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Actionable news in DVAX: Dynavax Technologies Corporation,

Dynavax Technologies Could Capture Majority Share In The Hepatitis B Vaccination Market

Summary

Dynavax's key product is a novel hepatitis B vaccine that has shown more clinical efficacy than current vaccines, while requiring fewer shots.

In light of recent developments, we present our investment thesis for this company and provide DCF/risk-adjusted NPV valuation for the common stock.

We are initiating coverage on Dynavax Technologies with a Buy rating and price target (intrinsic value based on risk-adjusted NPV/enterprise DCF method) of $19.68 for the common stock.

Dynavax (NASDAQ:DVAX) was incorporated in California in 1996. Its key technology is Toll-like receptor immune modulation platform (TLRs play an important role in innate immunity and adaptive immunity).

Dynavax's key product is a novel hepatitis B vaccine that has shown more clinical efficacy than current vaccines while requiring fewer shots. In view of recent developments, we present our investment thesis for this company and provide DCF/risk-adjusted NPV valuation for the common stock.

We are initiating coverage on Dynavax Technologies with Buy rating and price target (intrinsic value based on risk-adjusted NPV/ enterprise DCF method) of $19.68 for the common stock.

Investment Highlights:

  • Stock rating= Buy
  • Stock price target (intrinsic value)= $19.68
  • Current stock price= $14
  • 52-week price range= $10.04 - $32.49
  • Average daily share volume= 800,654
  • Market Cap= $538.96 million
  • Cash reserves= $139 million
  • Cash enough to last till= Q2, 2017
  • Debt= nil

Figure 1: Dynavax common stock price chart (Nasdaq.com)

Problem: Hepatitis B is a viral infection affecting the liver that can become chronic and can lead to cirrhosis of the liver, liver cancer and death. In the U.S., about 20,000 hepatitis B infections are estimated to occur annually. Since there is no cure for hepatitis B, effective vaccination for disease prevention helps to reduce the spread of the disease. Hepatitis B vaccination is recommended in those at high risk for infection, like healthcare workers, those with multiple sexual partners, injection drug use, chronic liver disease patients, those with diabetes (type 1 and 2, in the U.S.).

There are about 20 million people with diabetes in the U.S., and another 1.5 million new cases are diagnosed every year (a new recommendation to vaccinate diabetes patients was issued in the U.S in late 2012). The CDC recommends vaccinating all diabetics less than 60 years of age. In those with age 60 years and above, the CDC advises to leave it to the discretion of the treating physician.

Currently marketed hepatitis B vaccines are administered in three doses over 6 months (0, 1 and 6 months). Only 54% of adults complete the 3-dose vaccination schedule. Those who do not are not adequately protected against hepatitis B.

Company's solution:

HEPLISAV-B Vaccine: It incorporates TLR9 agonist CPG oligonucleotide. It combines 1018, a proprietary TLR9 agonist adjuvant and recombinant hepatitis B surface antigen (HbsAg). It is given as two injections one month apart, compared to Engerix B and other available vaccines' 3 injections over 6 months.

It has been tested in 14,000 patients so far. The FDA gave a CRL in 2012, as it needed more safety data since the vaccine adjuvant was novel. Dynavax provided additional safety data on 5,000 subjects (phase 3) to the FDA in October 2015.

The PDUFA date was scheduled for December 15, 2016. The FDA has earlier also delayed this PDUFA...


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