Please ensure Javascript is enabled for purposes of website accessibility

Is Dynavax Technologies Stock a Buy?

By George Budwell - Feb 19, 2020 at 9:00AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Dynavax's stock has continued to lose ground in 2020. Is it finally time to buy?

Dynavax Technologies (DVAX -2.10%) is a small-cap, early commercial-stage biotech with a lot of promise. The company's hepatitis B vaccine Heplisav-B can be dosed less frequently than the current cohort of standard-bearers, which should lead to significantly higher compliance rates.

What's more, it also confers superior immunogenicity when pitted against other well-established hepatitis B vaccines like GlaxoSmithKline's Engerix-B. Dynavax believes that Heplisav-B can eventually achieve peak sales in the U.S. of around $500 million. That's quite a payday for a company with a market cap of about $430 million right now.

Despite the attractive value proposition, however, Dynavax's shares have slid by 10.5% since the start of 2020. In total, the biotech's stock has now lost a staggering 54% of its value over just the prior 12 months. Should bargain hunters pounce on this beaten-down biotech stock, or is it best to stick to the safety of the sidelines? Let's dig deeper to find out. 

Paper plane concept showing a rebounding trend set against a sky blue background.

Image source: Getty Images.

Dynavax's near-term challenges

Dynavax's core value proposition is fairly simple to understand. The biotech is presently valued at a fraction of Heplisav-B's commercial opportunity. That's a seriously pessimistic take in light of the fact that most commercial-stage biotechs sport premiums that are several multiples of the peak sales estimates for their flagship products. So what gives?

There are two interrelated issues weighing this stock down at the moment. First and foremost, Heplisav-B's commercial launch has unfolded in slow motion. For the full year of 2019, the biotech expects net sales to come in at $34 million to $36 million. In turn, Dynavax has been bleeding money of late. That leads us into the second key issue: Investors are clearly concerned about the biotech's ability to morph into a profitable operation before it runs out of cash. 

Will Dynavax face a cash crisis before Heplisav-B takes flight? Per the company's third-quarter earnings release, it still had cash, cash equivalents, and marketable securities of $174.9 million remaining in the bank at the end of last September. Dynavax's average quarterly cash burn over the past year works out to approximately $33 million. So, with the enormous year-over-year growth in Heplisav-B's sales that's expected to unfold in 2020, Dynavax should have a cash runway of a least two and a half years from this point forward.

So while it will indeed be close, the biotech should ultimately become profitable before hitting a liquidity crisis. Fleshing this point out, Dynavax is on track to eke out a modest profit by the second half of 2021 (assuming the company doesn't change strategy yet again).

That said, management would arguably be wise to tap the public markets for another $40 million or so within the next 12 months. It's never a good idea to raise cash from a position of weakness, after all. Shareholders, therefore, shouldn't be too upset if they get diluted by perhaps another 8% to 10% before the company crosses the finish line on the profitability benchmark.  

Time to buy?

Although Dynavax is in decent financial shape and Heplisav-B's sales are finally starting to ramp up, there's no overarching reason to buy this stock right now. In brief, Dynavax is definitely a worthwhile watch list candidate, but a rebound probably won't take shape until Heplisav-B truly starts to gobble up market share. That key buy signal, unfortunately, appears to be a mid- to late-2021 event.  

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

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Dynavax Technologies Corporation Stock Quote
Dynavax Technologies Corporation
DVAX
$16.34 (-2.10%) $0.35
GSK Stock Quote
GSK
GSK
$36.03 (0.84%) $0.30

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
400%
 
S&P 500 Returns
128%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/14/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.