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. 

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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.