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3 Things to Watch With Dynavax

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Investors could be poised to double their money within a matter of months if CNBC's Jim Cramer is right about small-cap biotech Dynavax (Nasdaq: DVAX  ) . On the other hand, Mr. Cramer also thinks the stock could plunge to half of its current value. Do you call that optimistic pessimism or pessimistic optimism?

Actually, Jim Cramer has every reason to be wishy-washy with Dynavax. The stock seems poised to skyrocket -- or to collapse -- depending on what happens within the next few months. Here are three things investors should watch for with this volatile stock.

1. Help for Heplisav
Nothing weighs more importantly for Dynavax's fate than the pending FDA decision on approval of the Biologics License Application for Heplisav. The FDA advisory committee reviewing the vaccine completes its meeting on Nov. 15. The deadline for the FDA to announce its decision is set for Feb. 24, 2013.

The company expects to receive FDA approval based largely on two premises. First, the clinical trials for Heplisav produced positive results compared to the leading hepatitis B vaccine, Engerix-B, which is made by GlaxoSmithKline (NYSE: GSK  ) . Heplisav provided longer-lasting protection and comparable safety to Engerix-B.

Second, the FDA already gave a positive decision earlier this year. In a pre-BLA meeting, Dynavax was told that it could submit the BLA for healthy adults ages 18-70. The company had initially planned to submit the BLA only for health adults ages 40 and above. Some analysts think this expansion means that the FDA leans toward approval of Heplisav.

Investors should watch the Advisory Committee recommendation closely. The likelihood is that a little help from the committee with a positive recommendation would send Dynavax shares soaring. On the other hand, a negative decision would probably leave the stock in tatters.

2. Diabetes dynamics
In October of last year, the CDC's Advisory Committee on Immunization Practices recommended that adults ages 19 through 59 with type 1 or type 2 diabetes be vaccinated against hepatitis B. The committee also recommended that adults age 60 and older be vaccinated at the discretion of their physicians.

The impact of this decision won't be felt immediately, but it could be huge for hepatitis B vaccine makers over the next few years. Drug companies currently in the hepatitis B market include Glaxo, with its aforementioned Engerix-B and Twinrix vaccines, and Merck (NYSE: MRK  ) with Recombivax.

Dynavax estimates the current U.S. market for hepatitis B vaccines around $270 million. The company thinks that it can garner a price premium for Heplisav that would enable it to increase that market to $360 million.

But when the vaccination of adults with diabetes is factored in, Dynavax estimates that its market for Heplisav could top $750 million. Regardless if this figure is on target, investors should keep an eye on the dynamics of hepatitis B vaccines for diabetics.

3. Partners and pipelines
Heplisav isn't the only thing Dynavax has going for it. The company is currently in phase 1 trials with a universal flu vaccine. Novartis (NYSE: NVS  ) partners as a supplier for a key component to this vaccine.

While Dynavax hopes to compete against Glaxo if Heplisav is approved, the two companies are also working together. Their partnership focuses on development of treatments for autoimmune and inflammatory diseases such as rheumatoid arthritis.

Another collaboration with AstraZeneca (NYSE: AZN  ) centers on development of a drug to treat asthma. AstraZeneca is footing the bill for the development costs of the drug.

These partnerships are important for Dynavax. The company's small size presents challenges in bringing products to market. Alliances with major players such as AstraZeneca, Glaxo, and Novartis help considerably.

Investors should watch for potential alliances in launching Heplisav, assuming it gains FDA approval. Also, don't be surprised if one of Dynavax's current partners or another large pharma makes a bid for the company down the road.

I won't be wishy-washy. My prediction is that the advisory committee recommends approval for Heplisav in its November meeting. I also predict that the FDA grants approval for the vaccine early next year.

Furthermore, I'll step out on a limb and forecast that Dynavax shares will hit $8 by the end of 2012 and will top $10 sometime in 2013. If my first two predictions come true, the latter two certainly are within the realm of possibility.

While I'm at it, I'll pick the Houston Texans to win the Super Bowl. Houston should prevail -- unless they don't. If Jim Cramer can hedge, so can I.

Keith Speights has no positions in the stocks mentioned above. He really would prefer that the New Orleans Saints win the Super Bowl but doesn't expect them to do so. The Motley Fool owns shares of AstraZeneca plc (ADR) and GlaxoSmithKline. Motley Fool newsletter services recommend GlaxoSmithKline. Try any of our Foolish newsletter services free for 30 days. We Fools may not 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.

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