Dynavax Technologies (NASDAQ:DVAX) received devastating news on Monday. The U.S. Food and Drug Administration (FDA) rejected the company's experimental hepatitis B vaccine Heplisav-B. Dynavax's shares plunged and closed nearly 65% lower on the announcement. Is there any hope for Heplisav -- and what will Dynavax do now?

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What the FDA said

The FDA's complete response letter (CRL) asked for clarification on several items, including specific adverse events of special interest (AESIs) and a numerical imbalance in a small number of cardiac events in a single study. Additionally, the CRL asked for more information on new analyses of the integrated safety data base across different time periods and post-marketing commitments.

It's also important what the FDA didn't say. The agency did not request any additional clinical trials. Neither did it appear to have any concerns with rare serious autoimmune events, according to Dynavax.

Eddie Gray, Dynavax's CEO, said that "the CRL is consistent with our opinion that Heplisav-B is approvable." The company maintained its confidence in its clinical data on a conference call held to discuss the FDA's rejection of the experimental vaccine.

In September, the FDA raised eyebrows by cancelling a review meeting originally scheduled for Nov. 16. At that time, the agency told Dynavax that it would provide information requests related to open questions.

Dynavax management said that 25 FDA questions included in the CRL were already answered as part of this process. The company stated that "it would appear the agency could not fully assess the responses in the current review period," although the FDA still had another month before the scheduled decision date of Dec. 15.

What will Dynavax do now?

The last time that Dynavax received a CRL for Heplisav, the company buckled down and conducted additional clinical studies. With the FDA seemingly not asking for additional studies this time around, Dynavax must simply answer the agency's questions and hope for the best.

Dynavax isn't giving up hope that Heplisav could eventually gain approval. However, the company apparently realizes that it won't be able to manage the process on its own. Gray said that Dynavax intends to find a partner to advance the program.

While Gray didn't mention any potential partners, you'd have to think that Merck (NYSE:MRK) could be a possibility. The two companies are already working together to evaluate a combination of Merck's Keytruda with Dynavax's experimental toll-like receptor 9 (TLR9) agonist SD-101. Dynavax said that SD-101 will remain a top priority. 

Merck also has a thriving vaccine business. Its Gardasil and ProQuad/M-M-R II/Varivax vaccines, are blockbusters. Merck also sells the Recombivax hepatitis B vaccine, which has some limitations compared to Heplisav.

Dynavax won't wait to find a partner before responding to the FDA. Expect the company to move quickly, although Gray said a full response to the CRL probably won't be completed by the end of 2016.

Looking ahead

Although the FDA's decision wasn't a shock given the cancellation of the review meeting, it was still obviously a huge disappointment to Dynavax shareholders. There's at least one sliver of good news: Cash shouldn't be a problem for a while.

Dynavax reported cash, cash equivalents, and marketable securities of $109.6 million at the end of the third quarter. The company felt that amount would carry it through late 2017. That shouldn't change, but it won't be surprising if Dynavax makes some cuts to stretch the cash out for as long as possible.

The big open question, of course, is Heplisav's fate. After Dynavax responds to the FDA's CRL questions, the agency has six months to review the response. Perhaps by the third quarter of 2017 we'll know if the experimental hepatitis B vaccine still has any realistic hopes of approval. 

Keith Speights 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.