Sublease Income		Operating Lease Liabilities
2017 (remaining)	$	544
2018		2,349
2019		2,552
2020		2,614
2020 (remaining)			$	3,801	$	5,148
2021		2,542		5,201		6,888
2022				5,357		6,201
2023				5,518		5,343
2024				5,684		5,487
Thereafter		9,130		39,596		36,261
Total	$	19,731	$	65,157		65,328
Less:
Present value adjustment						(25,405	)
Total					$	39,923

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

On February 20, 2018, we entered into a $175.0 million term loan agreement (“Loan Agreement”) with CRG Servicing LLC. We borrowed $100.0 million under the Loan Agreement at closing and the remaining $75.0 million in March 2019 (collectively, “Term Loans”). At our option, until September 30, 2023, a portion of the interest payments may be paid in kind, and thereby added to the principal. Through March 31, 2020, a portion of our interest was paid in kind, which increased the principal amount of the Term Loans to $179.6 million, net of debt discount of $1.3 million. The Term Loans have a maturity date of December 31, 2023, unless earlier prepaid. See Note 8.

As of March 31, 2020, our material non-cancelable purchase and other commitments, for the supply of HEPLISAV-B and for clinical research, totaled $7.8 million.

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 March 31, 2020 and is collateralized by a certificate of deposit for €0.2 million, which has been included ~~above,~~in restricted cash in the consolidated balance sheets as of March 31, 2020.

In conjunction with a financing arrangement with Symphony Dynamo, Inc. and Symphony Dynamo Holdings LLC (“Holdings”) in November 2009, we ~~have entered into contractual arrangements that obligate us~~agreed to make contingent cash payments to the contractual counterparties upon the occurrence of future events, including a $2.5 million payment due upon approval of HEPLISAV-B. In addition, in the normal course of operations, we have entered into license and other agreements and intendHoldings equal to ~~continue to seek additional rights relating to compounds or technologies in connection with our discovery, manufacturing and development programs. Under the terms~~50% of the ~~agreements, we may be required~~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 ~~pay future up-front fees, milestones~~the development and/or commercialization of cancer and ~~royalties on net sales of products originating from the~~hepatitis C therapies originally licensed ~~technologies, if any, or other~~to Symphony Dynamo, Inc., including SD-101. We have made 0 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~~not recorded a liability 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.of March 31, 2020.

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.

In June 2017, we entered into an agreement to provide Serum Institute of India Pvt. Ltd. (“SIIPL”) with technical support. In consideration, SIIPL agreed to pay us at an agreed-upon hourly rate for services and reimburse certain out-of-pocket expenses. In addition, we have rights to commercialization of certain potential products manufactured at the SIIPL facility. For the three months ended March 31, 2020 and 2019, we recognized collaboration revenue of $0.4 million and $0.1 million, respectively.

In February 2018, we entered into a ~~Stipulation~~Sublicense Agreement (the “Sublicense Agreement”) with Merck. The Sublicense Agreement grants us, under certain non-exclusive U.S. patent rights controlled by Merck which relate to recombinant production of ~~Settlement~~hepatitis B surface antigen, the right to ~~settle the case entitled In re Dynavax Technologies Securities Litigation filed in 2013. The settlement, which was approved by the U.S. District Court~~manufacture, use, offer for ~~the Northern District of California on February 6, 2017, provided for a payment of $4.1 million by us~~sale, sell and results 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 asset reflected in our consolidated balance sheet as of December 31, 2016 were released during the first quarter of 2017.

In February 2017, we tentatively agreed to a settlement for derivative complaints filed in 2013, all of which will be paid by our insurers. We recorded an accrual of $0.9 million reflected in accrued liabilitiesimport HEPLISAV-B in the ~~consolidated balance sheet as of December 31, 2016~~United States and ~~do not expect any significant additional charges related~~includes the right to this matter. In addition, we record anticipated recoveries under existing insurance contracts when recovery is assured. We recorded a current asset in the amount of $0.9 million reflected in prepaid expenses and other current assets in the consolidated balance sheet as of December 31, 2016. Amounts recorded for contingencies can result from a complex series of judgments about future events and uncertainties and can rely heavily on estimates and assumptions.

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 under our agreement with AstraZeneca were completed. As no~~grant further performance obligations remain, we revised the estimated period of performance of development work to June 2016 from September 2016, and recognized remaining deferred payments 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.

sublicenses. Under the terms of the ~~agreement, as amended,~~Sublicense Agreement, we are ~~eligible~~obligated to ~~receive up to approximately $100~~pay $21.0 million in ~~additional milestone~~3 installments. The first, second and third installment of $7.0 million each was paid in February 2018, 2019 and 2020, respectively. At March 31, 2020 and December 31, 2019, the intangible asset, net balance was $0.2 million and $2.5 million, respectively. See Note 5. The Sublicense Agreement expired in April 2020, at which time the license became perpetual, irrevocable, fully paid-up and royalty free.

On February 20, 2018, we entered into a $175.0 million Loan Agreement with CRG Servicing LLC. Net proceeds under the Loan Agreement were $173.3 million. The Term Loans under the Loan Agreement bear interest at a rate equal to 9.5% per annum. At March 31, 2020, the effective interest rate was 10.3%. At our option, until September 30, 2023, a portion of the interest payments ~~based~~may be paid in kind, and thereby added to the principal. Through March 31, 2020, a portion of our interest was paid in kind, which increased the principal amount of the Term Loans to $179.6 million, net of debt discount of $1.3 million. The Term Loans have a maturity date of December 31, 2023, unless earlier prepaid. The Term Loans and paid-in-kind interest will be entirely payable at maturity.

In August 2019, we entered into a second amendment to the Loan Agreement (the “Second Amendment”). The Second Amendment amended the annual net sales threshold for sales of HEPLISAV-B, revising the twelve-month measurement periods from beginning on January 1 of each year to beginning on July 1 of each year (including 2019) and ending on June 30, 2023. The Second Amendment also revised the ~~achievement~~fee payable upon partial prepayment or at maturity of the Term Loans from 3% to 4% of the aggregate principal amounts.

The obligations under the Loan Agreement are secured, subject to customary permitted liens and other agreed upon exceptions, by a perfected security interest in (i) all tangible and intangible assets of the Company and any future subsidiary guarantors, except for certain customary excluded property, and (ii) all of the capital stock owned by the Company and such future subsidiary guarantors (limited, in the case of the stock of certain ~~development~~non-U.S. subsidiaries of the Company and ~~regulatory objectives. Additionally, upon commercialization~~certain U.S. subsidiaries substantially all of ~~AZD1419, we are eligible~~whose assets consist of equity interests in non-U.S. subsidiaries, to ~~receive tiered royalties ranging from~~65% of the ~~mid~~capital stock of such subsidiaries, subject to ~~high single-digits based~~certain

exceptions). The obligations under the Loan Agreement will be guaranteed by each of the Company’s future direct and indirect subsidiaries (other than certain non-U.S. subsidiaries of the Company and certain U.S. subsidiaries substantially all of whose assets consist of equity interests in non-U.S. subsidiaries, subject to certain exceptions). The Loan Agreement contains customary covenants and requires us to comply with a $15.0 million daily minimum combined cash and investment balance covenant and a twelve-month period revenue requirement starting on ~~product~~July 1, 2019 for sales of ~~any products originating from~~HEPLISAV-B.

We recorded $4.7 million and $2.6 million of interest expense related to the ~~collaboration. We have~~Term Loans during the ~~option to co-promote~~three months ended March 31, 2020 and 2019, respectively.

All of our product revenue consisted of sales of HEPLISAV-B in the ~~United States products arising from~~U.S. For the ~~collaboration, if any. AstraZeneca has the right to sublicense its rights upon~~three months ended March 31, 2020 and 2019, our ~~prior consent.~~

three largest Customers collectively represented approximately 68% and 66% of our product revenue, respectively. The following table summarizes balances and activity in each of the ~~revenues earned under our agreement with AstraZeneca, included as collaboration~~product revenue ~~in our consolidated statements of operations~~allowance and reserve categories for the three months ended March 31, 2020 (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

	Balance at Beginning of Period		Provisions related to current period sales		Credit or payments made during the period			Balance at End of Period
Three months ended March 31, 2020:
Accounts receivable reserves(1)	$	2,701	$	2,906	$	(2,749	)	$	2,858
Revenue reserve accruals(2)	$	3,893	$	2,045	$	(1,355	)	$	4,583

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

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.

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 per share is computed by dividing the net loss by the weighted-average number of 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 stock options, ~~and~~ stock awards, warrants and Series B Convertible Preferred Stock are considered to be potentially dilutive common shares and are only included in the calculation of diluted net loss per share when their effect is dilutive. ~~Stock~~

The following is a reconciliation of the numerator and the denominator used in the calculation of basic and diluted net loss per share (in thousands):

As of March 31, 2020, stock options and stock awards and Series B Convertible Preferred Stock (on an as converted to common stock basis), totaling approximately ~~6,120,000~~11,443,432 and ~~4,680,000~~4,840,000 shares of common stock, ~~as of September 30, 2017 and 2016,~~ respectively were excluded from the calculation of diluted net loss per share for the three ~~and nine~~ months ended ~~September 30, 2017 and 2016,~~March 31, 2020, because the effect of their inclusion would have been anti-dilutive. ~~For periods in which we have a net loss~~As of March 31, 2019, stock options and ~~no instruments are determined to be dilutive, such as~~stock awards, totaling approximately 8,946,000 shares of common stock were excluded from the ~~three and nine months ended September 30, 2017 and 2016, basic and~~calculation of diluted net loss per share ~~are~~for the ~~same.~~three months ended March 31, 2019, because the effect of their inclusion would have been anti-dilutive.

As of ~~September 30, 2017,~~March 31, 2020, there were ~~60,587,000~~87,599,440 shares of our common stock outstanding.

In August ~~2017,~~2019, we ~~completed an underwritten public offering of 5,750,000~~sold (i) 18,525,000 shares of our common stock, par value $0.001 per share, (ii) 4,840 shares of our Series B Preferred Stock, par value $0.001 per share (“Series B Preferred Stock”) and ~~received~~(iii) warrants to purchase up to an aggregate of 5,841,250 shares of our common stock in an underwritten public offering (the “Offering”). Each share of common stock was sold together with a warrant to purchase 0.25 shares of common stock, at a combined price of $3.00 per share of common stock and the accompanying warrant. Each share of Series B Preferred Stock was sold together with a warrant to purchase 250 shares of common stock, at a combined price of $3,000 per share and the accompanying warrant. Proceeds from the Offering were approximately $65.6 million, net of issuance costs of $4.5 million.

Investment funds associated with Bain Capital Life Sciences Investors, LLC (“Bain Capital Life Sciences”) purchased approximately $35.0 million of common stock, Series B Preferred Stock and warrants in the Offering at the public offering price. Pursuant to the Offering, (i) Bain Capital Life Sciences Fund, L.P. purchased 6,826,266 shares of common stock, 3,756 shares of Series B Preferred Stock and warrants to purchase 2,645,566 shares of common stock for a total purchase price of approximately $31.7 million and (ii) BCIP Life Sciences Associates, L.P. purchased 698,734 shares of common stock, 384 shares of Series B Preferred Stock and warrants to purchase 270,684 shares of common stock for a total purchase price of approximately $3.2 million (together, “Bain Life Sciences Funds”). Bain Capital Life Sciences is the general partner of Bain Life Sciences Funds. The participation by these investors was on the same terms as the other investors in the Offering.

Following the Offering, Andrew A. F. Hack, M.D., Ph.D and Managing Director of Bain Capital Life Sciences (a related party), was appointed to our board of directors.

On March 11, 2020, we entered into a warrant exchange agreement with Bain Life Sciences Funds pursuant to which we agreed that we would, upon future notice from Bain Life Sciences Funds, exchange all or a portion of the common stock warrants held by Bain Life Sciences Funds for warrants to purchase a new Series C convertible preferred stock (“Series C Warrants”). Each share of Series C convertible preferred stock would be convertible into 1,000 shares of common stock, with a conversion price of $4.50 and would have substantially identical rights to our Series B Convertible Preferred Stock. As of March 31, 2020, Bain Life Sciences Funds have not exercised their rights to exchange common stock warrants with Series C Warrants.

On November 3, 2017, we entered into an At Market Sales Agreement (“2017 ATM 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 up to $150 million through Cowen as our sales agent. We 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~~sold through Cowen under the 2017 ATM Agreement. For the three months ended March 31, 2020, we received net cash proceeds of ~~$88.2~~$14.2 million ~~pursuant~~resulting from sales of 2,908,875 shares of our common stock. As of March 31, 2020, we have $104.0 million remaining under the 2017 ATM Agreement. Subsequent to March 31, 2020 and through May 1, 2020, we sold 4,584,591 shares of common stock for net proceeds of $15.9 million under the 2017 ATM Agreement.

As of March 31, 2020, there were 4,840 shares of Series B Preferred Stock outstanding.

Each share of Series B Preferred Stock is convertible into 1,000 shares of common stock at any time at the holder’s option. However, the holder is prohibited from converting the Series B Preferred Stock into shares of common stock if, as a result of such conversion, the holder and its affiliates would own more than 4.99% of the total number of shares of common stock then issued and outstanding, which percentage may be changed at the holders’ election to a higher or lower percentage (not to exceed 19.99%) upon 61 days’ notice to the Company. In the event of liquidation, dissolution, or winding up, the holder of Series B Preferred Stock will receive payment on shares of Series B Preferred Stock (determined on an Atas-converted to common stock basis) equal to the ~~Market Agreement~~amount that ~~terminated~~would be paid on our common stock. Shares of Series B Preferred Stock generally have no voting rights, except as required by law and except that the consent of holders of a majority of the outstanding Series B Preferred Stock is required to amend the terms of the Series B Preferred Stock. Holders of Series B Preferred Stock are not entitled to receive any dividends, unless and until specifically declared by our board of directors. The Series B Preferred Stock ranks on parity with our common stock as to distributions of assets upon liquidation, dissolution or winding up. The Series B Preferred Stock may rank senior to, on parity with or junior to any class or series of capital stock created in ~~June 2017. See Note 10.~~the future depending upon the specific terms of such future stock issuance.

The fair value of the common stock into which the Series B Preferred Stock is convertible exceeded the allocated purchase price of the Series B Preferred Stock by $3.3 million on the date of issuance, for which we recorded a deemed dividend. We recognized a deemed dividend equal to the number of shares of common stock into which the Series B Preferred Stock is convertible multiplied by the difference between the value of the common stock and the Series B Preferred Stock conversion price per share on the date of issuance, which is the date the stock first became convertible. The dividend was reflected as a one-time, non-cash, deemed dividend to the holders of Series B Preferred Stock on the date of issuance.

Warrants were exercisable upon issuance. The holder is prohibited from exercising these warrants if, as a result of such exercise, the holder and its affiliates, would own more than 4.99% of the total number of shares of common stock then issued and outstanding, which percentage may be changed at the holders’ election to a higher or lower percentage (not to exceed 19.99%) upon 61 days’ notice to the Company.

The warrants contain provisions that may obligate us to repurchase them for an amount that does not represent fair value in the event of a change of control. Due to this provision, the warrants do not meet the criteria to be considered indexed to our own stock. Accordingly, we recorded the warrants as a derivative liability at fair value of $7.4 million on the issuance date, which was estimated using the Black-Scholes model.

The warrants will be revalued at each reporting period using the Black-Scholes model and the change in the fair value of the warrants will recognized as other income (expense) in the condensed consolidated statements of operations. At March 31, 2020, the estimated fair value of warrant liability was $6.3 million. For the three months ended March 31, 2020, we recognized the $8.6 million decrease in the estimated fair value of warrant liability as a gain in other income (expense), net in our condensed consolidated statements of operations.

Our 2018 Equity Incentive Plan (the “2018 EIP”) is intended to be the successor to and continuation of the Dynavax Technologies Corporation 2011 Equity Incentive Plan (the “2011 EIP”). The aggregate number of shares of our common stock that may be issued under the 2018 EIP (subject to adjustment for certain changes in capitalization) is comprised of the sum of (i) 5,000,000 newly reserved shares of common stock, (ii) 140,250 unallocated shares of common stock remaining available for grant under the 2011 EIP as of May 31, 2018, and (iii) 7,477,619 shares subject to outstanding stock awards granted under the 2011 EIP and the Dynavax Technologies Corporation 2017 Inducement Award Plan that may become available from time to time as set forth in the 2018 EIP. The 2018 EIP provides for the issuance of up to 12,617,869 shares of our common stock to our employees and directors.

On May 30, 2019, our stockholders approved an amendment to 2018 Equity Incentive Plan (the “Amended 2018 EIP”) to, among other things, increase the aggregate number of shares of common stock authorized for issuance by 2,300,000. Under the Amended 2018 EIP, the aggregate number of shares of our common stock that may be issued to employees and directors (subject to adjustment for certain changes in capitalization) is 14,917,869.

Option activity under our stock-based compensation plans during the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2020 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

	Shares Underlying Outstanding Options			Weighted- Average Exercise Price Per Share		Weighted- Average Remaining Contractual Term (years)		Aggregate Intrinsic Value
Balance at December 31, 2019		8,006		$	13.86
Options granted		1,335			5.34
Options exercised		—			—
Options cancelled:
Options forfeited (unvested)		(41	)		6.77
Options expired (vested)		(40	)		18.93
Balance at March 31, 2020		9,260		$	12.64		4.53	$	6
Vested and expected to vest at March 31, 2020		8,901		$	12.91		4.45	$	5
Exercisable at March 31, 2020		4,826		$	18.06		2.94	$	—

In June 2017, stockholders of the Company approved a proposal to increase the aggregate number of shares of common stock authorized for issuance under the 2011 Equity Incentive Plan, as amended, by 1,600,000 shares.

Restricted stock unit activity under our stock-based compensation plans during the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2020 was as follows (in thousands except per share amounts):

The aggregate intrinsic value of the restricted stock units outstanding as of ~~September 30, 2017,~~March 31, 2020, based on our stock price on that date was ~~$52.5~~$7.7 million. Fair value of restricted stock units is determined at the date of grant using our closing stock price.

As of ~~September 30, 2017,~~March 31, 2020, approximately ~~21,000~~139,000 shares underlying stock options and approximately ~~63,000~~185,000 restricted stock unit awards with performance-based vesting criteria were outstanding. ~~Vesting criteria for these restricted stock units awards with performance-based awards were not probable as of September 30, 2017.~~

Under our stock-based compensation plans, option awards generally vest over a three or four-year period contingent upon continuous service, and expire seven to ten years from the date of grant (or earlier upon termination of continuous service). The fair value-based measurement of each option is estimated on the date of grant using the Black-Scholes option valuation model.

The fair value-based measurements and weighted-average assumptions used in the calculations of these measurements are as follows:

	Stock Options						Stock Options						Employee Stock Purchase Plan						Stock Options						Employee Stock Purchase Plan
	Three Months Ended						Nine Months Ended						Nine Months Ended						Three Months Ended						Three Months Ended
	September 30,						September 30,						September 30,						March 31,						March 31,
	2017			2016			2017			2016			2017			2016			2020			2019			2020			2019
Weighted-average fair value	$	8.11		$	8.90		$	4.73		$	9.67		$	3.05		$	7.86
Weighted-average fair value per share																			$	3.58		$	6.85		$	2.17		$	5.19
Risk-free interest rate		1.9	%		1.1	%		1.9	%		1.4	%		1.0	%		0.6	%		1.4	%		2.5	%		1.5	%		2.5	%
Expected life (in years)		4.5			4.5			4.5			4.9			1.2			1.2			4.5			4.5			1.2			1.2
Volatility		0.9			0.7			0.9			0.7			1.0			0.6			0.9			0.9			0.6			0.8

Compensation expense is based on awards ultimately expected to vest and reflects estimated forfeitures. ~~The components~~Stock-based compensation for the three months ended March 31, 2020 included reversal of ~~stock-based compensation expense were (in thousands):~~expenses related to cancellation of certain equity grants.

As of ~~September 30, 2017,~~March 31, 2020, the total unrecognized compensation cost related to non-vested equity awards including all awards with time-based vesting amounted to ~~$22.0~~$30.8 million, which is expected to be recognized over the remaining weighted-average vesting period of ~~1.7~~1.9 years. Additionally, as of ~~September 30, 2017,~~March 31, 2020, the total unrecognized compensation cost related to equity awards with performance-based vesting criteria ~~not deemed probable of vesting~~ amounted to ~~$0.4~~$0.9 million.

The Amended and Restated 2014 Employee Stock Purchase Plan ~~as amended,~~ (the “Purchase Plan”) provides for the purchase of common stock by eligible employees and became effective on May 28, 2014. On May 31, 2018, our stockholders approved an amendment to the Purchase Plan to increase the aggregate number of shares of common stock authorized for issuance by 600,000 shares. The purchase price per share is the lesser of (i) 85% of the fair market value of the common stock on the commencement of the two-year 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~~three months ended ~~September 30, 2017,~~March 31, 2020, employees have acquired ~~84,247~~91,653 shares of our common stock under the Purchase Plan and ~~98,227~~359,264 shares of our common stock remained available for future purchases under the Purchase Plan.

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 during the three months ended June 30, 2017 and September 30, 2017. ~~Of that amount, we paid $2.7 million during the nine month period ended September 30, 2017 and expect to pay the remaining amount in the fourth quarter of 2017.~~

The outstanding restructuring liabilities are included in accrued liabilities on the condensed consolidated balance sheets. As of September 30, 2017, the components of the liabilities were as follows (in thousands):

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

The following discussion and analysis is intended to provide an investor with a narrative of our financial results and an evaluation of our financial condition and results of operations. This discussion should be read in conjunction with the unaudited Condensed Consolidated Financial Statements and related Notes included in Item 1 of this Quarterly Report on Form 10-Q and the Consolidated Financial Statements and the related Notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2019.

We are a ~~clinical-stage immunotherapy~~fully-integrated biopharmaceutical company focused on ~~leveraging~~developing and commercializing novel vaccines. Our first commercial product, HEPLISAV-B® [Hepatitis B Vaccine (Recombinant), Adjuvanted] is approved by the ~~power~~United States Food and Drug Administration (“FDA”) for prevention of infection caused by all known subtypes of hepatitis B virus in adults age 18 years and older. We commenced commercial shipments of HEPLISAV-B in January 2018. 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 ~~body’s innate and adaptive immune responses through toll-like receptor (“TLR”) stimulation. Our current product candidates~~only two-dose hepatitis B vaccine for adults approved in the U.S.

We have worldwide commercial rights to HEPLISAV-B. There are ~~being investigated for use as a vaccine~~three other vaccines approved for the prevention of hepatitis B in the U.S.: Engerix-B and ~~in multiple cancer indications.~~Twinrix® from GlaxoSmithKline plc and Recombivax-HB® from Merck & Co.

~~HEPLISAV-B~~All of product revenue is ~~our investigational adult hepatitis B vaccine. We resubmitted our application to market~~from sales of HEPLISAV-B to certain wholesalers and specialty distributors in the ~~FDA~~U.S. whose principal customers include independent hospitals and clinics, integrated delivery networks, public health clinics and prisons, the Departments of Defense and Veterans Affairs and retail pharmacies. For the three months ended March 31, 2020, product revenue, net was $10.5 million.

In February 2018, we entered into a term loan agreement with CRG Servicing LLC. We borrowed $100 million at closing and the remaining $75.0 million in ~~February 2017~~March 2019. At March 31, 2020, the balance of the term loan was $179.6 million and ~~on July 28, 2017~~ the ~~FDA’s~~ ~~Vaccines~~loan and ~~Related Biological Products Advisory Committee (“VRBPAC”) voted 12 to 1 (with 3 abstentions) that~~related unpaid interest and fees are due in December 2023.

For the ~~safety data for HEPLISAV-B support licensure for immunization against hepatitis B infection in adults 18 years~~three months ended March 31, 2020, we received net cash proceeds of ~~age and older and provided commentary on the design~~$14.2 million from sales of 2,908,875 shares of our ~~proposed post-marketing safety study for HEPLISAV-B. A prior VRBPAC panel voted 13~~common stock under the At Market Sales Agreement with Cowen and Company, LLC entered in November 2017.

The ongoing COVID-19 global pandemic has presented a substantial public health and economic challenge around the world and is affecting our employees, patients, communities and business operations, as well as the U.S. economy and financial markets. The full extent to 1which the COVID-19 pandemic will directly or indirectly impact our business, results of operations and financial condition will depend on future developments that are highly uncertain and cannot be accurately predicted, including new information that may emerge concerning COVID-19 virus, the ~~immunogenicity data for~~actions taken to contain it or treat its impact and the economic impact on local, regional, national and international markets.

To date, we and our distribution partners have been able to continue to supply HEPLISAV-B ~~support approval~~throughout the United States, and ~~thus~~currently do not anticipate any interruptions in supply. However, we are continuing to assess 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. Since the July VRBPAC meeting, we have worked with FDA on completing the detailspotential impact of the ~~post-marketing study~~COVID-19 pandemic on our business and ~~other steps required for an approval decision. We have reinitiated preparations for the launch of~~operations. Although there was a modest impact from COVID-19 on 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 launchnet product sales in the first quarter, most medical centers restricted access to their facilities and focused on providing care to only the most severely affected patients by mid-March. This has resulted in significantly reduced utilization of ~~2018.~~vaccines, including HEPLISAV-B, since the end of the first quarter of 2020, which has significantly impacted sales and is likely to continue until the U.S. returns to more normal conditions.

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. 23

We are ~~conducting~~continuing to closely monitor the impact of the COVID-19 global pandemic on our business and are taking proactive efforts to protect the health and safety of our workforce, patients and healthcare professionals, and to continue our business operations and advance our goal of bringing important new vaccines to patients as rapidly as possible. We have implemented measures to protect the health and safety of our workforce, including a ~~research~~mandatory work-from-home policy for employees who can perform their jobs offsite. In the conduct of our business activities, we are also taking actions to protect the safety of patients and ~~clinical program intended to assess potential efficacy of SD-101~~healthcare professionals. Our field-based personnel have paused in-person customer interactions in ~~a range of tumors~~healthcare settings and ~~in combination with a range of treatments, including checkpoint inhibitors~~are solely using electronic communication, such as emails, phone calls and video conferences. Many health care and contracting professionals at hospitals and other ~~therapies. In June 2017, we presented updated data at~~medical institutions with whom our field-based personnel interact are working a greater proportion of their working schedule from home and are facing additional demands on their time during the ~~American Society~~COVID-19 pandemic. We expect that the different quality of ~~Clinical Oncology Annual Meeting in patients~~electronic interactions as compared with ~~metastatic melanoma from~~in-person interactions, as well as the ~~dose-escalation phase~~reduced quantity of ~~an ongoing Phase 1/2 study~~interactions during the COVID-19 pandemic, may reduce the effectiveness of ~~SD-101 in combination with Keytruda® (pembrolizumab), an anti-PD-1 therapy developed by Merck, known~~our sales personnel, as ~~MSD outside~~well as those of our collaborators, which could negatively affect our product sales.

Currently, our HEPLISAV-B product’s post-marketing observational studies are fully enrolled and continuing uninterrupted. Due to the ~~United States~~design 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 combinationconduct 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~~studies, 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~~do not anticipate an impact 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 forintegrity of 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 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 of $879.9 million as of September 30, 2017. These losses have resulted principally from costs incurred in connection with research and development activities, compensation and other related personnel costs and general corporate expenses. Research and development activities include costs 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. Our operating results may fluctuate substantially from period to period principallystudies as a result of the ~~timing~~“shelter in place” mandates. Our HEPLISAV-B dialysis study also continues to enroll patients, since the dialysis treatment is classified under the “essential travel” exemptions. However, if the COVID-19 pandemic continues and persists for an extended period of ~~preclinical activities~~time, we could experience significant disruptions to our post-marketing studies, which could adversely affect our business and growth prospects.

The extent of the impact of the COVID-19 pandemic on our ability to generate sales and revenues, our regulatory efforts, our corporate development objectives and the value of and market for our common stock, will depend on future developments that are highly uncertain and cannot be predicted with confidence at this time. Because of the above and other ~~activities related~~factors, our results of operations may vary substantially from year to ~~clinical trials for~~year and from quarter to quarter and, as a result, we believe that period to period comparisons of our ~~drug candidates.~~

~~Since~~operating results may not be meaningful and should not be relied upon as being indicative of our ~~inception, we have relied primarily~~future performance. For additional information on the ~~proceeds from public~~various current and ~~private sales~~future potential risks posed by the COVID-19 pandemic, please read Item 1A. Risk Factors included herein.

We have been actively pursuing opportunities to collaborate with other organizations on the development of a COVID-19 vaccine, by leveraging our ~~equity securities, government grants and revenues from collaboration agreements to fund~~proprietary toll-like receptor 9 (“TLR9”) agonist adjuvant, CpG 1018, the adjuvant used in our ~~operations. We expect spending to increase in connection~~HEPLISAV-B product. In 2020, we announced multiple collaborations focused on COVID-19, including with the ~~development~~Coalition for Epidemic Preparedness Innovations (CEPI), the University of Queensland, and ~~manufacturing of~~Clover Biopharmaceuticals, and continue to work to identify other programs where CpG 1018 can be utilized to enhance the immune response to a coronavirus vaccine. We and our ~~product candidates, particularly SD-101 and DV281, our lead investigational cancer immunotherapeutic product candidates, and~~CMO are developing plans for scale-up activities to support ~~commercialization~~pandemic level of ~~HEPLISAV-B if it is approved,~~production of CpG 1018 adjuvant, as ~~well as human clinical trials for~~necessary to support our ~~other product candidates and additional applications and advancement of our technology. In order~~multiple collaborations to ~~continue these activities,~~develop a coronavirus vaccine. There can be no assurance 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~~be successful in ~~the future, we may need~~our efforts to ~~delay, reduce the scope of or put on hold one or more development programs while we seek strategic alternatives.~~develop a COVID-19 vaccine

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

We believe that there have been no significant changes in our critical accounting policies during the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2020, as compared with those disclosed in our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2019.

Revenues ~~consist~~consisted of amounts earned from ~~collaborations, grants~~product sales and ~~services~~collaboration revenue.

Product revenue, net, reflects sales of our HEPLISAV-B product. Revenue from product sales is recorded at the net sales price, which includes estimates of product returns, chargebacks, discounts, rebates and ~~license~~other fees. ~~Service~~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
		Three Months Ended				(Decrease) from
		March 31,				2019 to 2020
Revenues:		2020		2019		$		%
Product revenue, net	��	$	10,514	$	5,627	$	4,887		87	%
Other revenue			405		146		259		177	%
Total revenues		$	10,919	$	5,773	$	5,146		89	%

Product revenue, ~~decreased~~net increased in the ~~2017 periods~~first quarter of 2020 compared to same period in 2019 due to higher sales volume as ~~all performance obligations under the AstraZeneca agreement were~~additional healthcare providers completed ~~in 2016. Service~~operational activities required to switch to HEPLISAV-B and ~~license revenue decreased~~existing customers placed repeat orders. Although there was a modest impact from COVID-19 on HEPLISAV-B net product sales in the ~~2017 periods~~first quarter, most medical centers restricted access to their facilities and focused on providing care to only the most severely affected patients by mid-March. This has resulted in significantly reduced utilization of vaccines, including HEPLISAV-B, since the end of the first quarter of 2020, which has significantly impacted sales and is likely to continue until the U.S. returns to more normal conditions.

For the three months ended March 31, 2020 and 2019, other revenue includes collaboration revenue of $0.4 million and $0.1 million, respectively, related to services performed under a collaboration agreement with Serum Institute of India Pvt. Ltd.

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

Cost of sales - product primarily includes certain fill, finish and overhead costs for pre-filled syringes (“PFS”) of HEPLISAV-B. Our HEPLISAV-B PFS finished goods inventory includes components for which a portion of the manufacturing costs were previously expensed to research and development prior to the approval of the PFS presentation by the FDA in March 2018. We expect to use this HEPLISAV-B PFS inventory over approximately the next six months. The increase in cost of sales-product in the first quarter of 2020 compared to the first quarter of 2019 is due to higher sales volume and higher unit costs as nowe produce and then sell inventory that reflects the full cost of manufacturing ~~services were performed on behalf~~the product.

At March 31, 2020, inventories, net increased to $48.1 million from $41.3 million at December 31, 2019.

The following is a summary of our cost of sales – amortization of intangible assets (in thousands, except for percentages):

Cost of sales - amortization of intangible assets consists of amortization of the intangible asset recorded as a result of sublicense payments to Merck, Sharpe & Dohme Corp. (“Merck”), upon or after FDA approval of HEPLISAV-B in November 2017. At March 31, 2020, the intangible asset related to Merck was $0.2 million. The Sublicense Agreement expired in April 2020, at which time the license became perpetual, irrevocable, fully paid-up and royalty free.

Research and development expense consists, primarily, of compensation and related personnel costs (which include benefits, recruitment, travel and supply costs), outside services, allocated facility costs and non-cash stock-based compensation. Outside services ~~relate to our~~consist of costs associated with clinical development, process development, preclinical ~~experiments~~discovery and ~~clinical trials,~~development, regulatory filings and ~~manufacturing of our product candidates. For the nine months ended September 30, 2017~~research, including fees and ~~2016, approximately 35%~~expenses incurred by contract research organizations, clinical study sites, and ~~69%, respectively, of our total research and development expense, excluding non-cash stock-based compensation, is related to our investigational adult hepatitis B vaccine, HEPLISAV-B.~~ other service providers.

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

						Increase
	Three Months Ended					(Decrease) from
	March 31,					2019 to 2020
Research and Development:	2020			2019		$			%
Compensation and related personnel costs	$	2,197		$	7,904	$	(5,707	)		(72	)%
Outside services		3,935			8,731		(4,796	)		(55	)%
Facility costs		94			2,391		(2,297	)		(96	)%
Non-cash stock-based compensation		(1,573	)		2,180		(3,753	)		(172	)%
Total research and development	$	4,653		$	21,206	$	(16,553	)		(78	)%

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 the three and nine months ended September 30, 2017 compared to 2016:~~

Compensation and related personnel costs and non-cash stock-based compensation decreased due to i~~mplementation~~lower research and development headcount as a result of ~~organizational~~our restructuring ~~and cost reduction plans~~ in ~~January 2017. Outside services expense decreased primarily due to a reduction~~May 2019. Stock-based compensation for the three months ended March 31, 2020 included reversal of ~~costs~~expenses related to ~~HEPLISAV-B clinical and manufacturing activities partially offset by increased costs relating to seeking regulatory approval for HEPLISAV-B and~~cancellation of certain equity grants. The decrease in outside services was the ~~ongoing development~~result of ~~SD-101 and earlier stage oncology~~winding down of our immuno-oncology programs. ~~Non-cash stock-based compensation increased due to recognition of expense related to share-based awards granted to employees in 2016 and 2017.~~ Facility costs, which ~~includes an overhead allocation~~ primarily ~~comprised~~comprise of occupancy and related expenses, decreased due to ~~overall~~ lower ~~facility and related costs and a decrease in headcount.~~

~~We expect~~overhead allocation to research and development spending 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.functions.

~~General~~Selling, general and administrative expense 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										Increase
	Three Months Ended				(Decrease) from						Nine Months Ended				(Decrease) from						Three Months Ended				(Decrease) from
	September 30,				2016 to 2017						September 30,				2016 to 2017						March 31,				2019 to 2020
General and Administrative:	2017		2016		$			%			2017		2016		$			%
Selling, General and Administrative:																					2020		2019		$			%
Compensation and related personnel costs	$	1,771	$	3,446	$	(1,675	)		(49	)%	$	5,771	$	9,859	$	(4,088	)		(41	)%	$	8,300	$	5,114	$	3,186			62	%
Outside services		1,574		5,439		(3,865	)		(71	)%		4,336		11,164		(6,828	)		(61	)%		6,625		8,568		(1,943	)		(23	)%
Legal costs		718		561		157			28	%		2,063		1,735		328			19	%		734		526		208			40	%
Facility costs		277		298		(21	)		(7	)%		804		788		16			2	%		2,825		1,060		1,765			167	%
Non-cash stock-based compensation		1,687		2,022		(335	)		(17	)%		5,137		5,540		(403	)		(7	)%		2,442		3,080		(638	)		(21	)%
Total general and administrative	$	6,027	$	11,766	$	(5,739	)		(49	)%	$	18,111	$	29,086	$	(10,975	)		(38	)%
Total selling, general and administrative																					$	20,926	$	18,348	$	2,578			14	%

~~For both the three and nine months ended September 30, 2017 compared to 2016:~~26

~~Compensation~~The increase in compensation and related personnel costs and the related decrease in outside services was due to the conversion of the external sales force to our employees effective April 1, 2019. The corresponding decrease in outside services was partially offset by costs related to HEPLISAV-B post-marketing study. Facility costs, which primarily comprise of occupancy and related expenses, increased due to higher overhead allocation to selling, general and administrative functions. Non-cash stock-based compensation decreased due to the retirement of our former CEO in August 2019. In addition, non-cash stock-based compensation ~~decreased due to implementation~~for the three months ending March 31, 2020 included reversal of ~~organizational restructuring and cost reduction plans in January 2017. Outside services decreased as the first nine months of 2016 included costs~~expenses related to ~~hiring of consultants for administrative and commercial development services for the anticipated commercial launch of HEPLISAV-B~~.certain equity grants cancellations.

~~We expect general and administrative spending to increase in connection with the commercialization of HEPLISAV-B, if it is approved by the FDA.~~

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

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

							Increase										Increase												Increase
	Three Months Ended						(Decrease) from					Nine Months Ended					(Decrease) from						Three Months Ended						(Decrease) from
	September 30,						2016 to 2017					September 30,					2016 to 2017						March 31,						2019 to 2020
	2017			2016			$		%			2017			2016		$			%			2020			2019			$			%
Interest income	$	429		$	170		$	259		152	%	$	809		$	615	$	194			32	%	$	590		$	735		$	(145	)		(20	)%
Other (expense) income, net	$	(166	)	$	(26	)	$	140		538	%	$	(378	)	$	68	$	(446	)		(656	)%
Interest expense																							$	(4,731	)	$	(2,734	)	$	1,997			73	%
Sublease income																							$	1,926		$	-		$	1,926		NM
Change in fair value of warrant liability																							$	8,610		$	-		$	8,610		NM
Other income, net																							$	322		$	181		$	141			78	%

~~For both the three and nine months ended September 30, 2017 compared to 2016, interest income~~NM=Not Meaningful

Interest expense increased due to the borrowing of the remaining $75.0 million in March 2019 under the term loan agreement with CRG Servicing LLC (“Loan Agreement”). We recognized sublease income of $1.9 million in connection with our sublease of office and laboratory space located at 5959 Horton Street, Emeryville, California to a ~~higher average rate of return on our investments and a higher average investment balance.~~third party in July 2019. The change in the fair value of the warrant liability is primarily due to decrease in our stock price. The change in other ~~(expense)~~ income, net is primarily due to foreign currency transactions ~~resulting from~~and related fluctuations in the value of the Euro compared to the U.S. dollar.

As of ~~September 30, 2017,~~March 31, 2020, we had ~~$191.7~~ $129.5 million in cash, cash equivalents and marketable securities. Since our inception, we have relied primarily on the proceeds from public and private sales of our equity securities, borrowings, government grants and revenues from product sales and collaboration agreements to fund our operations. Our funds are currently invested in ~~short-term~~ money market funds, U.S. ~~Treasuries,~~treasuries, U.S. ~~Government~~government agency securities and corporate debt securities. We currently anticipate that our cash, cash equivalents and short-term marketable securities as of March 31, 2020, and anticipated revenues from HEPLISAV-B will be sufficient to fund our operations for at least the next 12 months from the date of this filing.

At March 31, 2020, $104.0 million of common stock remained available for sale under our At Market Sales Agreement with Cowen and Company, LLC (“2017 ATM Agreement”). Subsequent to March 31, 2020 and through May 1, 2020, we ~~completed an underwritten public offering of 5,750,000~~sold 4,584,591 shares of ~~our~~ common stock ~~and received~~for net proceeds of ~~approximately $80.8 million.~~$15.9 million under the 2017 ATM Agreement.

During the ~~six~~three 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,~~March 31, 2020, we used ~~$59.8~~$26.9 million of cash for our operations primarily due to our net loss of ~~$67.7~~$12.6 million, of which ~~$13.0~~$1.7 million consisted of non-cash ~~charges such as~~items which included change in fair value of warrant liability, amortization of intangible assets, stock-based compensation, non-cash interest expense, depreciation and amortization, ~~reversal~~amortization of ~~deferred rent upon lease amendment~~right-of-use assets 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~~three months ended ~~September 30, 2016,~~March 31, 2019, we used ~~$80.8~~$39.9 million of cash for our operations primarily due to aour net loss of ~~$90.7~~$39.7 million, of which ~~$12.4~~$11.9 million consisted of non-cash ~~charges~~items such as stock-based compensation, amortization of intangible assets, depreciation and amortization, amortization of right-of-use assets, non-cash interest expense and accretion and amortization on marketable securities. Cash used in our operations during the first ~~nine~~three months of ~~2017~~2020 decreased by ~~$21.0~~$13.0 million. For the three months ended March 31, 2020, we received tenant improvement reimbursements from the landlord of 5959 Horton Street totaling $0.9 million and invested approximately $6.8 million in HEPLISAV-B inventory. Net cash used in operating activities is also impacted by changes in our operating assets and liabilities due to timing of cash receipts and expenditures.

During the ~~nine~~three months ended ~~September 30, 2017, net cash used in investing activities was $114.8 million compared to $58.1 million in~~March 31, 2020 and 2019, net cash provided by investing activities ~~for the nine months ended September 30, 2016. Cash used in investing activities during~~was $10.6 million and $14.6 million, respectively. During the first ~~nine~~three months of ~~2017 included $114.4 million of~~2020 and 2019, net ~~purchases~~proceeds from maturities and redemptions of marketable securities ~~compared with $64.6~~was $19.9 million and $25.5 million, respectively. During each of the first three months of 2020 and 2019, we paid $7.0 million of ~~net proceeds of marketable securities during the first nine months of 2016.~~sublicense payment to Merck. Cash used in net purchases of property plant and equipment decreased by ~~$6.1~~$1.5 million during the first ~~nine~~three months of ~~2017~~2020 compared to the same period in ~~2016 primarily due to the purchase of manufacturing equipment in 2016 for HEPLISAV-B.~~2019.

During the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2020 and ~~2016,~~2019, net cash provided by financing activities was ~~$169.8~~$14.5 million and ~~$0.7~~$88.3 million, respectively. Cash provided by financing activities in the first ~~nine~~three months of ~~2017~~2020 included net proceeds of ~~$169.2~~$14.2 million from the issuance of common stock under our ~~underwritten public offering~~2017 ATM Agreement. Cash provided by financing activities in ~~August~~the first three months of 2019 included net proceeds of $74.3 million from the second tranche of the Loan Agreement and net proceeds of $13.6 million from the issuance of common stock under our 2017 ~~and our 2015~~ ATM Agreement.

We ~~have incurred significant~~expect to incur operating losses ~~and negative cash flows~~for the foreseeable future as we continue to invest in commercialization of HEPLISAV-B. If we cannot generate a sufficient amount of revenue from ~~operations since our inception.~~ ~~As of September 30, 2017, we had cash, cash equivalents and marketable securities of~~ ~~$191.7 million~~ ~~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 will be sufficient to meet our projected operating requirements for at least the next 12 months from the date of this filing. 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, human clinical trials for our other 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 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.

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, ~~as well as~~our creditworthiness and the uncertainty that we would be able to raise such additional capital at a price or on terms that are favorable to us. In addition, our ability to raise additional funds may be adversely impacted by deteriorating global economic conditions and the recent disruptions to and volatility in the credit and financial markets in the United States and worldwide resulting from the ongoing COVID-19 pandemic. Adequate financing may not be available to us on acceptable terms, or at all. If adequate funds are not available when needed, we may need to significantly reduce our operations while we seek strategic alternatives, which could have an adverse impact on our ability to achieve our intended business objectives.

~~We lease~~As of March 31, 2020, our ~~facilities in Berkeley, California (“Berkeley Lease”)~~material non-cancelable purchase and ~~Düsseldorf, Germany (“Düsseldorf Lease”) under operating leases that expire in December 2025~~other commitments, for the supply of HEPLISAV-B 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 payments at September 30, 2017 are $19.7for clinical research, totaled $7.8 million.

~~In addition to the non-cancelable commitments included above, we have entered into contractual arrangements that obligate us to make payments~~There were no other material changes to the contractual ~~counterparties upon~~obligations previously disclosed in our Annual Report on Form 10-K for the occurrence of future events. In addition, in the normal course of operations, we have entered into license 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 time during the contract through the notice period.year ended December 31, 2019.

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

~~Quantitative~~During the three months ended March 31, 2020, there were no material changes to our market risk disclosures as set forth in Part II, Item 7A, “Quantitative and Qualitative ~~Disclosure~~Disclosures About Market ~~Risk~~

We are subject to interest rate risk. Our investment portfolio is maintained in accordance with our investment policy, which defines allowable investments, specifies credit quality standards and limits the credit exposure of any single issuer. The primary objective of our investment activities is to preserve principal and, secondarily, to maximize income we receive 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 instrumentsRisk” in our investment portfolio. To assess our risk, we calculate that if interest rates were to rise or fall from current levels by 100 basis points or by 125 basis points, the pro forma change in fair value of our net unrealized lossAnnual Report on ~~investments would be $1.1 million or $1.4 million, respectively.~~

Due to the short duration and nature of our cash equivalents and marketable securities, as well as our intention to hold the investments to maturity, we do not expect any material loss with respect to our investment portfolio.

~~We have certain investments outside the U.S.~~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, 2019.

We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (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.

There ~~has~~have been no ~~change~~changes in our internal controls over financial reporting as defined in Rule 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.

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.

Various statements in this Quarterly Report on Form 10-Q are forward-looking statements concerning our future efforts to obtain regulatory approval, ~~timing of development activities,~~achieve restructuring goals, commercialize approved products, 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. 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~~2019 that was filed with the Securities and Exchange Commission on March ~~13, 2017.~~11, 2020.

HEPLISAV-B has been launched in the United States and there is significant competition in the marketplace. Since this is our first marketed product, the timing of uptake and distribution efforts are unpredictable and there is a risk that we may not achieve and sustain commercial success for HEPLISAV-B.*

We have established sales, marketing and distribution capabilities and commercialized HEPLISAV-B in the U.S. Successful commercialization of HEPLISAV-B will require significant resources and time and, while Dynavax personnel are experienced with respect to marketing of healthcare products, because HEPLISAV-B is the company’s first marketed product, the potential uptake of the product in distribution and the timing for growth in sales, if any, is unpredictable and we may not be successful in commercializing HEPLISAV-B. 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 not complete or maintain all of these important contracts on favorable terms or that in a potentially evolving reimbursement environment our efforts can overcome established competition at favorable pricing.

We converted our contracted field sales team into full-time Dynavax employees in the second quarter of 2019. We have not previously employed an in-house field sales team, and thus have limited experience in overseeing and managing an employed salesforce. In addition, retention of capable sales personnel may be more difficult with a single product offering and we must retain our salesforce in order for HEPLISAV-B to establish a commercial presence.

Moreover, we expect that significant resources will need to be invested in order to successfully market, sell and distribute HEPLISAV-B for use with diabetes patients, one of our targeted patient populations. Although the Centers for Disease Control and Prevention (“CDC”) and the CDC’s Advisory Committee on Immunization Practices (“ACIP”) recommend that patients with diabetes receive hepatitis B vaccinations, we are unable to predict how many of those patients may 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:

If we are not successful, we may be required to collaborate or partner HEPLISAV-B with a third-party pharmaceutical or biotechnology company with existing products. To the extent we collaborate or partner, the financial value will be shared with another party and we will need to establish and maintain a successful collaboration arrangement, and we may not be able to enter into these arrangements on acceptable terms or in a timely manner in order to establish HEPLISAV-B in the market. To the extent 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.

We are continuing to closely monitor the impact of the COVID-19 global pandemic on our business and are taking proactive efforts to protect the health and safety of our workforce, patients and healthcare professionals, and to continue our business operations and advance our goal of bringing important new vaccines to patients as rapidly as possible. We have implemented measures to protect the health and safety of our workforce, including a mandatory work-from-home policy for employees who can perform their jobs offsite. In the conduct of our business activities, we are also taking actions to protect the safety of patients and healthcare professionals. Our field-based personnel have paused in-person customer interactions in healthcare settings and are solely using electronic communication, such as emails, phone calls and video conferences. Many health care and contracting professionals at hospitals and other medical institutions with whom our field-based personnel interact are working a greater proportion of their working schedule from home and are facing additional demands on their time during the COVID-19 pandemic. We expect that the different quality of electronic interactions as compared with in-person interactions, as well as the reduced quantity of interactions during the COVID-19 pandemic, may reduce the effectiveness of our sales personnel, as well as those of our collaborators, which could negatively affect our product sales.

If we, or our partners, if any, are not successful in setting our marketing, pricing and reimbursement strategies, recruiting and maintaining effective sales and marketing personnel or in building and maintaining the infrastructure to support commercial operations, we will have difficulty successfully commercializing HEPLISAV-B, which would adversely affect our business and financial condition.

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

Our business has been and may continue to be adversely affected by the effects of the recent and evolving COVID-19 virus, which was declared by the World Health Organization (“WHO”) as a global pandemic. The COVID-19 pandemic has resulted in travel and other restrictions in order to reduce the spread of the disease, including a California executive order, San Francisco Bay Area order and other state and local orders across the country, which, among other things, direct individuals to shelter at their places of residence, direct businesses and governmental agencies to cease non-essential operations at physical locations, prohibit certain non-essential gatherings, and order cessation of non-essential travel. The San Francisco Bay Area shelter-in-place order is expected to continue until May 31, 2020, unless further extended. In response to these public health directives and orders, we have implemented work-from-home policies for all employees, except those that need to be at work in order to perform critical responsibilities.

The COVID-19 pandemic and government measures taken in response have had a significant impact, both direct and indirect, on businesses and commerce, as significant reductions in business related activities have occurred, supply chains have been disrupted, and manufacturing and clinical development activities have been curtailed or suspended. In accordance with guidance issued by the Centers for Disease Control and Prevention, WHO and local authorities, beginning in March 2020, most of our global workforce transitioned to working remotely. 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, have all drastically curtailed their day-to-day activities and ceased allowing access to their facilities for non-COVID-19 related business. Thus, our field sales and medical science employees began utilizing telephone and web-based means to seek to continue in their roles, but have not been able to do so as effectively as being in-person.

This has significantly and adversely impacted our sales of HEPLISAV-B and our business and operating results since mid-March. We also cannot predict to what extent the COVID-19 pandemic may disrupt demand for HEPLISAV-B, but the overall magnitude of the disruption to our business will depend, in part, on the length and ongoing severity of the restrictions, and other limitations on our ability to conduct our business in the ordinary course, and prolonged disruptions would likely materially and negatively impact our business, operating results and financial condition.

Quarantines, shelter-in-place, executive and similar government orders related to COVID-19 have had no material impact on the supply of HEPLISAV-B and we have no current expectation that they will. However, if they continue for a substantial period of time, they could impact personnel at our manufacturing facility in Germany and third-party manufacturing facilities in the United States. This could adversely affect our ability to maintain and distribute a consistent supply of HEPLISAV-B sufficient to meet demand.

The spread of COVID-19, which has caused a broad impact globally, may materially affect us economically. While the potential economic impact brought by, and the duration of, COVID-19 may be difficult to assess or predict, a widespread pandemic could result in significant disruption of global financial markets, reducing our ability to access capital, which could in the future negatively affect our liquidity. In addition, a recession or market correction resulting from the spread of COVID-19 could materially affect our business and the value of our common stock.

The global pandemic of COVID-19 continues to rapidly evolve. The extent to which the COVID-19 pandemic impacts our business, our future sales of HEPLISAV-B and 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 of the outbreak, travel restrictions, quarantines, social distancing requirements and business closures in the United States, business disruptions and the effectiveness of actions taken in the United States 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 adversely affect 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 in this ‘‘Risk Factors’’ section.

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 or 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, 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 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. Thus, there can be no assurance that HEPLISAV-B will achieve and sustain stable pricing and favorable reimbursement. Our ability to successfully obtain and retain market share and achieve and sustain profitability will be significantly dependent on the ~~success~~market’s acceptance of a price for HEPLSIAV-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 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 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.

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, the Trump administration’s budget proposal for fiscal year 2021 includes a $135 billion allowance to support legislative proposals seeking to reduce drug prices, increase competition, lower out-of-pocket drug costs for patients, and increase patient access to lower-cost generic and biosimilar drugs. Additionally, the Trump administration previously released a “Blueprint” to lower drug prices and reduce out of pocket costs of drugs that contained proposals to increase manufacturer competition, increase the negotiating power of certain federal healthcare programs, incentivize manufacturers to lower the list price of their products and reduce the out of pocket costs of drug products paid by consumers. The U.S. Department of Health and Human Services, or HHS, has solicited feedback on some of these measures and has implemented others under its existing authority. For example, in May 2019, the Centers for Medicare & Medicaid Services (“CMS”) issued a final rule to allow Medicare Advantage Plans the option of using step therapy for Part B drugs beginning January 1, 2020. This final rule codified CMS’s policy change that was effective January 1, 2019. While a number of these and other measures may require additional authorization to become effective, Congress and the Trump administration have each indicated that it will continue to seek new legislative and/or administrative measures to control drug costs. 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. There have been, and likely will continue to be, legislative and regulatory proposals at the foreign, federal and state levels directed at broadening the availability of healthcare and containing or lowering the cost of healthcare. We cannot predict the initiatives that may be adopted in the future or the effect any such initiatives may have on our business.

We implemented a strategic restructuring to prioritize our vaccine business and explore strategic alternatives for our immuno-oncology portfolio, and we cannot assure you that we will be able to successfully execute on a strategic alternative for our immuno-oncology portfolio.

In the second quarter of 2019, we implemented a strategic restructuring that would focus our efforts on HEPLISAV-B, which included a reduction in our workforce and operations to focus resources on HEPLISAV-B commercialization and sales execution as well as assess additional opportunities to leverage our CpG 1018 adjuvant. Additionally, we are seeking strategic alternatives for our immuno-oncology portfolio, including our development stage products such as SD-101 and DV281. In connection with the restructuring, we made the determination to wind down ongoing immuno-oncology trials. Our ability to successfully execute on a strategic alternative for our immuno-oncology portfolio is dependent on a number of factors and we may not be able to execute upon a transaction or other strategic alternative for our immuno-oncology portfolio upon favorable terms within an advantageous timeframe and recognize significant value for these assets, if at all. Additionally, the negotiation and consummation of a transaction or other strategic alternative involving our immuno-oncology may be costly and time-consuming. Our strategic restructuring may not result in anticipated savings or other economic benefits, could result in total costs and expenses that are greater than expected, could make it more difficult to attract and retain qualified personnel and may disrupt our operations, each of which could have a material adverse effect on our business.

We are subject to ongoing FDA 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 problems 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 must conduct an observational comparative study of HEPLISAV-B to Energix-B to assess occurrence of acute myocardial infarction, or AMI. This study was initiated in August 2018 and is scheduled to continue through November 2020. We must also conduct an observational surveillance study to evaluate the incidence of new onset immune-mediated diseases, herpes zoster and anaphylaxis; and we are required to establish a pregnancy registry to provide information on outcomes following pregnancy exposure to HEPLISAV-B. These studies will require significant effort and resources, and failure to timely conduct these studies or complete these studies to the satisfaction of FDA could result in withdrawal of our BLA approval, which would have a material adverse effect on our business, results of operations, financial condition and prospects. The results of post-marketing studies may also result in additional warnings or precautions for the HEPLISAV-B label or expose additional safety concerns that may result in product liability and withdrawal of the product from the market, any of which would have a material adverse effect on our business, results of operations, financial condition and prospects.

In December 2019, we filed with the FDA a cumulative report on both interim analyses of the ongoing observational comparative AMI study. The interim analyses were based on currently-available data, and the final results, related findings and conclusions of the study will not be known until its completion and the receipt and review of the complete study data. Interim results may not be reproduced in the future, and thus should be considered carefully and not relied upon as indicative of future study results. Material adverse differences in final data, compared to interim data, could significantly adversely affect our business and business prospects, including our future HEPLISAV-B business. Certain assumptions, estimations, calculations and conclusions may have been made in connection with the interim analyses of the study data, and others, including regulatory agencies, may not accept or agree with these assumptions, estimations, calculations or conclusions, or may interpret or weigh the importance of data differently, which could impact the actual or perceived value of the study, HEPLISAV-B or the Company in general.

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. These requirements include submissions of safety and other post-marketing information and reports, registration, as well as continued compliance with cGMPs, GCPs, ICH guidelines, and GLPs. If we are not able to meet and maintain regulatory compliance, we may lose marketing approval and be required to withdraw our product. As noted in the preceding paragraph, withdrawal would have a material adverse effect on our business.

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 limits our marketing claims, we may be unable to generate significant revenues, if any.

Even if we obtain regulatory approval for our product candidates, such as the FDA approval of HEPLISAV-B in November 2017, 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:

The FDA or other regulatory agencies could limit the labeling indication for which our product candidates may be marketed or could otherwise limit marketing efforts for our products. If we are unable to achieve approval or successfully market any of our product candidates, ~~especially~~or marketing efforts are restricted by regulatory limits, our ability to generate revenues could be significantly impaired.

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 revenues and our business will be harmed.

We compete with pharmaceutical companies, biotechnology companies, academic institutions and research organizations, in developing and marketing therapies to prevent or treat cancer and infectious and inflammatory diseases. For example, HEPLISAV-B competes in the U.S. with established hepatitis B vaccines marketed by Merck and ~~SD-101, which depend on regulatory approval. The FDA or foreign regulatory agencies~~GlaxoSmithKline plc (“GSK”) and if approved outside the U.S., with vaccines from those companies as well as several additional established pharmaceutical companies. There are also modified schedules of conventional hepatitis B vaccines for limited age ranges that are approved in the European Union and U.S. In addition, HEPLISAV-B competes against Twinrix, a bivalent vaccine marketed by GSK for protection against hepatitis B and hepatitis A. A three dose HBV vaccine is reported to be under development by VBI Vaccines Inc (“VBI”).

We are in competition with many companies developing vaccines and vaccine adjuvants, including GSK, Pfizer, Sanofi, Merck, Seqirus, Agenus, Emergent BioSolutions, Novavax, Medicago and VBI.

Existing and potential competitors may ~~determine our clinical trials or other data regarding safety, efficacy, consistency of manufacture or compliance~~also compete with ~~GMP regulations are insufficient~~us for ~~regulatory approval. Failure to obtain regulatory approvals or the delay~~qualified commercial, scientific and ~~additional costs~~management personnel, as well as for technology that would otherwise be ~~required~~advantageous to obtain regulatory approvals could require us to discontinue operations.*

~~None of~~ our product candidates has been approved for sale by any regulatory agency. Any product candidate we develop is subject to extensive regulation by federal, state and local governmental authorities in the U.S., including the FDA, and foreign regulatory agencies.business. Our success ~~is primarily dependent~~in developing marketable products and achieving a competitive position will depend, in part, on our ability to attract and retain qualified personnel in the near-term, particularly with respect to HEPLISAV-B commercialization. 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 ~~regulatory approvals~~financing, enter into collaborative arrangements, sell our product candidates or generate revenues.

We have incurred net losses in each year since our inception and anticipate that we will continue to incur significant losses for the foreseeable future unless we can successfully commercialize HEPLISAV-B, and if we are unable to achieve and sustain profitability, the market value of our ~~most advanced~~common stock will likely decline.

We have generated limited revenue from the sale of products and have incurred losses in each year since we commenced operations in 1996. Our net losses for three months ended March 31, 2020 and 2019 were $12.6 million and $39.7 million, respectively. As of March 31, 2020, we had an accumulated deficit of $1.2 billion.

With our investment in the launch and commercialization of HEPLISAV-B in the U.S., we expect to continue incurring operating losses for the foreseeable future. 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. The timing for uptake of our product ~~candidates. Approval processes~~ in the U.S. has further increased losses related to commercialization, and the advancement of our oncology pipeline has historically increased our costs as we conducted more and larger studies to invest in ~~other countries are uncertain, can take many years~~clinical development. While we anticipate operating expenditures related to external oncology costs will decrease as a result of our strategic restructuring, due to the numerous risks and ~~require the expenditure of substantial resources,~~uncertainties associated with developing and commercializing vaccine and pharmaceutical products, we are unable to predict the ~~timing~~extent of any future losses or when, ~~regulatory approval~~if ever, we will become profitable.

Until we are able to generate significant revenues or achieve profitability through product sales, we will require substantial additional capital to finance our operations.

As of March 31, 2020, we had $129.5 million in cash, cash equivalents and marketable securities. We expect to incur operating losses for the foreseeable future as we continue to invest in commercialization of HEPLISAV-B. If we cannot generate a sufficient amount of revenue from product sales, we will need to finance our operations through strategic alliance and licensing arrangements and/or future public or private debt and equity financings. Raising additional funds through the issuance of equity or debt securities could result in dilution to our existing stockholders, increased fixed payment obligations, or both. In addition, these securities may have rights senior to those of our common stock and could include covenants that would restrict our operations.

For our most advanced product, 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 for HEPLISAV-B support licensure for immunization against hepatitis B infection in adults 18 years of age and older. ~~A prior VRBPAC panel voted 13 to 1 that the immunogenicity data for HEPLISAV-B support approval and thus the July 2017 VRBPAC was only asked to vote on safety. The FDA is not bound~~adversely impacted 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 datedeteriorating global economic conditions and the ~~review period could be further extended. In addition, unless we reach an agreement on~~recent disruptions to and volatility in the ~~post-marketing study our BLA~~credit and financial markets in the United States and worldwide resulting from the ongoing COVID-19 pandemic. Adequate financing may not be ~~approved~~available to us on acceptable terms, or ~~the study~~at

We may seek to introduce HEPLISAV-B, or any other product candidates we may develop, in various markets outside the ~~product.~~ ~~Finally,~~ ~~despite~~U.S. Developing, seeking regulatory approval for and marketing our product candidates outside the ~~favorable VRBPAC vote, there~~U.S. could impose substantial costs as well as burdens on our personnel resources in addition to potential diversion of management’s attention from domestic operations. International operations are subject to risk, including:

In the event that we determine to pursue commercialization of HEPLISAV-B outside the United States, such as in Europe, our opportunity will depend upon our receiving regulatory approval, which can be ~~no assurance~~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 ~~FDA will not issue a Complete Response Letter (“CRL”) in reconsidering 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~~risk that we may ~~sell the product~~not receive approval in ~~their respective geographic area. Obtaining approval of a BLA and corresponding foreign applications is highly uncertain and~~one or more jurisdictions. In March, 2019, we ~~may fail to obtain approval. The BLA review process is extensive, lengthy, expensive and uncertain,~~submitted, and the FDA or foreign regulatory agencies may delay, limit or deny approval of our application 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 organizationsEuropean Medical Agency (“~~CROs”~~EMA”); 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. We have responded to each CRL, but there can be no assurance that we have addressed ~~the outstanding FDA questions in a manner sufficient for approval in the U.S.~~

~~In February 2014, we announced our withdrawal of~~ accepted, our Marketing Authorization Application (“MAA”) for HEPLISAV-B. We may not be able to provide sufficient data or respond to comments to our MAA sufficient to obtain regulatory approval in Europe in a reasonable time period or at all.

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 regulatory approval in the United States. If we are unable to successfully manage our international operations, we may incur significant unanticipated costs and delays in regulatory approval or commercialization of our product candidates, which would impair our ability to generate revenues.

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 their outcomes are uncertain.

Clinical trials, including post-marketing studies, to generate sufficient data to meet FDA 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. 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 ~~HEPLISAV-B to~~a product candidate.

Each of our clinical trials requires the ~~EMA, in part because~~investment of substantial planning, expense and time and the ~~required time frame for response under the MAA procedure was not long enough to permit the collection~~timing of the ~~necessary~~commencement, continuation and completion of these clinical ~~data.~~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.

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 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 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 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.

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:

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.

The FDA or other foreign governmental 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:

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,~~

Third-party organizations such as 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.

The EMA and other 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.

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

HEPLISAV-B, SD-101 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.~~operations, or reevaluate the viability of strategic alternatives.

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, we may be required to delay, discontinue or modify ~~many of~~ our clinical trials or our clinical trial ~~strategy.~~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 and/or inhibitor technology as a whole, we may be required to significantly reduce or discontinue our operations.

We have no commercialization experience, 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 we may not be able to achieve these capabilities or enter into these arrangements on acceptable terms and in a timely manner. In particular, significant resources may be necessary to successfully market, sell and distribute HEPLISAV-B to patients with diabetes, a group recommended by the Centers for Disease Control (“CDC”) and Advisory Committee on Immunization Practices (“ACIP”) to receive hepatitis B vaccination.

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 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 in the marketing and launch 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 or that we can successfully manufacture sufficient quantities in compliance with GMP in order to meet market demand.

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 adversely affect our business and financial condition. 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 or at all. To the extent that we enter into co-promotion or other arrangements, 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, Germanyand third parties to supply materials or perform processes necessary to manufacture HEPLISAV-B 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 product candidates in commercial quantities.* With respect to HEPLISAV-B, we have switched to a pre-filled syringe presentation of the vaccine and our ability to meet future demand will depend on our ability to manufacture sufficient supply in this presentation.

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,~~HEPLISAV-B certain antigens, the ~~combination~~combination of the oligonucleotide and the antigens, and ~~the~~ formulation, fill and finish. ~~In connection with~~The FDA approved our ~~restructuring in January 2017, we elected to retain, but furlough, the majority of the workforce in Düsseldorf supporting the manufacture~~pre-filled presentation of HEPLISAV-B in 2018 and ~~utilize~~we expect such presentation will be the ~~existing stockpiled inventory~~sole presentation for HEPLISAV-B going forward. We have limited experience in manufacturing and supplying this presentation, and there can be no assurance that we can successfully manufacture sufficient quantities of ~~HEPLISAV-B~~pre-filled syringes in compliance with GMP in order 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.market demand.

We have also relied on a limited number of suppliers to produce oligonucleotides for clinical trials and a single supplier to produce our CpG 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~~supplier for CpG 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 manufacturing HEPLISAV-B and developing and commercializing our product ~~candidates, particularly HEPLISAV-B.~~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.

~~We utilize our facility in Düsseldorf to manufacture rHBsAg for HEPLISAV-B. The commercial manufacturing~~In countries outside 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,~~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 ~~delay~~ or disrupt the commercialization of HEPLISAV-B or our other product candidates and could result in significant expense.

IfHEPLISAV-B is subject to FDA 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.~~review for such products.

WeWith respect to HEPLISAV-B and our ~~third party~~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 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 BLA submitted to the FDA for any product candidate for which we are seeking FDA approval. Additionally, ~~third party~~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, 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 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 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.

Further, in March, 2019, we submitted, and the EMA accepted, our MAA for HEPLISAV-B. We may not be able to provide sufficient data or respond to comments to our MAA sufficient to obtain regulatory approval 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 our international operations, we may incur significant unanticipated costs and delays in regulatory approval or commercialization of our product candidates, which would impair our ability to generate revenues.

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 our stock price.

Any regulatory approvals 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 data from subsequent studies 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 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 to maintain price levels sufficient to achieve profitability and could harm our future prospects and reduce our stock price.

We may develop, seek regulatory approval for and market our product candidates outside the U.S., requiring a significant 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 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 operations are subject to risk, including:

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 our international operations, we may incur significant unanticipated costs 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, we may be unable to generate significant revenues, if any.

Even if we obtain regulatory approval for our product candidates and are able to commercialize them, our products may not gain market acceptance among physicians, patients, healthcare payors and the medical community.

~~The degree of market acceptance of any of our approved products will depend upon a number of factors, including:~~

The FDA or other regulatory agencies could limit the labeling indication for which our product candidates may be marketed or could otherwise limit marketing efforts for our products. If we are unable to achieve approval 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 for products in development is to establish collaborative relationships to ~~commercialize~~help fund development and ~~fund development~~commercialization of our product ~~candidates.~~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 ~~our~~those products ~~successfully,~~and programs, if at all.*

We may need to establish collaborative relationships to obtain domestic ~~and~~and/or international sales, marketing, research, development and distribution capabilities for our product candidates ~~in particular with respect to the commercialization of HEPLISAV-B, if approved.~~and our discovery research programs. Failure to obtain a collaborative relationship for those product candidates and programs or HEPLISAV-B ~~particularly~~ in markets outside the U.S. requiring extensive sales efforts, may significantly impair the potential for ~~this product~~those products and programs and we may be required to raise additional ~~capital.~~capital to continue them. The process of establishing and maintaining collaborative relationships is difficult and time-consuming, and ~~involves~~even if we establish such relationships, they may involve significant uncertainty, including:

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.

~~Many~~We have entered into collaborative relationships to develop vaccines utilizing CpG 1018, including collaborations to develop a vaccine for COVID-19. These collaborations may not be successful.*

As part of our ~~competitors~~business, we collaborate with others to develop new vaccines utilizing CpG 1018, including to develop a vaccine for COVID-19. There are risks and uncertainties inherent in vaccine research and development, including the timing of completing development, the results of clinical trials, whether the vaccine will be approved for use, the extent of competition, and whether a vaccine can be successfully commercialized. As a result, these collaborative efforts may not be successful.

The term loan agreement we entered into in February 2018 imposes significant operating and financial restrictions on us that may prevent us from pursuing certain business opportunities and restrict our ability to operate our business.

In February, 2018, we entered into a term loan agreement under which we have ~~greater financial resources~~borrowed $180.9 million, which includes paid-in-kind interest. The agreement contains covenants that restrict our ability to take various actions, including, among other things, incur additional indebtedness, pay dividends or distributions or make certain investments, create or incur certain liens, transfer, sell, lease or

dispose of assets, enter into transactions with affiliates, consummate a merger or sell or other dispose of assets. The agreement also requires us to comply with a daily minimum liquidity covenant and ~~expertise than we do. If~~an annual revenue requirement based on the sales of HEPLISAV-B, which is $30 million for the period July 1, 2019 through June 30, 2020, the first period for which we are ~~unable~~subject to ~~successfully compete~~such requirement. The agreement specifies a number of events of default, some of which are subject to applicable grace or cure periods, including, among other things, non-payment defaults, covenant defaults, cross-defaults to other material indebtedness, bankruptcy and insolvency defaults, and non-payment of material judgments.

Our ability to comply with ~~existing or potential competitors as a result of~~ these ~~disadvantages~~covenants will likely be affected by many factors, including events beyond our control, and we may ~~be unable~~not satisfy those requirements. Our failure to ~~generate revenues~~comply with our obligations could result in an event of default and the acceleration of our ~~business will be harmed.~~

~~We compete~~repayment obligation at a time when we may not have the cash to comply with ~~pharmaceutical companies, biotechnology companies, academic institutions and research organizations,~~that obligation, which could result in ~~developing therapies to prevent or treat cancer and infectious and inflammatory diseases. For example, if it is approved~~a seizure of most of our assets. The restrictions contained 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 oragreement could also limit our ability to ~~generate revenues from~~meet capital needs or otherwise restrict our ~~product candidates.~~

~~Existing~~activities and ~~potential competitors may also compete with us for qualified scientific and management personnel, as well as for technology~~adversely affect our ability to finance our operations, enter into acquisitions or to engage in other business activities that would be ~~advantageous to~~in 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.interest.

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~~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 we ~~evolve from a company primarily involved in research and development to a company potentially involved in~~focus on commercializationof HEPLISAV-B, we may encounter difficulties in managing our commercial 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 commercial operations expand, we expect that we will also need to manage additional relationships with various ~~collaborative partners,~~third parties, including sole source suppliers, distributors, wholesalers and ~~other third parties.~~hospital customers. Future growth, including managing an in-house field sales team, will impose significant added responsibilities on our organization, in particular on management. Our future financial performance and our ability to successfully 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:

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~~federal civil 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 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 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 remain legal and political challenges to certain aspects of ACA, as well as efforts by the Trump administration to repeal or replace certain aspects of the ACA. Since January 2017, President Trump has signed two executive orders and other directives designed to delay, circumvent, or loosen certain requirements mandated by ACA. Concurrently, Congress has 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 ~~extent~~Tax Cuts and Jobs Act of 2017, or Tax Act, includes a provision repealing, effective January 1, 2019, the tax-based shared responsibility payment imposed by ACA on certain individuals who fail to ~~which~~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 eliminates the health insurer tax. The Bipartisan Budget Act of 2018, or the BBA, among other things, amends 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”. In December 2018, CMS published a new final rule permitting further collections and payments to and from certain PPACA qualified health plans and health insurance issuers under the ACA risk adjustment program in response to the outcome of federal district court litigation regarding the method CMS uses to determine this risk adjustment. On December 14, 2018, a Texas U.S. District Court Judge ruled that the ACA is unconstitutional in its entirety because the “individual mandate” was repealed

by Congress as part of the Tax Act. Additionally, on December 18, 2019, the U.S. Court of Appeals for the 5th Circuit upheld the District Court ruling that the individual mandate was unconstitutional and remanded the case back to the District Court to determine whether the remaining provisions of the ACA are invalid as well. It is unclear how this decision, future ~~legislation~~decisions, subsequent appeals, and other efforts to repeal and replace the PPACA will impact the PPACA and on our business.

Other legislative changes have also been proposed and adopted since the PPACA 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, including the BBA, will remain in effect through 2029 unless additional Congressional action is taken. 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 ~~regulations, if any,~~may in the future be enacted, may result in additional reductions in Medicare and other healthcare funding.

In the future, there will likely continue to be additional proposals relating to ~~health care fraud~~the reform of the U.S. healthcare system, some of which could further limit coverage and ~~abuse laws and/~~reimbursement of products, including our product candidates. Any reduction in reimbursement from Medicare or ~~enforcement,~~other government programs may ~~be enacted~~result in a similar reduction in payments from private payors. The implementation of cost containment measures or ~~what effect such legislation~~other healthcare reforms may prevent us from being able to generate revenue, attain profitability or ~~regulation would have on~~commercialize our ~~business remains uncertain.~~products.

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

We depend on our senior executive officers, as well as other key scientific ~~and other~~ personnel. Our ~~research, product development~~commercial and business efforts could be adversely affected by the loss of one or more key members of our ~~scientific~~commercial or management staff, including our ~~Chief Executive Officer.~~senior executive officers. 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, 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 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 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 our company and achieving profitability.

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.

WeOur business operations are ~~involved in legal actions that are expensive~~vulnerable to interruptions by natural disasters, health epidemics and ~~time consuming, and, if resolved adversely,~~other catastrophic events beyond our control, the occurrence of which could materially harm our manufacturing, distribution, sales, business operations and financial ~~condition, or results~~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, and geo-political unrest and uncertainties. We have not undertaken a systematic analysis 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 could result in payments of monetary damages or fines, or adversely affect our products, and accordinglythe 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.

Our business could be ~~no assurance that a favorable final outcome will~~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, could cause restrictions on supply chains, access to workplaces and affect employee health and availability.

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 are potentially vulnerable to data security breaches—whether by employees or others—that may expose sensitive data to unauthorized persons. Such data security breaches could lead to the loss of trade secrets or other intellectual property, or could lead to the public exposure of personally identifiable information (including sensitive personal information) of our employees, collaborators, clinical trial patients, and others. 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 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 E.U. General Data Protection Regulation, or GDPR (EU) 2016/679, resulting in significant penalties, increased costs or loss of revenue.

In the United States, California adopted the California Consumer Privacy Act of 2018 (“CCPA”), which became effective in January 2020. The CCPA establishes a privacy framework for covered businesses, including an expansive definition of personal information and data privacy rights for California residents. The CCPA includes a framework with potentially severe statutory damages and private rights of action. The CCPA requires covered companies to provide new disclosures to California consumers (as that word is broadly defined in the CCPA), provide such consumers new ways to opt-out of certain sales of personal information, and allow for a new cause of action for data breaches. It remains unclear how the CCPA will be interpreted, but as currently written, it will likely impact our business activities and exemplifies the vulnerability of our business to not only cyber threats but also the evolving regulatory environment related to personal data. As we expand our operations, the CCPA may increase our compliance costs and potential liability. Some observers have noted that the CCPA could mark the beginning of a trend toward more stringent privacy legislation in the United States. Other states are beginning to pass similar laws.

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 international authorities have been warning businesses of increased cybersecurity threats from actors seeking to exploit the COVID-19 pandemic. We have recently 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.

~~We 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 based on our current plans. We will not be able to achieve approval 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 our current and planned 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:

The cash requirements of our current operations will be significantly impacted by 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.

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~~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 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.~~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 could preclude 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.

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, 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 with respect to our patents and other proprietary rights include the following:

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.

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:

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~~have in 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~~past been, and 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:

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 any new rules implemented by the Securities and Exchange Commission and the ~~NASDAQ~~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~~ATM 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.~~ $150 million. As of March 31, 2020, we have $104.0 million remaining under this agreement. 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~~.

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.~~None.

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.

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

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

		Page No.
PART I FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)	4
	Condensed Consolidated Balance Sheets as of ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016~~2019	4
	Condensed Consolidated Statements of Operations for the Three ~~and Nine~~ Months Ended ~~September 30, 2017~~March 31, 2020 and ~~2016~~2019	5
	Condensed Consolidated Statements of Comprehensive Loss for the Three ~~and Nine~~ Months Ended ~~September 30, 2017~~March 31, 2020 and ~~2016~~2019	5
	Condensed Consolidated Statements of ~~Cash Flows~~Stockholders’ Equity for the ~~Nine~~Three Months Ended ~~September 30, 2017~~March 31, 2020 and ~~2016~~2019	6
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2020 and 2019	7
	Notes to Condensed Consolidated Financial Statements	78
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1823
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	2329
Item 4.	Controls and Procedures	2329
PART II OTHER INFORMATION
Item 1.	Legal Proceedings	2430
Item 1A.	Risk Factors	2530
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3946
Item 5.	Other Information	3946
Item 6.	Exhibits	4047
SIGNATURES		4248

	March 31, 2020		December 31, 2019
Raw materials	$	18,441	$	15,198
Work-in-process		23,981		22,890
Finished goods		5,677		3,244
Total	$	48,099	$	41,332

Number of shares		5,841,250
Expected term	1.9 years
Expected volatility		0.7
Risk-free interest rate		0.1	%
Dividend yield		0	%

Balance at December 31, 2019	$	14,860
Decrease in estimated fair value of warrant liability upon revaluation		(8,610	)
Balance at March 31, 2020	$	6,250

	March 31, 2020		December 31, 2019		March 31, 2019		December 31, 2018
Cash and cash equivalents	$	37,899	$	39,884	$	112,133	$	49,348
Restricted cash		212		216		615		619
Total cash, cash equivalents and restricted cash shown in the condensed consolidated statements of cash flows	$	38,111	$	40,100	$	112,748	$	49,967

	March 31, 2020			December 31, 2019
Intangible assets	$	19,773		$	19,773
Less accumulated amortization		(19,571	)		(17,273	)
Total	$	202		$	2,500

	March 31, 2020		December 31, 2019
Operating lease liabilities:
Current portion of lease liabilities (included in other current liabilities)	$	2,951	$	3,039
Long-term portion of lease liabilities		36,972		37,845
Total operating lease liabilities	$	39,923	$	40,884

	March 31, 2020			December 31, 2019
Weighted average remaining lease term	9.6 years			9.7 years
Weighted average discount rate		10.1	%		10.1	%

	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

	Number of Shares (in thousands)			Weighted-Average Grant-Date Fair Value Per Share
Non-vested as of December 31, 2019		1,784		$	9.16
Granted		1,156			5.30
Vested		(728	)		10.56
Forfeited		(29	)		6.60
Non-vested as of March 31, 2020		2,183		$	6.68

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

		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

		~~Incorporated by Reference~~
Exhibit Number	~~Document~~	~~Exhibit Number~~	~~Filing~~	~~Filing Date~~	~~File No.~~	~~Filed Herewith~~
~~31.1~~	~~Certification of Chief 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 Chief 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	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)

	DYNAVAX TECHNOLOGIES CORPORATION

Date: ~~November 3, 2017~~May 7, 2020	By:	/s/ ~~EDDIE GRAY~~RYAN SPENCER
		~~Eddie Gray~~Ryan Spencer
		Chief Executive Officer
		(Principal Executive Officer)

Date: ~~November 3, 2017~~May 7, 2020	By:	/s/ MICHAEL OSTRACH
		Michael Ostrach
		Chief Financial Officer
		(Principal Financial Officer)

Date: ~~November 3, 2017~~May 7, 2020	By:	/s/ DAVID JOHNSON
		David Johnson
		Vice President, Chief Accounting Officer
		(Principal Accounting Officer)

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company