Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Why Dynavax Technologies Corporation Should Be on Your Watchlist

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!


Read/Post Comments (3) | Recommend This Article (9)

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 May 08, 2014, at 8:58 PM, SyDVooh wrote:

    DVAX closed at $1.30 today. A low price for a buying opportunity, for those intending to buy and hold.

    This is an interesting small cap that should be counted as a potential takeover target, now that Big Pharma seems to be on a buying spree. GSK seems to be a likely buyer, as the DVAX vaccine directly competes with their vaccine. So GSK is the one company that might make an offer on DVAX before their vaccine is approved by the FDA, where others may be hesitant to make a takeover offer before approval.

  • Report this Comment On May 12, 2014, at 11:43 PM, Canyonex wrote:

    When the board meets in 2 weeks and votes on a reverse stock split (prop2) 2,3,4,5,6,7,8,9,or10 for 1 will be left to the discretion of the board. This seems to me that they all ready see a take over coming and trying to secure more control of the company. I wonder if this split is in all the investors interest ???

  • Report this Comment On May 14, 2014, at 10:35 PM, SyDVooh wrote:

    @Canyonex: The reverse split will allow the management to bring the share price over $5.00 per. Many funds have by laws that do not allow them to buy shares priced under $5.00. A split, in either direction, doesn't change your percentage of company ownership. If there is a takeover offer coming, you can't be forced to sell your shares, unless you like the price that is offered.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2946637, ~/Articles/ArticleHandler.aspx, 8/30/2015 10:46:46 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

George Budwell

George Budwell has been writing about healthcare and biotechnology companies at the Motley Fool since 2013. His primary interests are novel small molecule drugs, next generation vaccines, and cell therapies.

Today's Market

updated 2 days ago Sponsored by:
DOW 16,643.01 -11.76 -0.07%
S&P 500 1,988.87 1.21 0.06%
NASD 4,828.33 15.62 0.32%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

8/28/2015 4:00 PM
DVAX $29.76 Up +1.31 +4.60%
Dynavax Technologi… CAPS Rating: ***
AZN $31.67 Up +0.06 +0.19%
AstraZeneca plc (A… CAPS Rating: ****
GSK $41.25 Up +0.04 +0.10%
GlaxoSmithKline CAPS Rating: ****