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Avoid This Biotech Stock

Editor's note: This article is a stock pitch made by a member on CAPS, The Motley Fool's free investing community. The pitch is published UNEDITED and is the opinion of the CAPS member whose pitch it is -- in this case, zzlangerhans.

Each week, Motley Fool editors cull a top stock idea from the pitches made on CAPS, The Motley Fool's 180,000-member free investing community. Want your idea considered for this series? Make a compelling pitch on CAPS with a minimum length of 400 words. Want to follow our weekly picks? Subscribe to our RSS feed or follow us on Twitter.

Company Dynavax Technologies (Nasdaq: DVAX  )
Submitted By: zzlangerhans
Member Rating: 99.16
Submitted On: 12/21/2011
Stock Price at Underperform Recommendation: $3.28

Dynavax Technologies Profile

Star Rating (out of 5) **
Headquarters Berkeley, Calif.
Industry Biotechnology
Market Cap $46.7 million
Industry Peers GlaxoSmithKline (NYSE: GSK  )
Dendreon (Nasdaq: DNDN  )
SciClone Pharmaceuticals (Nasdaq: SCLN  )

Sources: S&P Capital IQ, Yahoo! Finance, and Motley Fool CAPS.

This week's pitch:

I think the momentum has run out for Dynavax, and there's a good chance the share price will drop substantially between now and when any regulatory decisions are made regarding Heplisav.

1. The Heplisav ship has been listing heavily ever since the FDA shot down the vaccine for general use, supposedly due to a single instance of autoimmune disease in a recipient. Merck dumped the partnership. The company is now seeking approval of Heplisav in a relatively small subset of the general population (over 40 and chronic kidney disease).

2. There were three serious autoimmune events reported in the follow-up phase III trial.

3. The Heplisav BLA submission was postponed from Q4 2011 to Q1 2012 without much explanation.

4. The company has taken advantage of the stock run-up by raising money heavily through dilutive financing. Prudent, yes. Optimistic, no. The cash cushion may make Dynavax another green thumb stock if the share price gets beaten up badly on Heplisav rejection or sell-off after approval.

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Dan Dzombak had no position in any of the companies mentioned in this article. Pitches must be compelling, made in the past 30 days, and be at least 400 words. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Read/Post Comments (2) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On December 31, 2011, at 11:38 AM, helpmesav wrote:

    No serious effects and looking forwards to rise in pps - read

  • Report this Comment On December 31, 2011, at 11:51 AM, fkoman wrote:

    DVAX definitely had a great run recently, but to predict a sell-off this early seems premature at best unless you are predicting a general market sell-off early 2012. FDA decision probably won't be until Q4 2012 and this run up is a bit early for that decision don't you think. What about the run up, spike, and sell-off after the BLA submission coming up soon, and any other news from their 5 other programs, 3 of which have partners inbetween the BLA submission and FDA decision dates. And to create a bias that makes it seem like rejection is likely seems just as far fetched as saying FDA approval is a sure thing. I think they have strong data to support a favorable risk/benefit profile for approval by the FDA. To say that a run up to 3.28 is a time to sell when this company is near the finish line for one of their programs is to make listeners into potentially real "Fools". I for one look forward to the volatility in this stock this coming year with an upward trend unless pps is above $6 then I would agree with you. Good luck with this one whatever your intentions are.

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