10-Q 1 dvax-20240331.htm 10-Q 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

 

(Mark One)

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

For the quarterly period ended March 31, 2024

or

 

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

For the transition period from to .

Commission file number: 001-34207

 

Dynavax Technologies Corporation

(Exact name of registrant as specified in its charter)

 

Delaware

33-0728374

(State or other jurisdiction of
incorporation or organization)

(IRS Employer
Identification No.)

2100 Powell Street, Suite 720

Emeryville, CA 94608

(510) 848-5100

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

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

Title of each class:

Trading symbol(s):

Name of each exchange on which registered:

Common Stock, $0.001 par value

DVAX

Nasdaq Global Select Market

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 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.

Large accelerated filer

Accelerated filer

 

 

 

 

Non-accelerated filer

Smaller reporting company

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

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 May 6, 2024, the registrant had outstanding 130,891,710 shares of common stock.

 


 

INDEX

DYNAVAX TECHNOLOGIES CORPORATION

 

 

Page No.

PART I FINANCIAL INFORMATION

 

 

Item 1.

Financial Statements (Unaudited)

4

 

Condensed Consolidated Balance Sheets as of March 31, 2024 and December 31, 2023

4

Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2024 and 2023

5

 

Condensed Consolidated Statements of Comprehensive Loss for the Three Months Ended March 31, 2024 and 2023

6

 

Condensed Consolidated Statements of Stockholders’ Equity for the Three Months Ended March 31, 2024 and 2023

7

Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2024 and 2023

8

Notes to Unaudited Condensed Consolidated Financial Statements

9

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

24

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

33

Item 4.

Controls and Procedures

33

PART II OTHER INFORMATION

 

Item 1.

Legal Proceedings

34

Item 1A.

Risk Factors

34

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

63

Item 3.

Defaults upon Senior Securities

63

Item 4.

Mine Safety Disclosures

63

Item 5.

Other Information

63

Item 6.

Exhibits

64

SIGNATURES

66

 

 

2


 

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are subject to a number of risks and uncertainties. All statements that are not historical facts are forward-looking statements, including statements about sales of HEPLISAV-B®, our ability to successfully commercialize HEPLISAV-B, CpG 1018 adjuvant or any future product, our anticipated market opportunity and level of sales of HEPLISAV-B and CpG 1018 adjuvant, our ability to manufacture sufficient supply of HEPLISAV-B to meet future demand, our business, collaboration and regulatory strategy, our ability to successfully support the development, manufacture and commercialization of other vaccines containing our CpG 1018 adjuvant, including any current or potential vaccine or vaccine candidate that stems from any of our collaborations, our ability to manufacture sufficient supply of CpG 1018 adjuvant to meet potential future demand in connection with new vaccines, our ability to advance our other product candidates, such as our shingles, Tdap and plague programs, and to otherwise develop and expand our clinical research pipeline, meet regulatory requirements, including post-marketing obligations and commitments, uncertainty regarding our capital needs and future operating results and profitability, anticipated sources of funds, liquidity and cash needs (including our ability to collect on accounts receivables), anticipated future revenue, as well as our plans, objectives, strategies, expectations and intentions for our business. 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 after the date they are made.

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

 

 

3


 

PART I. FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

Dynavax Technologies Corporation

Condensed Consolidated Balance Sheets

(In thousands, except per share amounts)

 

 

March 31,

 

 

December 31,

 

 

2024

 

 

2023

 

 

(unaudited)

 

 

(Note 1)

 

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

132,033

 

 

$

150,279

 

Marketable securities available-for-sale

 

591,505

 

 

 

592,023

 

Accounts receivables, net of allowance for doubtful accounts of $12,313 at March 31, 2024 and December 31, 2023, respectively

 

44,161

 

 

 

40,607

 

Other receivables

 

1,993

 

 

 

3,926

 

Inventories

 

61,806

 

 

 

53,290

 

Prepaid expenses and other current assets

 

19,788

 

 

 

18,995

 

Total current assets

 

851,286

 

 

 

859,120

 

Property and equipment, net

 

36,413

 

 

 

37,297

 

Operating lease right-of-use assets

 

23,392

 

 

 

24,287

 

Goodwill

 

2,022

 

 

 

2,067

 

Other assets

 

73,452

 

 

 

74,325

 

Total assets

$

986,565

 

 

$

997,096

 

Liabilities and stockholders’ equity

 

 

 

 

Current liabilities:

 

 

 

 

Accounts payable

$

2,431

 

 

$

5,245

 

Accrued research and development

 

3,137

 

 

 

2,982

 

Accrued liabilities

 

45,841

 

 

 

49,448

 

Other current liabilities

 

4,593

 

 

 

4,520

 

Total current liabilities

 

56,002

 

 

 

62,195

 

Convertible Notes, net of debt discount of $2,516 and $2,802 at March 31, 2024 and December 31, 2023, respectively (Note 7)

 

222,984

 

 

 

222,698

 

Long-term portion of lease liabilities

 

28,559

 

 

 

29,720

 

CEPI accrual long-term (Note 6)

 

60,337

 

 

 

60,337

 

Other long-term liabilities

 

203

 

 

 

74

 

Total liabilities

 

368,085

 

 

 

375,024

 

Commitments and contingencies (Note 5)

 

 

 

 

Stockholders’ equity:

 

 

 

 

Preferred stock: $0.001 par value, 5,000 shares authorized at
  March 31, 2024 and December 31, 2023;
zero shares outstanding at
  March 31, 2024 and December 31, 2023

 

-

 

 

 

-

 

Common stock: $0.001 par value, 278,000 shares authorized at
  March 31, 2024 and December 31, 2023;
130,859 shares and 129,530
   shares issued and outstanding at March 31, 2024 and December 31, 2023,
   respectively

 

131

 

 

 

130

 

Additional paid-in capital

 

1,562,027

 

 

 

1,554,634

 

Accumulated other comprehensive loss

 

(4,373

)

 

 

(2,108

)

Accumulated deficit

 

(939,305

)

 

 

(930,584

)

Total stockholders’ equity

 

618,480

 

 

 

622,072

 

Total liabilities and stockholders’ equity

$

986,565

 

 

$

997,096

 

 

See accompanying notes.

 

4


 

Dynavax Technologies Corporation

Condensed Consolidated Statements of Operations

(In thousands, except per share amounts)

(Unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

Revenues:

 

 

 

 

 

 

Product revenue, net

 

$

47,845

 

 

$

43,451

 

Other revenue

 

 

2,945

 

 

 

3,474

 

Total revenues

 

 

50,790

 

 

 

46,925

 

Operating expenses:

 

 

 

 

 

 

Cost of sales - product

 

 

10,966

 

 

 

14,712

 

Research and development

 

 

13,528

 

 

 

13,605

 

Selling, general and administrative

 

 

44,065

 

 

 

36,543

 

Bad debt expense

 

 

-

 

 

 

12,313

 

Total operating expenses

 

 

68,559

 

 

 

77,173

 

Loss from operations

 

 

(17,769

)

 

 

(30,248

)

Other income (expense):

 

 

 

 

 

 

Interest income

 

 

9,468

 

 

 

6,597

 

Interest expense

 

 

(1,695

)

 

 

(1,686

)

Sublease (expense) income (Note 5)

 

 

(1,602

)

 

 

1,598

 

Other

 

 

101

 

 

 

23

 

Net loss before income taxes

 

 

(11,497

)

 

 

(23,716

)

Benefit from (provision for) income taxes

 

 

2,776

 

 

 

(616

)

Net loss

 

$

(8,721

)

 

$

(24,332

)

Net loss per share attributable to common stockholders

 

 

 

 

 

 

Basic

 

$

(0.07

)

 

$

(0.19

)

Diluted

 

$

(0.07

)

 

$

(0.19

)

Weighted-average shares used in computing net loss per share attributable to common stockholders:

 

 

 

 

 

 

Basic

 

 

130,200

 

 

 

127,921

 

Diluted

 

 

130,200

 

 

 

127,921

 

See accompanying notes.

 

5


 

Condensed Consolidated Statements of Comprehensive Loss

(In thousands)

(Unaudited)

 

 

Three Months Ended March 31,

 

 

 

 

2024

 

 

2023

 

 

Net loss

 

$

(8,721

)

 

$

(24,332

)

 

Other comprehensive (loss) income, net of tax:

 

 

 

 

 

 

 

Change in unrealized loss on marketable securities available-for-sale

 

 

(1,457

)

 

 

666

 

 

Cumulative foreign currency translation adjustments

 

 

(808

)

 

 

572

 

 

Total other comprehensive (loss) income

 

 

(2,265

)

 

 

1,238

 

 

Total comprehensive loss

 

$

(10,986

)

 

$

(23,094

)

 

 

See accompanying notes.

 

 

 

6


 

Dynavax Technologies Corporation

Condensed Consolidated Statements of Stockholders’ Equity

(In thousands)

(Unaudited)

 

 

 

Common Stock

 

 

Preferred Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 2024

 

Shares

 

 

Par Amount

 

 

Shares

 

 

Par Amount

 

 

Additional
Paid-In Capital

 

 

Accumulated
Other
Comprehensive Loss

 

 

Accumulated Deficit

 

 

Total
Stockholders' Equity

 

Balances at December 31, 2023

 

 

129,530

 

 

$

130

 

 

 

-

 

 

$

-

 

 

$

1,554,634

 

 

$

(2,108

)

 

$

(930,584

)

 

$

622,072

 

Issuance of common stock upon exercise of stock options

 

 

240

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,635

 

 

 

-

 

 

 

-

 

 

 

1,635

 

Issuance of common stock upon release of restricted stock awards, net of statutory tax withholdings

 

 

995

 

 

 

1

 

 

 

-

 

 

 

-

 

 

 

(8,160

)

 

 

-

 

 

 

-

 

 

 

(8,159

)

Issuance of common stock under Employee Stock Purchase Plan

 

 

94

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

904

 

 

 

-

 

 

 

-

 

 

 

904

 

Stock compensation expense

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

13,014

 

 

 

-

 

 

 

-

 

 

 

13,014

 

Total other comprehensive loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(2,265

)

 

 

-

 

 

 

(2,265

)

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(8,721

)

 

 

(8,721

)

Balances at March 31, 2024

 

 

130,859

 

 

$

131

 

 

 

-

 

 

$

-

 

 

$

1,562,027

 

 

$

(4,373

)

 

$

(939,305

)

 

$

618,480

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Preferred Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 2023

 

Shares

 

 

Par Amount

 

 

Shares

 

 

Par Amount

 

 

Additional
Paid-In Capital

 

 

Accumulated
Other
Comprehensive (Loss) Income

 

 

Accumulated Deficit

 

 

Total
Stockholders' Equity

 

Balances at December 31, 2022

 

 

127,604

 

 

$

128

 

 

 

-

 

 

$

-

 

 

$

1,510,518

 

 

$

(5,438

)

 

$

(924,195

)

 

$

581,013

 

Issuance of common stock upon exercise of stock options

 

 

41

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

239

 

 

 

-

 

 

 

-

 

 

 

239

 

Issuance of common stock upon release of restricted stock awards, net of statutory tax withholdings

 

 

746

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(5,237

)

 

 

-

 

 

 

-

 

 

 

(5,237

)

Issuance of common stock under Employee Stock Purchase Plan

 

 

81

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

777

 

 

 

-

 

 

 

-

 

 

 

777

 

Stock compensation expense

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

10,034

 

 

 

-

 

 

 

-

 

 

 

10,034

 

Total other comprehensive income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,238

 

 

 

-

 

 

 

1,238

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(24,332

)

 

 

(24,332

)

Balances at March 31, 2023

 

 

128,472

 

 

$

128

 

 

 

-

 

 

$

-

 

 

$

1,516,331

 

 

$

(4,200

)

 

$

(948,527

)

 

$

563,732

 

 

See accompanying notes.

 

 

 

7


 

Dynavax Technologies Corporation

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

 

Three Months Ended March 31,

 

2024

 

 

2023

 

Operating activities

 

 

 

 

 

Net loss

$

(8,721

)

 

$

(24,332

)

Adjustments to reconcile net loss to net cash (used in) provided by operating activities:

 

 

 

 

 

Depreciation and amortization

 

1,124

 

 

 

1,013

 

Amortization of right-of-use assets

 

824

 

 

 

642

 

Inventory write off

 

1,264

 

 

 

-

 

Sublease termination loss (Note 5)

 

4,765

 

 

 

-

 

Accretion of discounts on marketable securities

 

(4,528

)

 

 

(3,498

)

Stock-based compensation expense

 

13,014

 

 

 

10,034

 

Bad debt expense (Note 6)

 

-

 

 

 

12,313

 

Non-cash interest expense

 

1,695

 

 

 

1,686

 

Changes in operating assets and liabilities:

 

 

 

 

 

Accounts and other receivables, net

 

(1,621

)

 

 

30,336

 

Inventories

 

(9,780

)

 

 

1,753

 

Prepaid expenses and other current assets

 

(4,800

)

 

 

(1,304

)

Other assets

 

118

 

 

 

677

 

Accounts payable

 

(2,640

)

 

 

4,096

 

Lease liabilities

 

(1,025

)

 

 

(793

)

Accrued and other liabilities

 

(6,368

)

 

 

(5,001

)

Net cash (used in) provided by operating activities

 

(16,679

)

 

 

27,622

 

Investing activities

 

 

 

 

 

Purchases of marketable securities

 

(150,685

)

 

 

(185,301

)

Proceeds from maturities and redemption of marketable securities

 

154,265

 

 

 

134,250

 

Purchases of property and equipment, net

 

(749

)

 

 

(1,283

)

Net cash provided by (used in) investing activities

 

2,831

 

 

 

(52,334

)

Financing activities

 

 

 

 

 

Proceeds from exercise of stock options

 

1,635

 

 

 

239

 

Proceeds from Employee Stock Purchase Plan

 

904

 

 

 

777

 

Payments for taxes related to net share settlement of restricted stock units

 

(6,742

)

 

 

(4,106

)

Net cash used in financing activities

 

(4,203

)

 

 

(3,090

)

Effect of exchange rate changes on cash and cash equivalents, and restricted cash

 

(201

)

 

 

151

 

Net decrease in cash and cash equivalents, and restricted cash

 

(18,252

)

 

 

(27,651

)

Cash and cash equivalents, and restricted cash at beginning of period

 

150,556

 

 

 

202,211

 

Cash and cash equivalents, and restricted cash at end of period

$

132,304

 

 

$

174,560

 

Supplemental disclosure of cash flow information

 

 

 

 

 

Cash paid during the period for income taxes

$

949

 

 

$

32

 

Reclassification of contract asset from other current assets to other assets

$

-

 

 

$

71,307

 

Reclassification of CEPI accrual to CEPI accrual long-term

$

-

 

 

$

(60,337

)

Non-cash investing and financing activities:

 

 

 

 

 

Purchases of property and equipment, not yet paid

$

355

 

 

$

926

 

Right-of-use assets obtained in exchange of operating lease liabilities

$

-

 

 

$

278

 

 

See accompanying notes.

 

8


 

Dynavax Technologies Corporation

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

1. Organization

Dynavax Technologies Corporation (“we,” “our,” “us,” “Dynavax” or the “Company”) is a commercial stage biopharmaceutical company developing and commercializing innovative vaccines to help protect the world against infectious diseases. Our first marketed product, HEPLISAV-B® [Hepatitis B Vaccine (Recombinant), Adjuvanted] is approved in the United States, the European Union and Great Britain for the prevention of infection caused by all known subtypes of hepatitis B virus in adults aged 18 years and older. In May 2022, we commenced commercial shipments of HEPLISAV-B in Germany.

We are advancing a pipeline of differentiated product candidates that leverage our CpG 1018® adjuvant, the adjuvant used in HEPLISAV-B, to develop improved vaccines in indications with unmet medical needs. These programs include vaccine candidates under development for shingles and Tdap, and a plague vaccine candidate program in collaboration with and fully funded by the U.S. Department of Defense ("DoD").

Additionally. we manufacture and have supplied in the past CpG 1018 adjuvant, the adjuvant used in HEPLISAV-B, through both commercial supply agreements, and through preclinical and clinical research collaborations with third-party organizations.

Basis of Presentation

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

The condensed consolidated balance sheet as of December 31, 2023 has been derived from audited financial statements at that date, but excludes some disclosures required by GAAP for complete financial statements.

The unaudited condensed consolidated financial statements and these notes should be read in conjunction with the audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023, 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 subsidiaries, Dynavax GmbH, located in Düsseldorf, Germany, Dynavax India LLP, located in India, and a branch of Dynavax registered in Italy. All significant intercompany accounts and transactions among these entities have been eliminated from the unaudited condensed consolidated financial statements. We operate in one business segment: discovery, development and commercialization of novel vaccines.

Use of Estimates

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

 

9


 

Recent Accounting Pronouncements

Accounting Standards Update 2016-13

In November 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires public entities to disclose information about their reportable segments’ significant expenses and other segment items on an interim and annual basis. Public entities with a single reportable segment are required to apply the disclosure requirements in ASU 2023-07, as well as all existing segment disclosures and reconciliation requirements in ASC 280 on an interim and annual basis. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. We are currently evaluating the impact of adopting ASU 2023-07.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires public entities, on an annual basis, to provide disclosure of specific categories in the rate reconciliation, as well as disclosure of income taxes paid disaggregated by jurisdiction. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. We are currently evaluating the impact of adopting ASU 2023-09.

 

2. Fair Value Measurements

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

Level 1—Observable inputs, such as quoted prices in active markets for identical assets or liabilities;
Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and
Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities; therefore, requiring an entity to develop its own valuation techniques and assumptions.

Assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurements. We review the fair value hierarchy classification on a quarterly basis. Changes in the ability to observe valuation inputs may result in a reclassification of levels for certain assets or liabilities within the fair value hierarchy. There were no transfers between Level 1, 2 and 3 during the three months ended March 31, 2024.

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.

 

10


 

Recurring Fair Value Measurements

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

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

March 31, 2024

 

 

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

 

 

 

Money market funds

$

120,106

 

 

$

-

 

 

$

-

 

 

$

120,106

 

U.S. treasuries

 

-

 

 

 

102,363

 

 

 

-

 

 

 

102,363

 

U.S. government agency securities

 

-

 

 

 

169,861

 

 

 

-

 

 

 

169,861

 

Corporate debt securities

 

-

 

 

 

319,811

 

 

 

-

 

 

 

319,811

 

Total assets

$

120,106

 

 

$

592,035

 

 

$

-

 

 

$

712,141

 

 

 

 

 

 

 

 

 

 

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

December 31, 2023

 

 

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

 

 

 

Money market funds

$

131,635

 

 

$

-

 

 

$

-

 

 

$

131,635

 

U.S. treasuries

 

-

 

 

 

74,237

 

 

 

-

 

 

 

74,237

 

U.S. government agency securities

 

-

 

 

 

216,688

 

 

 

-

 

 

 

216,688

 

Corporate debt securities

 

-

 

 

 

308,552

 

 

 

-

 

 

 

308,552

 

Total assets

$

131,635

 

 

$

599,477

 

 

$

-

 

 

$

731,112

 

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, U.S. 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 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.

 

3. Cash and Cash Equivalents, Restricted Cash and Marketable Securities

The following table provides a reconciliation of cash and cash equivalents, and 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):

 

 

 

March 31,
2024

 

 

December 31,
2023

 

 

March 31,
2023

 

 

December 31,
2022

 

Cash and cash equivalents

 

$

132,033

 

 

$

150,279

 

 

$

174,350

 

 

$

202,004

 

Restricted cash (1)

 

 

271

 

 

 

277

 

 

 

210

 

 

 

207

 

Total cash and cash equivalents, and restricted cash shown
   in the condensed consolidated statements of cash flows

 

$

132,304

 

 

$

150,556

 

 

$

174,560

 

 

$

202,211

 

(1) Restricted cash is included in "Other assets" in the Condensed Consolidated Balance Sheets.

 

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

 

11


 

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

 

 

Amortized
Cost

 

 

Unrealized
Gains

 

 

Unrealized
Losses

 

 

Estimated
Fair Value

 

March 31, 2024

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

Cash

$

11,397

 

 

$

-

 

 

$

-

 

 

$

11,397

 

Money market funds

 

120,106

 

 

 

-

 

 

 

-

 

 

 

120,106

 

Corporate debt securities

 

530

 

 

 

-

 

 

 

-

 

 

 

530

 

Total cash and cash equivalents

 

132,033

 

 

 

-

 

 

 

-

 

 

 

132,033

 

Marketable securities available-for-sale:

 

 

 

 

 

 

 

 

 

 

 

U.S. treasuries

 

102,575

 

 

 

20

 

 

 

(232

)

 

 

102,363

 

U.S. government agency securities

 

170,070

 

 

 

158

 

 

 

(367

)

 

 

169,861

 

Corporate debt securities

 

319,472

 

 

 

70

 

 

 

(261

)

 

 

319,281

 

Total marketable securities available-for-sale

 

592,117

 

 

 

248

 

 

 

(860

)

 

 

591,505

 

Total cash and cash equivalents, and marketable securities

$

724,150

 

 

$

248

 

 

$

(860

)

 

$

723,538

 

December 31, 2023

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

Cash

$

11,190

 

 

$

-

 

 

$

-

 

 

$

11,190

 

Money market funds

 

131,635

 

 

 

-

 

 

 

-

 

 

 

131,635

 

Corporate debt securities

 

7,453

 

 

 

1

 

 

 

-

 

 

 

7,454

 

Total cash and cash equivalents

 

150,278

 

 

 

1

 

 

 

-

 

 

 

150,279

 

Marketable securities available-for-sale:

 

 

 

 

 

 

 

 

 

 

 

U.S. treasuries

 

74,109

 

 

 

172

 

 

 

(44

)

 

 

74,237

 

U.S. government agency securities

 

216,265

 

 

 

692

 

 

 

(269

)

 

 

216,688

 

Corporate debt securities

 

300,803

 

 

 

315

 

 

 

(20

)

 

 

301,098

 

Total marketable securities available-for-sale

 

591,177

 

 

 

1,179

 

 

 

(333

)

 

 

592,023

 

Total cash and cash equivalents, and marketable securities

$

741,455

 

 

$

1,180

 

 

$

(333

)

 

$

742,302

 

 

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

 

 

March 31, 2024

 

 

 

Amortized
Cost

 

 

Estimated
Fair Value

 

Mature in one year or less

 

$

371,571

 

 

$

371,273

 

Mature after one year through two years

 

 

220,546

 

 

 

220,232

 

 

 

$

592,117

 

 

$

591,505

 

 

 

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. Unrealized losses are included in accumulated other comprehensive loss in stockholders’ equity. We determine whether a decline in the fair value of our available-for-sale ("AFS") debt securities below their amortized cost basis (i.e., an impairment) is due to credit-related factors or noncredit-related factors. Any impairment that is not credit related is recognized in other comprehensive income (loss), net of applicable taxes. Credit-related impairments (if any) are recognized as an allowance on the balance sheet with a corresponding adjustment to earnings. Both the allowance and the adjustment to net income can be reversed if conditions change.

There were no realized gains or losses from the sale of marketable securities during the three months ended March 31, 2024 and 2023. We do not intend to sell, and are not required to sell, the investments that are in an unrealized loss position before recovery of their amortized cost basis. During the three months ended March 31, 2024, we did not record an allowance for credit losses, as

 

12


 

management believes any such losses would be immaterial based on the investment-grade credit rating for each of the investments as of March 31, 2024. As such, there have been no declines in fair value that have been identified as a credit-related impairment.

4. Inventories

The following table presents inventories (in thousands):

 

 

 

March 31, 2024

 

 

December 31, 2023

 

Raw materials

 

$

19,660

 

 

$

27,256

 

Work-in-process

 

 

33,969

 

 

 

18,954

 

Finished goods

 

 

8,177

 

 

 

7,080

 

Total

 

$

61,806

 

 

$

53,290

 

 

5. Commitments and Contingencies

Leases

 

We lease our facilities in Emeryville, California and Düsseldorf, Germany. We lease and sublease certain manufacturing and office space with lease terms ranging from 3 to 12 years. These leases require monthly lease payments that may be subject to annual increases throughout the lease term. Certain of these leases also include options to renew or extend the lease for two successive five-year terms. These optional periods have not been considered in the determination of the right-of-use assets or lease liabilities associated with these leases as we did not consider the exercise of these options to be reasonably certain.

 

Sublease Termination and New Sublease

On February 22, 2024, our third-party subtenant obtained the approval of a voluntary petition for relief under Chapter 11 of the United States Code. As a consequence, the sublease agreement with that third-party for the subleased premises (approximately 75,662 square feet of office/laboratory space located at 5959 Horton Street, Emeryville, California) was terminated effective March 7, 2024. Simultaneously, on March 7, 2024, we entered into a new sublease agreement with a different third-party under similar conditions and for the same premises. Rent from the new sublease agreement is subject to scheduled annual increases, and the subtenant is responsible for certain operating expenses and taxes throughout the life of the sublease. The new sublease term expires on March 31, 2031, unless earlier terminated, concurrent with the term of our lease. The subtenant has no option to extend the sublease term.

 

As a result of the termination of the existing sublease agreement, we recognized a net loss of approximately $3.5 million comprising primarily of a $4.8 million write-off of the accrued rent asset balance as of March 7, 2024, partially offset by the collection of a termination payment of $1.3 million. Sublease income for the three months ended March 31, 2024 was $1.9 million. Sublease income for the three months ended March 31, 2023 was $1.6 million. Both the net loss on sublease termination and the sublease income are included net in “Sublease (loss) income” within “other income (expense)” in our condensed consolidated statements of operations. Rent received from the new subtenant in excess of rent paid to the landlord shall be shared by paying the landlord 50% of the excess rent. The excess rent is considered a variable lease payment and the total estimated payments are being recognized as additional rent expense on a straight-line basis.

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

 

 

 

Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

Operating lease expense

 

$

1,416

 

 

$

1,388

 

 

Cash paid for amounts included in the measurement of lease liabilities was $1.9 million and $1.7 million for the three months ended March 31, 2024 and 2023, respectively, and were included in change in lease liabilities in our condensed consolidated statement of cash flows.

 

13


 

The balance sheet classification of our operating lease liabilities was as follows (in thousands):

 

 

 

March 31, 2024

 

 

December 31, 2023

 

Operating lease liabilities:

 

 

 

 

 

 

Current portion of lease liabilities (included in other current liabilities)

 

$

4,557

 

 

$

4,496

 

Long-term portion of lease liabilities

 

 

28,559

 

 

 

29,720

 

Total operating lease liabilities

 

$

33,116

 

 

$

34,216

 

 

As of March 31, 2024, the maturities of our sublease income and operating lease liabilities were as follows (in thousands):

 

Years ending December 31,

 

Sublease Income

 

 

Operating Lease
Liabilities

 

2024 (remaining)

 

$

3,700

 

 

$

5,716

 

2025

 

 

6,127

 

 

 

6,966

 

2026

 

 

6,342

 

 

 

6,107

 

2027

 

 

6,564

 

 

 

6,038

 

2028

 

 

6,794

 

 

 

6,201

 

Thereafter

 

 

16,191

 

 

 

15,021

 

Total

 

$

45,718