Why Dynavax Technologies Corporation Should Be on Your Watchlist

Share of Dynavax Technologies have struggled ever since the FDA rejected the company's experimental hepatitis B vaccine, Heplisav. With a new trial launched, the stock could be a compelling long-term investment opportunity.

May 8, 2014 at 6:30PM

Vaccines are one of the fastest growing segments of the health care industry, with the total value of the market expected to nearly triple by 2022. Investors looking for a way to capture some of this growth, however, are generally limited to large-cap pharmas that have extensive product lines outside of the vaccine market space. The prevailing issue is that new vaccines tend to be low-profit ventures, making it difficult for smaller companies to raise the funds necessary to develop and bring a new vaccine to market. Dynavax Technologies Corporation (NASDAQ:DVAX) is a prime example of these difficulties -- and opportunities -- in the growing vaccine market.

Dynavax is developing a hepatitis B vaccine called Heplisav that is expected to compete chiefly against GlaxoSmithKline's (NYSE:GSK) Engerix-B. And although a late-stage study for Heplisav showed that it was clinically superior to Engerix-B, the Food and Drug Administration rejected it last year based on deficiencies in the study's ability to detect rare but serious adverse events. The European Medicines Agency came to roughly the same conclusion this February, forcing Dynavax to withdraw its Marketing Authorization Application in Europe as well. To remedy this issue, Dynavax recently launched a new late-stage study, which is expected to wrap up in late 2015. 

With little on the horizon in terms of catalysts, it's not entirely surprising that Dynavax shares have moved lower since withdrawing Heplisav's European application. Yet I believe there are two good reasons to keep this stock on your long-term watchlist.

DVAX Chart

DVAX data by YCharts

Reason No. 1
Investor focus is surely to remain squarely on Heplisav for the foreseeable future. That said, I think it represents a compelling value proposition that's worth checking out. Namely, Dynavax estimates that Heplisav's global peak sales could top $700 million per year. While not quite a blockbuster, that's still almost twice the value of Dynavax's current market cap.

So why are investors apparently ignoring this compelling value proposition? I believe there are two reasons. Firstly, we are looking at a potential two-year wait until the vaccine might gain a regulatory approval in the U.S. or Europe. Secondly, GlaxoSmithKline's vaccine has a fairly clean safety profile as far as vaccines go, so Heplisav's new trial data will be scrutinized in this light. In effect, Heplisav has little margin for error in terms of safety because there is an approved product for this indication that is effective across a wide range of patient populations.

Even so, Heplisav appears to be substantially more effective than Engerix-B in certain subpopulations considered "difficult to immunize." And it's worth noting that the newly initiated trial is taking this issue one step further by specifically looking at Heplisav's seroprotection rate in type II diabetics. As such, I am cautiously optimistic that Heplisav will eventually be approved for at least certain subpopulations. 

Reason No. 2
An overlooked aspect of Dynavax is its early stage clinical program that includes partnerships with GlaxoSmithKline for autoimmune disorders and AstraZeneca (NYSE:AZN) for asthma. What's key to note is that the collaboration with AstraZeneca for AZD1419, as a potential asthma treatment, appears to be going well. Specifically, Dynavax received a $5.4 million payment in the first quarter as part of an amended agreement that saw AstraZeneca take responsibility for developing the therapy in a midstage trial. In short, AstraZeneca apparently likes what they've seen so far. Looking ahead, Dynavax is entitled to milestone payments totaling $100 million as AZD1419 progresses in clinical trials, and royalty payments if the therapy is eventually approved.

Foolish wrap-up
Although Dynavax shares have struggled mightily over the past half year, I believe this stock holds a fair amount of potential over the long term. The company secured its near-term-financing needs with a secondary offering recently, giving Dynavax $177.7 million at the end of the first quarter. Given its cash burn rate of roughly $7.3 million per month, I estimate the company to have a cash runway of around two years, so a dilutive financing shouldn't be an immediate concern. And while the stock lacks any clear cut near-term catalysts, I don't think its present market cap of only $383 million adequately reflects the potential of the company's clinical pipeline or its partnerships with major pharmas. So, you may want to dig deeper into this underloved biotech. 

Warren Buffett just bought nearly 9 million shares of this company
Imagine a company that rents a very specific and valuable piece of machinery for $41,000... per hour (that's almost as much as the average American makes in a year!). And Warren Buffett is so confident in this company's can't-live-without-it business model, he just loaded up on 8.8 million shares. An exclusive, brand-new Motley Fool report details this company that already has over 50% market share. Just click HERE to discover more about this industry-leading stock... and join Buffett in his quest for a veritable landslide of profits!

 

George Budwell has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. 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.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.

 


Compare Brokers