Editor's note: A previous version of this article incorrectly stated that Dynavax is receiving payments from GlaxoSmithKline for Heplisav's progress and that CEO Dino Dina had left the company. Dynavax does have a partnership with GlaxoSmithKline on its TLR inhibitor program but retains worldwide rights to Heplisav. Moreover, Dina is still the current CEO of Dynavax. The Fool regrets the errors.

When considering any stock for your portfolio, don't be swayed by just the positives. Examine its pros and cons, and decide whether it's possible upside outweighs its risks. Let's take a look at Dynavax Technologies (Nasdaq: DVAX) today, and see why you might want to buy, sell, or hold it.

Dynavax, with a market capitalization of about $650 million, and a stock price up 75% over the past year, is a biotech company focusing on treating infectious and inflammatory diseases.

Buy
With biotech companies, their future depends most on their pipeline. Dynavax has a hepatitis-B vaccine, Heplisav, that's getting close to an approval decision from the Food and Drug Administration (FDA). That's very promising, but don't prematurely count those chickens. Once approved, a company can still encounter problems, such as lower-than-expected demand, perhaps due to pricing, and stacking up favorably to current and future competition. Prostate-drug maker Dendreon (Nasdaq: DNDN) has suffered from both of those, and its stock is down nearly 60% over the past year. It's important to be able to launch a drug successfully.

The global market for hepatitis B drugs was about $3.1 billion in 2011, and is estimated to hit $4.4 billion by 2019. The market for its vaccines is estimated to grow to around $1.4 billion by 2018. That's the good news. On the flip side, it's not a market without competition. Dynavax's product will need to offer compelling efficacy in order to succeed.

Dynavax also has an asthma treatment in the works, and is getting funding support from AstraZeneca (NYSE: AZN) for that. The company has also partnered with GlaxoSmithKline (NYSE: GSK) for its TLR inhibitor program. These deals are good, as they let the smaller biotech outfits share risks and development costs of drugs, but they carry a downside, too, as future profits usually end up being shared, as well.

Another promising detail is that assuming that Heplisav gets approved, the company is ready to apply for approval for it to treat other conditions, such as chronic kidney disease, and wider ranges of patients.

Another reason to consider buying Dynavax, though not the best reason, is the possibility that it will be acquired by a bigger drug company. The upside there is that such buyouts usually involve a price premium being paid, giving the shares a nice pop. Of course, the downside is that the shares will soon no longer exist, nor will a future of potential rapid growth.

Sell
A look at Dynavax's financial statements offers a bunch of reasons to consider selling. Like most small biotechs, it has posted net losses from operations and has been cash-flow-negative for many years.

Also troubling is a steady increase in the number of shares outstanding, from about 40 million in 2009 to 147 million, recently. That suggests that the company has been raising money by issuing more shares. By doing so, it's diluting the value of existing shares. Imagine a pizza being cut into more and more pieces -- your allotted slices will become smaller and smaller. Similarly, each Dynavax share will have a smaller and smaller claim on the business.

Dynavax's stock price is another red flag. At roughly $3.70 per share recently, it's firmly in penny-stock territory, known for extra-risky companies and many lost fortunes. Some penny stocks end up doing well, but many of them are thinly traded, easily manipulated, and have more promise than actual profits.

Meanwhile, back in May, the company announced that longtime CEO, Dino Dina, had recommended that Dynavax's board of directors start a process that they believe would include naming a successor. Dina plans to stay on as CEO throughout the process, however, and will remain as a member of the board of directors even after stepping down in favor of his eventual successor.

Hold (off)
Given the reasons to buy or sell Dynavax, it's not unreasonable to decide to just hold off on it. You might want to wait for FDA approval of Heplisav, or for it to gain additional approvals in the U.S., or approval in Europe. You might want to see a string of profitable quarters, too, before investing.

Alternatively, you might look at other promising biotech companies, such as Spectrum Pharmaceuticals (Nasdaq: SPPI), which has been posting some solid numbers on strong sales of its colorectal cancer drug, Fusilev. It has some downsides, too, though, such as volatility and uncertain future sales.

The verdict
I'm holding off on Dynavax for now, but everyone's investment calculations are different. Do your own digging and see what you think. Dynavax may perform spectacularly in the coming years, but remember that there are plenty of compelling stocks out there.

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