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Article by DailyStocks_admin    (05-09-08 06:50 AM)

Dynavax Technologies Corp. CEO DINO DINA bought 100000 shares on 5-5-2008 at $2.31

BUSINESS OVERVIEW

Overview

Dynavax Technologies Corporation is a biopharmaceutical company that discovers, develops and intends to commercialize innovative Toll-like Receptor 9, or TLR9, agonist-based products to treat and prevent infectious diseases, allergies, cancer and chronic inflammatory diseases using versatile, proprietary approaches that alter immune system responses in highly specific ways. Our TLR9 agonists are based on immunostimulatory sequences, or ISS, which are short DNA sequences that enhance the ability of the immune system to fight disease and control chronic inflammation.

Our product candidates include: HEPLISAV ( tm) , a hepatitis B vaccine in Phase 3 partnered with Merck & Co. Inc.; TOLAMBA ( tm) , a ragweed allergy therapy in Phase 2; a therapy for metastatic colorectal cancer in Phase 1; and a therapy for hepatitis B in Phase 1. Our preclinical asthma and chronic obstructive pulmonary disease (COPD) program is partnered with AstraZeneca AB. The National Institutes of Health (NIH) partially funds our preclinical work on a vaccine for influenza. Symphony Dynamo, Inc. (SDI) funds our colorectal cancer and hepatitis C therapeutic programs. Deerfield Management, a healthcare investment fund, and its affiliates (Deerfield), have committed funding for our allergy programs.

Recent Developments

HEPLISAV

HEPLISAV, our product candidate for hepatitis B prophylaxis, is based on proprietary ISS that specifically targets TLR9 to stimulate an innate immune response. HEPLISAV combines ISS with hepatitis B surface antigen (HBsAg) and is designed to significantly enhance the level, speed and longevity of protection.
Previously reported clinical trial results have shown 100% seroprotection after two doses in subjects 18 to 39 years of age, and after three doses in difficult-to-immunize subjects 40 to 70 years of age.

We recently announced that two Investigational New Drug (IND) applications for HEPLISAV have been placed on clinical hold by the U.S. Food and Drug Administration (FDA) due to a serious adverse event (SAE) that occurred in one subject who received HEPLISAV in a Phase 3 study being conducted outside the United States. The subject was preliminarily diagnosed to have Wegener’s granulomatosis, an uncommon disease in which the blood vessels are inflamed. All subjects in this Phase 3 clinical study have received all doses per the study protocol, and will continue to be monitored. Administration of vaccine has been suspended in the only study of HEPLISAV where injections were being administered actively, a fully enrolled Phase 2 study in End Stage Renal Disease (ESRD) subjects being conducted in Canada. A total of approximately 2,500 individuals have been vaccinated with more than 5,000 doses of HEPLISAV in 10 clinical trials spanning approximately seven years. No additional HEPLISAV clinical trials will be initiated until the clinical hold has been resolved. We and Merck & Co., Inc. (Merck), along with additional collaborators, including clinical investigators and leading experts, are investigating the medical history of the individual who experienced the SAE to understand better the onset of this diagnosed disease, including whether it was a pre-existing condition. As a result of the clinical hold, there can be no assurance that HEPLISAV can continue in further development, or that if HEPLISAV continues in development, that the FDA will not require significant limitations impacting the timing and clinical data required to achieve approval.

In October 2007, we entered into a global license and development collaboration agreement with Merck to jointly develop HEPLISAV. Under the terms of the agreement, Merck received worldwide exclusive rights to HEPLISAV, and agreed to fund future vaccine development and be responsible for commercialization. We received an initial upfront payment of $31.5 million, and will be eligible to receive development cost reimbursement, future development and sales milestone payments up to $105 million, and double-digit tiered royalties on global sales of HEPLISAV. Under Merck’s oversight, we continue to manage the ongoing Phase 3 study in Canada and Europe as well as other licensure-required studies. The United States Food and Drug Administration Biologics Licensing Application (BLA) and other marketing applications will be the joint responsibility of Merck and Dynavax, and are intended to be submitted by Merck. Also in October 2007, we entered into a manufacturing agreement with Merck. We are responsible for manufacturing the hepatitis B surface antigen component of HEPLISAV for Merck, which is expected to be produced at Dynavax Europe’s Düsseldorf, Germany facility using our proprietary technology developed there and later, at our expanded facility to support expected market demand. This manufacturing obligation is for 10 years from the date of first major market launch of HEPLISAV. As a result of the clinical hold, there can be no assurance that HEPLISAV can continue in further development. Merck may terminate the agreement upon written notice to us, and there can be no assurance that Merck will continue the collaboration regardless of whether or not the clinical hold by the FDA is released.

Allergy Franchise

TOLAMBA

TOLAMBA, our product candidate for the treatment of ragweed allergy, consists of ISS linked to the purified major allergen of ragweed, Amb a 1. TOLAMBA is designed to target the underlying cause of seasonal allergic rhinitis caused by ragweed. The linking of ISS to Amb a 1 ensures that both ISS and ragweed allergen are presented simultaneously to the same immune cells, producing a highly specific and potent inhibitory effect and suppressing the Th2 cells responsible for inflammation associated with ragweed allergy.

In October 2007, we began dosing of TOLAMBA in subjects as part of an environmental exposure chamber study. Subjects were screened based on a history of ragweed allergy and a positive skin test. Exposure to ragweed allergen in the chamber is being used to select those individuals with confirmed ragweed allergic disease and establish their baseline level of symptoms. Subjects are being treated and will be re-exposed in the chamber to determine the effect of the six-week, six-injection TOLAMBA regimen as compared to placebo. Data from this study are expected in the first half of 2008 and, if positive, we intend to initiate a pivotal field study to support a potential BLA submission.

Peanut and Cat Allergy Therapies

Our peanut and cat allergy programs involve direct linkage of certain allergens to a proprietary TLR9 agonist. This approach is designed to mask the IgE binding sites of the native allergen to ensure safety and to induce an allergen-specific Th1 to Th2 immune shift to reprogram the immune response in allergic patients. Preclinical proof of concept studies have been generated with our peanut allergy approach, which provided protection in a mouse model of peanut induced anaphylaxis. We anticipate that the clinical development path for a disease-modifying peanut and cat allergy therapies to be focused on established challenge studies, in which both patient selection and study timing can be tightly controlled.

In July 2007, Deerfield and its affiliates committed up to $30 million in project financing for a chamber study and subsequent field study for TOLAMBA and to advance our preclinical peanut and cat allergy programs.

Influenza Vaccine

We are developing a universal flu vaccine designed specifically to overcome the limitations of standard seasonal and pandemic vaccines. Our approach combines standard flu vaccine, required for generating neutralizing antibodies against matched strains, with conserved antigens (NP and M2e) conjugated to a proprietary ISS. The ISS component enhances the immune response to standard vaccine, potentially increasing the efficacy and reducing the amount of antigen required. The conserved antigens enable protection against mismatched and pandemic strains, regardless of which strain ultimately causes a pandemic. This is a key differentiator versus other pandemic vaccines, most of which specifically target an individual H5 or H9 strain that may not ultimately acquire the characteristics of a potentially pandemic strain.

In August 2007, we were awarded a two-year $3.25 million grant from the National Institute of Allergy and Infectious Diseases (NIAID), a division of the National Institutes of Health (NIH), to continue development of our universal influenza vaccine. The new grant is directed toward advancing preclinical research into IND-enabling studies and product development.

The Immune System

The immune system is the body’s natural defense mechanism against infectious pathogens, such as bacteria, viruses and parasites, and plays an important role in identifying and eliminating abnormal cells, such as cancer cells. The body’s first line of defense against any foreign substance is a specialized function called innate immunity, which serves as a rapid response that protects the body during the days or weeks needed for a second longer-term immune response, termed adaptive immunity, to develop. Unique cells called dendritic cells have two key functions in the innate immune response. They produce molecules called cytokines that contribute to the killing of viruses and bacteria. In addition, they ensure that pathogens and other foreign substances are made highly visible to specialized helper T cells, called Th1 and Th2 cells, which coordinate the longer-term adaptive immune response. Dendritic cells recognize different types of pathogens or offending substances and are able to guide the immune system to make the most appropriate type of response. When viruses, bacteria and abnormal cells such as cancer cells are encountered, dendritic cells trigger a Th1 response, whereas detection of a parasite infection leads dendritic cells to initiate a Th2 response. Th1 and Th2 responses last for extended periods of time in the form of Th1 and Th2 memory cells, conferring long-term immunity.

The diagram above is a visual representation of how the immune system reacts when it encounters antigen. Upon encountering antigen, a cascade of events is initiated that leads to either a Th1 or a Th2 immune response, as described more fully in the paragraphs above.

The Th1 response involves the production of specific cytokines, including interferon-alpha, interferon-gamma and interleukin 12, or IL-12, as well as the generation of killer T cells, a specialized immune cell. These cytokines and killer T cells are believed to be the body’s most potent anti-infective weapons. In addition, protective IgG antibodies are generated that also help rid the body of foreign antigens and allergens. Once a population of Th1 cells specific to a particular antigen or allergen is produced, it persists for a long period of time in the form of memory Th1 cells, even if the antigen or allergen target is eliminated. If another infection by the same pathogen occurs, the immune system is able to react more quickly and powerfully to the infection, because the memory Th1 cells can reproduce immediately. When the Th1 response to an infection is insufficient, chronic disease can result. When the Th1 response is inappropriate, diseases such as rheumatoid arthritis can result, in part from elevated levels of Th1 cytokines.

Activation of the Th2 response results in the production of other cytokines, IL-4, IL-5 and IL-13. These cytokines attract inflammatory cells such as eosinophils, basophils and mast cells capable of destroying the invading organism. In addition, the Th2 response leads to the production of a specialized antibody, IgE. IgE has the ability to recognize foreign antigens and allergens and further enhances the protective response. An inappropriate activation of the Th2 immune response to allergens, such as plant pollens, can lead to chronic inflammation and result in allergic rhinitis, asthma and other allergic diseases. This inflammation is sustained by memory Th2 cells that are reactivated upon subsequent exposures to the allergen, leading to a chronic disease.

ISS and the Immune System

Our principal product development efforts are based on a technology that uses short synthetic DNA molecules called ISS that stimulate a Th1 immune response while suppressing Th2 immune responses. ISS contain specialized sequences that activate the innate immune system. ISS are recognized by a specialized subset of dendritic cells containing a unique receptor called Toll-Like Receptor 9, or TLR9. The interaction of TLR9 with ISS triggers the biological events that lead to the suppression of the Th2 immune response and the enhancement of the Th1 immune response.

We believe ISS have the following benefits:


• ISS work by changing or reprogramming the immune responses that cause disease rather than just treating the symptoms of disease.

• ISS influence helper T cell responses in a targeted and highly specific way by redirecting the response of only those T cells involved in a given disease. As a result, ISS do not alter the ability of the immune system to mount an appropriate response to infecting pathogens. In addition, because TLR9 is found only in a specialized subset of dendritic cells, ISS do not cause a generalized activation of the immune system, which might otherwise give rise to an autoimmune response.

• ISS, in conjunction with an allergen or antigen, establish populations of memory Th1 cells, allowing the immune system to respond appropriately to each future encounter with a specific pathogen or allergen, leading to long-lasting therapeutic effects.

We have developed a number of proprietary ISS compositions and formulations that make use of the different ways in which the innate immune system responds to ISS. Depending on the indication for which ISS is being explored as a therapy, we use ISS in different ways.

ISS Linked to Allergens

We link ISS to allergens that are known to cause specific allergies. By chemically linking ISS to allergens, rather than simply mixing them, we generate a superior Th1 response due to the fact that the ISS and allergen are presented simultaneously to the same part of the immune system. The linked molecules generate an increased Th1 response by the immune system in the form of IgG antibodies and interferon-gamma. In addition, the ISS-linked allergens have a highly specific and potent inhibitory effect on the Th2 cells, thereby reprogramming the immune response away from the Th2 response that causes specific allergies. Upon subsequent natural exposure to the allergens, the Th1 memory response is triggered and may provide long-term suppression of allergic responses.

ISS Linked to or Combined with Antigens

We also link ISS to antigens associated with pathogens such as viruses and bacteria to stimulate an immune response that will attack and destroy infected or abnormal cells. ISS, linked to or combined with appropriate antigens, increase the visibility of the antigen to the immune system and induce a highly specific and enhanced Th1 response, including increased IgG antibody production. As with ISS linked to allergens, this treatment also generates memory T cells that confer long-term protection against specific pathogens. This treatment may also have the potential for synergy with other cancer or infectious disease therapies.

ISS Alone

We use ISS alone in diseases like asthma, where a large variety of allergens may be associated with an inappropriate immune response. ISS administered alone may suppress the Th2 inflammatory response caused by any number of allergens, modifying the underlying cause of inflammation, as well as providing symptomatic relief. ISS may also be used in conjunction with a variety of anti-tumor monoclonal antibodies and chemotherapy agents as a combination therapy, with the goal of stimulating the elimination of cancer cells.

Advanced ISS Technologies

We have developed proprietary technologies that modify the molecular structure of ISS to significantly increase its versatility and potency. We are using these technologies in most of our preclinical programs and believe that they will be essential to our future product development efforts. Our advanced ISS technologies include ISS-like compounds, which we call CICs, as well as advanced ISS formulations.

CICs are molecules that are a mixture of nucleotide and non-nucleotide components. We have identified optimal sequences that induce particular immune responses, including potent interferon-alpha induction. CICs can be tailored to have specific immunostimulatory properties and can be administered alone, or linked to allergens or antigens.

We have also developed formulations for ISS and CICs that may dramatically increase their potency. These advanced formulations can be used in situations where high potency is required to see a desired clinical outcome and can decrease the dosage of ISS or CICs required to achieve therapeutic effect.

Our Primary Development Programs

Our primary development programs are HEPLISAV, Allergy and Influenza.

HEPLISAV: Our Hepatitis B Vaccine Candidate

Current hepatitis B vaccines consist of hepatitis B surface antigen combined with alum as an adjuvant. HEPLISAV is composed of hepatitis B surface antigen combined with 1018 ISS and, unlike conventional three-dose vaccines, appears to require only two vaccinations over one month to achieve protective hepatitis B antibody responses in healthy young adults. In addition, clinical studies have demonstrated that HEPLISAV offers higher levels of immunity in the age 40-70 population, which responds poorly to current vaccines. In October 2007, we entered into a global license and development collaboration agreement with Merck to jointly develop HEPLISAV.

Clinical Status

Our ongoing multi-center Phase 3 pivotal trial known as PHAST (Phase 3 HEPLISAV Short-regimen Trial), which began in Canada in late 2006 and in Germany in June 2007, has been placed on clinical hold by the FDA as a precautionary matter due to a serious adverse event (SAE) that occurred in one subject who received HEPLISAV. The study had enrolled over 2,400 subjects 11 to 55 years of age, and was designed to compare a two-dose regimen of HEPLISAV (administered at 0 and 1 month) to the conventional three-dose regimen of Engerix-B ® marketed by GlaxoSmithKline (administered at 0, 1 and 6 months).

In June 2007, we initiated a safety and immunogenicity study in the U.S. Consistent with the PHAST trial, subjects 11 to 55 years of age received a two-dose regimen of HEPLISAV, at 0 and 1 month. This safety study is designed to enable further clinical development in the U.S.

Pending assessment of the SAE in the PHAST trial, we placed on hold an ongoing Phase 2 trial initiated in August 2007 in Canada in patients with ESRD to evaluate the safety and immunogenicity of two different doses of HEPLISAV. The trial had enrolled adults 40 to 70 years of age who have progressive loss of renal function and are either pre-dialysis or hemodialysis patients. This is a difficult-to-immunize patient population for whom conventional hepatitis B vaccines have shown limited efficacy.

Results from Phase 2 and Phase 3 trials showed that HEPLISAV was well tolerated and induced more rapid immunity with fewer vaccinations in both healthy young and older adults than GlaxoSmithKline’s Engerix-B ® . We conducted a Phase 2 trial in Canada evaluating the immunogenicity of two doses of HEPLISAV compared to Engerix-B. A total of 99 healthy young adults were enrolled in this study, randomized to our vaccine or Engerix-B. Results showed that HEPLISAV induced a 79% rate of protective hepatitis B antibody response after one dose and protective hepatitis B antibody response in 100% of recipients after the second dose at two months. In contrast, subjects receiving Engerix-B had protective hepatitis B antibody responses after the first and second doses in 12% and 64% of recipients, respectively.

We completed a Phase 3 trial in Singapore, Korea and the Philippines that evaluated the immunogenicity of our vaccine in older subjects (ages 40-70 years) who have a diminished ability to respond to current vaccines. Results showed superiority of HEPLISAV compared to Engerix-B relative to the primary efficacy endpoint of seroprotection (100% seroprotection in the HEPLISAV-vaccinated group compared to 73.1% in the Engerix-B-vaccinated group). Results also showed that subjects vaccinated with HEPLISAV experienced more durable seroprotection. At week 50, the HEPLISAV-vaccinated group retained 100% seroprotection compared to 68.6% for the Engerix-B-vaccinated group. The primary endpoint of the trial was seroprotection following three doses. The safety profile of HEPLISAV was comparable to Engerix-B.

CEO BACKGROUND

Nancy L. Buc, Esq.

Ms. Buc was appointed to our Board in November 2005. Ms. Buc is a partner in the Washington, D.C. law firm Buc & Beardsley, and has had a long and distinguished legal career with a strong focus on healthcare policy and government service. Ms. Buc formerly served as Chief Counsel for the U.S. Food and Drug Administration. During an earlier period of government service, she served successively as Attorney-Advisor to the Chairman of the Federal Trade Commission (FTC) and Assistant Director of the FTC’s Bureau of Consumer Protection. Ms. Buc has served as a member of several major government panels, including the National Institutes of Health (NIH) Recombinant DNA Advisory Committee, the NIH Consensus Panel on Effective Medical Treatment of Heroin Addiction, and the Office of Technology Assessment’s Advisory Panels on Government Policies and Pharmaceutical Research and Development, and New Developments in Biotechnology. She was also a member of the Institute of Medicine’s committees on Contraceptive Research and Development and NIDA Medications Development. She is the Chair of the Food and Drug Law Institute’s Board of Directors. She received her Bachelor of Arts degree from Brown University and her Bachelor of Law degree from the University of Virginia, and was awarded an honorary doctor of laws degree from Brown University. She has served as both a trustee and a fellow on the Brown University Corporation, Brown’s governing body. She has been a director of the National Partnership for Women and Families.

David M. Lawrence, M.D.

Dr. Lawrence was appointed to our Board in December 2006. Dr. Lawrence is the Retired Chairman and Chief Executive Officer of Kaiser Foundation Health Plan, Inc. and Kaiser Foundation Hospitals (KFHP/KFH). Dr. Lawrence currently serves on the Boards of Agilent Technologies, Raffles Medical Group of Singapore, McKesson Corporation, and the RAND Health Advisory Board, among others. He also serves in advisory roles to the biotechnology industry. He has been a consultant to Dynavax since May 2005. Dr. Lawrence joined Kaiser in 1981. He was named chief executive officer of KFHP/KFH in 1991 and chairman of its Board in 1992. Prior to that, he served as vice chairman and chief operating officer as well as a key executive in Kaiser Permanente divisions in Oregon and Colorado. He retired on December 31, 2002. Dr. Lawrence is a graduate of Amherst College (BA), the University of Kentucky (MD), and the University of Washington (MPH). He is Board Certified in General Preventive Medicine (the Johns Hopkins University and the University of Washington). He is a member of Alpha Omega Alpha (Medical Honorary Society) and the Institute of Medicine (National Academy of Sciences).

Stanley A. Plotkin, M.D.

Dr. Plotkin was appointed to our Board in August 2005. Dr. Plotkin is Emeritus Professor of the University of Pennsylvania and Executive Advisor to Sanofi Pasteur. Until 1991, he was Professor of Pediatrics and Microbiology at the University of Pennsylvania, and Professor of Virology at the Wistar Institute and at the same time, Director of Infectious Diseases and Senior Physician at the Children’s Hospital of Philadelphia. In 1991, Dr. Plotkin left the University to join the vaccine manufacturer, Pasteur-Mérieux-Connaught (today, Sanofi Pasteur), where for seven years he was Medical and Scientific Director, based at Marnes-la-Coquette, outside Paris. Dr. Plotkin’s career included internship at Cleveland Metropolitan General Hospital, residency in pediatrics at the Children’s Hospital of Philadelphia and the Hospital for Sick Children in London and three years in the Epidemic Intelligence Service of the Centers for Disease Control of the U.S. Public Health Service. He has been chairman of the Infectious Diseases Committee and the AIDS Task Force of the American Academy of Pediatrics, liaison member of the Advisory Committee on Immunization Practices and Chairman of the Microbiology and Infectious Diseases Research Committee of the National Institutes of Health.

Arnold L. Oronsky, Ph.D.

Dr. Oronsky has been a member of our Board since November 1996 and became Chairman in February 2006. Dr. Oronsky is a managing director with InterWest Partners, a venture capital firm. Prior to joining InterWest Partners in 1994, Dr. Oronsky was Vice President of Discovery Research for the Lederle Laboratories division of American Cyanamid, a pharmaceutical company. From 1973 until 1976, Dr. Oronsky was head of the inflammation, allergy and immunology research program at Ciba-Geigy Pharmaceutical Company. Dr. Oronsky also serves as a senior lecturer in the Department of Medicine at The Johns Hopkins Medical School. Dr. Oronsky has won numerous grants and awards and has published over 125 scientific articles. Dr. Oronsky serves on the boards of directors of Metabasis Therapeutics Inc., and Anesiva, Inc. He received his Ph.D. from Columbia University, College of Physicians and Surgeons and his A.B. from New York University.

Peggy V. Phillips

Ms. Phillips was appointed to our Board in August 2006. Ms. Phillips currently also serves on the boards of directors of Portola Pharmaceuticals and the United States Naval Academy Foundation and she served on the board of Western Wireless from 2004 until the acquisition by Alltel in mid-2005. From 1996 until 2002, she served on the board of directors of Immunex Corporation and from 1999 she served as the Chief Operating Officer until the company was acquired by Amgen in 2002. During her career at Immunex, she held positions of increasing responsibility in research, development, manufacturing, sales and marketing. As senior vice president for pharmaceutical development and general manager for Enbrel ® , she was responsible for clinical development and regulatory affairs as well as the launch, sales and marketing of the product. Prior to joining Immunex, Ms. Phillips worked at Miles Laboratories. Ms. Phillips holds a BS and a MS in microbiology from the University of Idaho.

Dennis Carson, M.D.

Dr. Carson has been a member of our Board since December 1997. Dr. Carson is a noted researcher in the fields of autoimmune and immunodeficiency diseases and is co-discoverer with Dr. Eyal Raz of the immunostimulatory sequences that form the basis of our technology. He has played key roles in the founding of Vical, Inc., a gene therapy company, IDEC Pharmaceuticals, a biopharmaceutical company, and Triangle Pharmaceuticals. Dr. Carson is director of the Rebecca and John Moores Cancer Center at the University of California, San Diego and has been a professor in the Department of Medicine at the University of California, San Diego since 1990. He is a member of the National Academy of Sciences, American Academy of Arts and Sciences, and the Institute of Medicine, as well as the American Association for Cancer Research, the American Society for Clinical Investigation, the American Society of Hematology, and the Association of American Physicians. He received his M.D. from Columbia University and his B.A. from Haverford College. Dr. Carson completed his residency in internal medicine and a postdoctoral fellowship at the University of California San Diego.

Dino Dina, M.D.

Dr. Dina has been our President and a member of our Board since May 1997 and our Chief Executive Officer since May 1998. From 1982 until he joined us in 1997, Dr. Dina was an employee of Chiron Corporation, a biopharmaceutical company. At Chiron, Dr. Dina held a series of positions with increasing responsibility. He ultimately served as president of Chiron Vaccines (formerly Biocine Company), which he directed from its inception in 1987. Under Dr. Dina’s direction, Chiron Vaccines received the first-ever approval of an adjuvanted influenza vaccine in Italy, successfully completed development of the first genetically engineered pertussis vaccine, and conducted clinical trials for vaccines to prevent HIV, herpes simplex type II, cytomegalovirus, and hepatitis B infections. The virology group he directed was responsible for several key scientific findings, including the discovery, cloning, and sequencing of the hepatitis C virus, and the cloning and sequencing of the viral genomes for HIV and hepatitis A viruses. Prior to joining Chiron, Dr. Dina was employed at Albert Einstein College of Medicine in Bronx, New York, as an assistant professor of genetics from 1977 to 1982. He received his M.D. from the University of Genoa Medical School in Italy.

Denise M. Gilbert, Ph.D.

Dr. Gilbert was appointed to our Board in March 2004. Dr. Gilbert is currently an independent consultant and strategic advisor to life science companies. From 2001 to 2002, she served as Chief Executive Officer of Entigen Corporation, a private life science information technology company. From 1995 to 1999, Dr. Gilbert served as Chief Financial Officer and Executive Vice President of Incyte Pharmaceuticals (now Incyte Corporation), and from 1993 to 1995 she was Chief Financial Officer and Executive Vice President of Affymax. From 1986 through 1993 Dr. Gilbert was a Managing Director and senior biotechnology analyst at Smith Barney Harris & Upham and Vice President and biotechnology analyst at Montgomery Securities. Dr. Gilbert holds a B.S. from Cornell University and a Ph.D. in Cell and Developmental Biology from Harvard University.

MANAGEMENT DISCUSSION FROM LATEST 10K

Overview

Dynavax Technologies Corporation is a biopharmaceutical company that discovers, develops and intends to commercialize innovative Toll-like Receptor 9, or TLR9, agonist-based products to treat and prevent infectious diseases, allergies, cancer and chronic inflammatory diseases using versatile, proprietary approaches that alter immune system responses in highly specific ways. Our TLR9 agonists are based on immunostimulatory sequences, or ISS, which are short DNA sequences that enhance the ability of the immune system to fight disease and control chronic inflammation.

Our product candidates include: HEPLISAV tm , a hepatitis B vaccine in Phase 3 partnered with Merck & Co., Inc.; TOLAMBA tm , a ragweed allergy therapy in Phase 2; a therapy for metastatic colorectal cancer in Phase 1; and a therapy for hepatitis B in Phase 1. Our preclinical asthma and chronic obstructive pulmonary disease (COPD) program is partnered with AstraZeneca AB. The National Institutes of Health (NIH) partially funds our preclinical work on a vaccine for influenza. Symphony Dynamo, Inc. (SDI) funds our colorectal cancer and hepatitis C therapeutic programs. Deerfield Management, a healthcare investment fund, and its affiliates (Deerfield), have committed funding for our allergy programs.

Recent Developments

HEPLISAV

HEPLISAV, our product candidate for hepatitis B prophylaxis, is based on proprietary ISS that specifically targets TLR9 to stimulate an innate immune response. HEPLISAV combines ISS with hepatitis B surface antigen (HBsAg) and is designed to significantly enhance the level, speed and longevity of protection. Previously reported clinical trial results have shown 100% seroprotection after two doses in subjects 18 to 39 years of age, and after three doses in difficult-to-immunize subjects 40 to 70 years of age.

We recently announced that two Investigational New Drug (IND) applications for HEPLISAV have been placed on clinical hold by the U.S. Food and Drug Administration (FDA) due to a serious adverse event (SAE) that occurred in one subject who received HEPLISAV in a Phase 3 study being conducted outside the United States. The subject was preliminarily diagnosed to have Wegener’s granulomatosis, an uncommon disease in which the blood vessels are inflamed. All subjects in this Phase 3 clinical study have received all doses per the study protocol, and will continue to be monitored. Administration of vaccine has been suspended in the only study of HEPLISAV where injections were being administered actively, a fully enrolled Phase 2 study in End Stage Renal Disease (ESRD) subjects being conducted in Canada. A total of approximately 2,500 individuals have been vaccinated with more than 5,000 doses of HEPLISAV in 10 clinical trials spanning approximately seven years. No additional HEPLISAV clinical trials will be initiated until the clinical hold has been resolved. We and Merck & Co., Inc. (Merck), along with additional collaborators, including clinical investigators and leading experts, are investigating the medical history of the individual who experienced the SAE to understand better the onset of this diagnosed disease, including whether it was a pre-existing condition. As a result of the clinical hold, there can be no assurance that HEPLISAV can continue in further development, or that if HEPLISAV continues in development, that the FDA will not require significant limitations impacting the timing and clinical data required to achieve approval.

In October 2007, we entered into a global license and development collaboration agreement with Merck to jointly develop HEPLISAV. Under the terms of the agreement, Merck received worldwide exclusive rights to HEPLISAV, and agreed to fund future vaccine development and be responsible for commercialization. We received an initial upfront payment of $31.5 million, and will be eligible to receive development cost reimbursement, future development and sales milestone payments up to $105 million, and double-digit tiered royalties on global sales of HEPLISAV. Under Merck’s supervision, we continue to manage the ongoing Phase 3 study in Canada and Europe as well as other licensure-required studies. The United States Food and Drug Administration Biologics Licensing Application (BLA) and other marketing applications will be the joint responsibility of Merck and Dynavax, and are intended to be submitted by Merck. Also in October 2007, we entered into a manufacturing agreement with Merck. We are responsible for manufacturing the hepatitis B surface antigen component of HEPLISAV for Merck, which is expected to be produced at Dynavax Europe’s Düsseldorf, Germany facility using our proprietary technology developed there and later, at our expanded facility to support expected market demand. This manufacturing obligation is for 10 years from the date of first major market launch of HEPLISAV. As a result of the clinical hold, there can be no assurance that HEPLISAV can continue in further development. Merck may terminate the agreement upon written notice to us, and there can be no assurance that Merck will continue the collaboration regardless of whether or not the clinical hold by the FDA is released.

Allergy Franchise

TOLAMBA

TOLAMBA, our product candidate for the treatment of ragweed allergy, consists of ISS linked to the purified major allergen of ragweed, Amb a 1. TOLAMBA is designed to target the underlying cause of seasonal allergic rhinitis caused by ragweed. The linking of ISS to Amb a 1 ensures that both ISS and ragweed allergen are presented simultaneously to the same immune cells, producing a highly specific and potent inhibitory effect and suppressing the Th2 cells responsible for inflammation associated with ragweed allergy.

In October 2007, we began dosing of TOLAMBA in subjects as part of an environmental exposure chamber study. Subjects were screened based on a history of ragweed allergy and a positive skin test. Exposure to ragweed allergen in the chamber is being used to select those individuals with confirmed ragweed allergic disease and establish their baseline level of symptoms. Subjects are being treated and will be re-exposed in the chamber to determine the effect of the six-week, six-injection TOLAMBA regimen as compared to placebo. Data from this study are expected in the first half of 2008 and, if positive, we intend to initiate a pivotal field study to support a potential BLA submission.

Peanut and Cat Allergy Therapies

Our peanut and cat allergy programs involve direct linkage of certain allergens to a proprietary TLR9 agonist. This approach is designed to mask the IgE binding sites of the native allergen to ensure safety and to induce an allergen-specific Th1 to Th2 immune shift to reprogram the immune response in allergic patients. Preclinical proof of concept studies have been generated with our peanut allergy approach, which provided protection in a mouse model of peanut induced anaphylaxis. We anticipate that the clinical development path for a disease-modifying peanut and cat allergy therapies to be focused on established challenge studies, in which both patient selection and study timing can be tightly controlled.

In July 2007, Deerfield committed up to $30 million in project financing for a chamber study and subsequent field study for TOLAMBA and to advance our preclinical peanut and cat allergy programs.

Influenza Vaccine

We are developing a universal flu vaccine designed specifically to overcome the limitations of standard seasonal and pandemic vaccines. Our approach combines standard flu vaccine, required for generating neutralizing antibodies against matched strains, with conserved antigens (NP and M2e) conjugated to a proprietary ISS. The ISS component enhances the immune response to standard vaccine, potentially increasing the efficacy and reducing the amount of antigen required. The conserved antigens enable protection against mismatched and pandemic strains, regardless of which strain ultimately causes a pandemic. This is a key differentiator versus other pandemic vaccines, most of which specifically target an individual H5 or H9 strain that may not ultimately acquire the characteristics of a potentially pandemic strain.

In August 2007, we were awarded a two-year $3.25 million grant from the National Institute of Allergy and Infectious Diseases (NIAID), a division of the National Institutes of Health (NIH), to continue development of our universal influenza vaccine. The new grant is directed toward advancing preclinical research into IND-enabling studies and product development.

Critical Accounting Policies and the Use of Estimates

The accompanying discussion and analysis of our financial condition and results of operations are based upon our 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, including those related to revenue recognition, research and development activities, stock-based compensation, investments, asset impairment, the estimated useful life of assets, income taxes and contingencies. 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. Actual results may differ from these estimates under different assumptions or conditions.

While our significant accounting policies are more fully described in Note 2 to the consolidated financial statements, we believe the following critical accounting policies reflect the more significant judgments and estimates used in the preparation of our financial statements.

Revenue Recognition

Our revenues derive from collaborative agreements as well as grants. Collaborative agreements may include upfront license payments, cost reimbursement for the performance of research and development, milestone payments, contract manufacturing services, and royalty fees. In accordance with SAB 104, we recognize revenue when there is persuasive evidence that an arrangement exists, delivery has occurred or services have been rendered, the price is fixed or determinable and collectibility is reasonably assured. Our revenue arrangements that contain multiple elements are evaluated under the provisions of EITF 00-21. The different elements of the revenue arrangement are divided into separate units of accounting if certain criteria are met, including whether the delivered element has stand-alone value to the customer and whether there is objective and reliable evidence of the fair value of the undelivered items. The consideration we receive is allocated among the separate units based on their respective fair values, and the applicable revenue recognition criteria are applied to each of the separate units. Advance payments received in excess of amounts earned are classified as deferred revenue until earned.

Revenue from non-refundable upfront license fees and other payments under collaboration agreements where we have continuing performance obligations is deferred and recognized as performance occurs. Revenue is recognized on a ratable basis, unless we determine that another methodology is more appropriate, through the date at which our performance obligations are completed. We recognize cost reimbursement revenue under collaborative agreements as the related research and development costs are incurred, as provided for under the terms of these agreements.

Revenue from milestones that are contingent upon the achievement of substantive at-risk performance criteria is recognized in full upon achievement of those milestone events in accordance with the terms of the agreement and assuming all other revenue recognition criteria have been met. All revenue recognized to date under our collaborative agreements has been nonrefundable.

Revenues from the manufacturing and sale of vaccine and other materials 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. As a result, we recognize royalty revenue when reported by our licensees and when collection is reasonably assured.

Revenue from government and private agency grants are recognized as the related research expenses are incurred and to the extent that funding is approved. Additionally, we recognize revenue based on the facilities and administrative cost rate reimbursable per the terms of the grant awards. Any amounts received in advance of performance are recorded as deferred revenue until earned.

Results of Operations

Revenues

Revenues consist of amounts earned from collaborations, grants, services and license fees. Collaboration revenue includes revenue recognized under our collaboration agreements. Grant revenue includes amounts earned under government and private agency grants. Services and license fees include research and development and contract manufacturing services, license fees and royalty payments.

Total revenues for the year ended December 31, 2007 increased by $9.2 million, or 191%, over the same period in 2006 primarily due to an increase in revenue recognized from our collaboration arrangements with Merck and AstraZeneca, which we entered into in October 2007 and September 2006, respectively. Grant revenue for the year ended December 31, 2007 included an increase of $0.6 million associated with our National Institutes of Health (NIH) awards, following the resolution of a vendor restriction. In addition, the Company was awarded a two-year $3.25 million grant in August 2007 from the National Institute of Allergy and Infectious Diseases (NIAID), a division of the NIH, to continue development of a novel universal influenza vaccine. The Company recognized approximately $0.5 million for the year ended December 31, 2007 relating to this grant. Services and license revenue of $1.7 million was derived primarily from R&D services provided to customers of Dynavax Europe.

Collaboration revenue for the year ended December 31, 2006 decreased by $10.6 million, or 87%, over the same period in 2005. Collaboration revenue for the year ended December 31, 2005 included an acceleration of revenue recognition of $7.0 million resulting from the termination of our collaboration with UCB in March 2005. Grant revenue for the year ended December 31, 2006 decreased by $0.9 million, or 37%. Grant revenue for the year ended December 31, 2005 included $0.5 million associated with an adjustment to the final approved indirect cost rate utilized for our NIH awards.

We anticipate that our revenues will increase significantly in 2008 as compared to 2007 due primarily to our collaboration with Merck. Depending upon the resolution of the HEPLISAV clinical hold by the FDA, there could be an impact on the timing of the Merck-related revenues, including the recognition of the upfront payment and future development cost reimbursement.

Research and Development

Research and development expenses consist of compensation and related personnel costs which include benefits, recruitment, travel and supply costs; outside services; allocated facility costs; impairment and non-cash stock-based compensation. Outside services relate to our preclinical experiments and clinical trials, regulatory filings and manufacturing our product candidates. We expense our research and development costs as they are incurred.

Research and development expenses for the year ended December 31, 2007 increased by $15.8 million, or 31%, over the same period in 2006. The increase from fiscal 2006 was primarily due to outside services which included a non-recurring $5 million payment in June 2007 for a non-exclusive license to certain patents and patent applications for the purpose of commercializing HEPLISAV. The remaining growth in outside services was due to increased clinical trial costs related to our product candidates HEPLISAV and TOLAMBA and expenses incurred to support SDI programs and Dynavax Europe operations. Compensation and related personnel costs increased in 2007 due to continued organizational growth to further develop our clinical candidates and the impact of a full year of operations from Dynavax Europe. Facility costs increased primarily due to rent expense for Dynavax Europe and higher operating costs in the U.S.

Research and development expenses for 2007 also included approximately $0.4 million of impairment charges related to the Supervax program. In 2006, we acquired the Supervax hepatitis B vaccine manufactured by Dynavax Europe. Supervax was launched in Argentina in December 2006 and was approved for marketing and sales through a third party distributor. We recorded immaterial revenues and expenses related to the manufacture and sale of formulated bulk vaccine in 2006 to the third party distributor. During the fourth quarter of 2007, we were notified that the distributor was unable to meet its annual commitment to order additional bulk vaccine due to its inability to sell all of the previously purchased Supervax product in the Argentine market. The underperformance of the Supervax program relative to originally expected future sales caused us to discontinue our marketing efforts of Supervax in territories outside of Argentina. As a result, we determined that estimated future cash flows from sales of Supervax were significantly less than the projection established at the time of acquisition, and we considered this an indicator of impairment. As of November 2007, we performed our impairment test of long-lived assets. Based on our analysis, the fair value of the acquired intangible asset (developed technology) and inventory associated with the Supervax program was estimated to be zero; therefore, we recorded a permanent write down of these assets in accordance with SFAS No. 144.

Research and development expenses for the year ended December 31, 2006 increased by $22.2 million, or 80%, from the same period in 2005. The increase from fiscal year 2005 was primarily due to increased clinical trial and clinical material manufacturing costs for our product candidates TOLAMBA and HEPLISAV, as well as expenses incurred to support the SDI programs and Dynavax Europe operations. Outside services during the period also included approximately $0.1 million of costs associated with the manufacture of Supervax formulated bulk vaccine. Compensation and related personnel costs increased in 2006 due to continued organizational growth to further develop our clinical candidates and the acquisition of Dynavax Europe. Facility costs increased primarily due to rent expense for Dynavax Europe. In addition, we incurred higher stock-based compensation charges resulting from our adoption of FAS 123R effective January 1, 2006.

We anticipate that our research and development expenses will increase significantly in 2008 as compared to 2007, primarily in connection with the advancement of HEPLISAV, TOLAMBA and other programs.

General and Administrative

General and administrative expenses consist primarily of compensation and related personnel costs; outside services such as accounting, consulting, business development, investor relations and insurance; legal costs that include corporate and patent expenses, net of patent cost recoveries; allocated facility costs; and non-cash stock-based compensation.

General and administrative expenses for the year ended December 31, 2007 increased by $3.5 million, or 23%, over the same period in 2006. The increase primarily reflects additional legal costs associated with patent activities. Compensation and related personnel costs increased in 2007 as a result of overall organizational growth including the operations of Dynavax Europe. Outside services increased in 2007 related to higher professional fees incurred to support various corporate development activities, SDI programs and Dynavax Europe operations.

General and administrative expenses for the year ended December 31, 2006 increased by $5.6 million, or 60%, over the same period in 2005. The increase from fiscal 2005 primarily reflects additional compensation and related personnel costs associated with overall organizational growth, including the impact of Dynavax Europe. Outside services and legal costs increased in 2006 related to higher accounting fees, consulting fees incurred in conjunction with various corporate development activities, and expenses incurred to support SDI programs and Dynavax Europe operations. In addition, we incurred higher stock-based compensation charges resulting from our adoption of FAS 123R effective January 1, 2006.

We expect general and administrative expenses to increase modestly in 2008 as compared to 2007, resulting from continued organizational growth and expenses incurred to support corporate development activities.

Acquired In-process Research and Development

Following our April 2006 acquisition of Rhein Biotech GmbH (Rhein), we recorded the assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. As a result, we recorded net tangible assets of $3.0 million, goodwill of $2.3 million, other intangible assets of $5.1 million, and expense associated with the acquired in-process research and development of $4.2 million, representing the fair value of research projects that had not yet reached technological feasibility and that have no alternative future use.

At the time of the acquisition, the estimated fair value of the acquired in-process research and development for the Supervax program was determined using the income approach, which discounts expected future cash flows to present value. We estimated the related future net cash flows between 2006 and 2020 and discounted them to their present value using a risk-adjusted discount rate of 50%, which was based on the estimated internal rate of return for Rhein’s operations and was comparable to the estimated weighted average cost of capital for companies with Rhein’s profile. The projected cash flows from the Supervax program were based on key assumptions such as estimates of revenues and operating profits related to the program considering its stage of development; the time and resources needed to complete the development and approval of the related product; the life of the potential commercialized product and associated risks, including the inherent difficulties and uncertainties in developing a drug compound such as obtaining FDA and other regulatory approvals; and risks related to the viability of and potential alternative treatments in any future target markets. Given the high risk associated with the development of new drugs, we adjusted the revenue and expense forecasts to reflect the probability and risk of advancement through the regulatory approval process based on the stage of development in the regulatory process.

From the acquisition date through the year ended December 31, 2006, we continued registration activities for Supervax in territories other than Argentina. Actual sales for the fiscal year ended 2006 of Supervax in Argentina, while immaterial, were substantially in accordance with the original projections at the valuation date. During fiscal year 2007, we continued to monitor sales of Supervax in Argentina and we continued efforts to market Supervax in order to determine if we could achieve planned regulatory approvals in other markets. However, the lack of performance of the Supervax program under our distribution arrangement caused us to discontinue our marketing efforts of Supervax in territories outside of Argentina. For the year ended December 31, 2007, we recorded an impairment charge of $0.4 million to write off the intangible asset and inventory associated with the Supervax program.

At the time of the acquisition, the estimated fair value of the acquired in-process research and development for the Theravax and Cytovax programs was determined using the cost approach. We considered the stage of product development and the nature of these projects. At the valuation date, both Theravax and Cytovax were in early stages of development and were many years away from obtaining regulatory approval, if at all, and the risks associated with identifying material cash flows as well as the nature, timing and projected costs associated with the remaining efforts for completion of the projects were not reasonably estimable. However, we were able to estimate the cost involved in recreating the technology using historical data from Rhein, including cost and effort applied to the development of the technology prior to the acquisition date. We did not anticipate significant cash inflows for Theravax or Cytovax. Significant appraisal assumptions included historical data related to personnel effort, costs associated with those efforts, and external costs in order to estimate the fair value of these products as of the acquisition date.

We intend to continue further development of a therapy to treat chronic hepatitis B infection. In March 2007, we initiated a Phase 1 clinical study of our hepatitis B therapeutic candidate in 20 healthy subjects. In early 2007, we made a strategic decision to discontinue development of Cytovax in order to focus on other opportunities in our product pipeline; however, due to the early stage of development, there was no impact to our results of operations and financial condition.

MANAGEMENT DISCUSSION FOR LATEST QUARTER

Results of Operations

Revenues

Revenues consist of amounts earned from collaborations, government and private agency grants, services and license fees. Services and license fees include research and development and contract manufacturing services, license fees and royalty payments.

Total revenues for the quarter ended March 31, 2008 increased by $4.3 million, or 218%, over the same period in 2007 primarily due to an increase in revenue recognized from our collaboration arrangement with Merck, offset by a decrease in grant revenue resulting from the completion of certain grant activities in 2007. Services and license revenue of $0.2 million was derived primarily from R&D services provided to customers of Dynavax Europe.

We anticipate that our revenues will increase significantly in 2008 as compared to 2007 due primarily to our collaboration with Merck. Depending upon the resolution of the HEPLISAV clinical hold by the FDA, there could be an impact on the timing of the Merck-related revenues, including the recognition of the upfront payment and future development cost reimbursement.

Research and Development

Research and development expenses consist 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 preclinical experiments and clinical trials, regulatory filings, and manufacturing our product candidates. We expense our research and development costs as they are incurred.

Research and development expenses for the three months ended March 31, 2008 increased by $1.5 million, or 11%, over the same period in 2007. The increase primarily reflects additional compensation and related personnel costs associated with overall organizational growth to further develop our clinical candidates. Outside services increased primarily due to $1.1 million in cost related to the expansion of our manufacturing capabilities in Europe, offset by a decrease of $0.7 million in clinical development and preclinical costs for our product candidates and earlier stage programs. Facility costs increased primarily due to higher operating costs in both the U.S. and Europe.

We anticipate that our research and development expenses will increase significantly in 2008 as compared to 2007, primarily in connection with the advancement of HEPLISAV, TOLAMBA and other programs.

General and Administrative

General and administrative expenses consist primarily of compensation and related personnel costs; outside services such as accounting, consulting, business development, investor relations and insurance; legal costs that include corporate and patent expenses, net of patent cost recoveries; allocated facility costs; and non-cash stock-based compensation.

General and administrative expenses for the three months ended March 31, 2008 increased by $0.4 million, or 9%, over the same period in 2007. The increase primarily reflects additional compensation and related personnel costs associated with overall organizational growth. Outside services increased primarily due to higher accounting and consulting fees incurred in conjunction with various corporate activities. Facility costs increased primarily due to operating costs in both the U.S. and Europe.

We expect general and administrative expenses to increase modestly in 2008 as compared to 2007, resulting from continued organizational growth and expenses incurred to support corporate development activities.

Amortization of Intangible Assets

Intangible assets consist primarily of the manufacturing process and customer relationships resulting from our April 2006 acquisition of Rhein and are being amortized over 5 years from the date of acquisition. Amortization of intangible assets was $0.2 million for the three months ended March 31, 2008 compared to $0.3 million for the same period in 2007.

Interest and Other Income, Net and Interest Expense

Interest income is reported net of amortization on marketable securities and realized gains and losses on investments. Other income includes gains and losses on foreign currency translation of our activities primarily with Dynavax Europe and gains and losses on disposals of property and equipment.

Interest expense for the three months ended March 31, 2008 increased by $1.3 million, or 4,700%, over the same period in 2007 due to interest expense incurred from the commitment fees and warrants issued under the Deerfield financing agreement.

Amount Attributed to Noncontrolling Interest in Symphony Dynamo, Inc.

Pursuant to the agreements that we entered into with SDI in April 2006 and, in accordance with FIN 46R, the results of operations of SDI have been included in our consolidated financial statements from the date of formation on April 18, 2006. In accordance with FIN 46R, we have deducted the losses attributed to the noncontrolling interest in the determination of net loss in our consolidated statements of operations, and we will continue to deduct such losses until the carrying amount of the noncontrolling interest in the consolidated balance sheet is reduced to zero. For the three months ended March 31, 2008 and 2007, the losses attributed to the noncontrolling interest were $1.6 million and $2 million, respectively.

Recent Accounting Pronouncements

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements – an amendment of Accounting Research Bulletin No. 51” (“SFAS 160”). SFAS 160 establishes accounting and reporting standards for ownership interests in subsidiaries held by parties other than the parent, the amount of consolidated net income attributable to the parent and to the noncontrolling interest, changes in a parent’s ownership interest and the valuation of retained noncontrolling equity investments when a subsidiary is deconsolidated. SFAS 160 also establishes disclosure requirements that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. SFAS 160 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and will be adopted by us in the first quarter of fiscal 2009. We are currently evaluating the potential impact, if any, of the adoption of SFAS 160 on our consolidated results of operations and financial condition.

In December 2007, the FASB ratified the final consensus in Emerging Issues Task Force (EITF) Issue No. 07-1, “Accounting for Collaboration Agreements”, which required certain income statement presentation of transactions with third parties and of payments between parties to the collaboration arrangement, along with disclosure about the nature of the arrangement. EITF 07-1 is effective for us beginning January 1, 2009. We do not expect the adoption of EITF 07-1 to have a material effect on our consolidated results of operations and financial conditions.

In March 2007, the FASB discussed Emerging Issues Task Force (EITF) Issue No. 07-3, “Accounting for Nonrefundable Advance Payments for Goods or Services to Be Used in Future Research and Development Activities”, which addressed the accounting for nonrefundable advance payments. The EITF concluded that nonrefundable advance payments for goods or services to be received in the future for use in research and development activities should be deferred and capitalized. The capitalized amounts should be expensed as the related goods are delivered or the services performed. If an entity’s expectations change such that it does not expect it will need the goods to be delivered or the services to be rendered, capitalized nonrefundable advance payment should be charged to expense. EITF 07-3 is effective for new contracts entered into during fiscal years beginning after December 15, 2007, including interim periods within those fiscal years. Early adoption of the provision of the consensus was not permitted . Accordingly, we adopted EITF 07-3 in the first quarter of fiscal 2008. There was no impact on our consolidated financial position, results of operations and cash flows as a result of adoption.

In September 2006, the FASB issued SFAS 157, “Fair Value Measurements.” SFAS 157 provides guidance for using fair value to measure assets and liabilities. It also responds to investors’ requests for expanded information about the extent to which companies measure assets and liabilities at fair value, the information used to measure fair value, and the effect of fair value measurements on earnings. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007. Accordingly, we adopted SFAS 157 in the first quarter of fiscal 2008. In February 2008, the FASB issued FASB Staff Position No. FAS 157-2, “Effective Date of FASB Statement No. 157”, which provides a one year deferral of the effective date of SFAS 157 for non-financial assets and non-financial liabilities, except those that are recognized or disclosed in the financial statements at fair value at least annually. Therefore, the Company has adopted the provisions of SFAS 157 with respect to its financial assets and liabilities only. SFAS 157 defines fair value, establishes a framework for measuring fair value under generally accepted accounting principles and enhances disclosures about fair value measurements. Fair value is defined under SFAS 157 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 under SFAS 157 must maximize the use of observable inputs and minimize the use of unobservable inputs. The 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:


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Level 1 - Quoted prices in active markets for identical assets or liabilities;


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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


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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.

There was no impact on our consolidated financial position, results of operations and cash flows as a result of adoption of this pronouncement.

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