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Dynavax: Powerful Prospects Lost In Market Noise

Summary

Dynavax has recently finished a Phase III trial, with data that has met all previous concerns of the FDA.

Based on promising results, Dynavax and its collaborator, AstraZeneca, have agreed to bypass Phase Ib in an asthma indication drug and accelerate the full clinical workflow through AstraZeneca.

In its latest earnings release, the company indicates it can sustain itself well into 1Q 2017 with cash on hand, with no additional funding, milestones, or dilution.

Still, the stock price is near a 52-week low.

Figure 1. Dynavax's October 2015 to Present Chart

Background - The Basic Science of Dynavax's Vaccines

Dynavax Technologies (NASDAQ:DVAX) is a multi-pipeline pharmaceutical company based around activating or deactivating our own immune systems. The specific therapeutic target of this company is the Toll-like Receptors (TLRs). The long story short is that Dynavax makes synthetic DNA from known viruses (such as hepatitis B) that our body can recognize and subsequently prepare for. This is how the majority of vaccines work: either a protein, DNA, or RNA are injected into the body (that by themselves do no harm), which causes the body to attack them and, most importantly, remember them. Thus, after stimulation of our immune system with these synthetic DNA segments, our body will naturally disable the real threats, such as hepatitis B.

Dynavax's Positive Results - Market Reaction

The bottom line was that Dynavax's drug HEPLISAV-B™ was significantly better than the control (GlaxoSmithKline's (NYSE:GSK) hep B vaccine, Engerix-B):

  1. The peak seroprotection rate (SPR) in participants with type 2 diabetes mellitus who received HEPLISAV-B was 90.0%, compared to 65.1% for Engerix-B, demonstrating non-inferiority and a statistically significant higher percentage of seroprotection provided by HEPLISAV-B compared to Engerix-B.
  2. The peak SPR in the entire HBV-23 HEPLISAV-B group (95.4%) was statistically significantly higher than the peak SPR in the Engerix-B group (81.3%).
  3. The peak SPR in the HEPLISAV-B group was statistically significantly higher than the peak SPR in the Engerix-B group in each age decile.
  4. The peak SPR in the HEPLISAV-B group was statistically significantly higher than the peak SPR in the Engerix-B group in each prespecified subpopulation analyzed, including by sex, body mass index, and smoking status.
  5. Repeated late-stage evidence that shows two injections of HEPLISAV-B can provide better protection against the virus, when compared to the standard three injections of Engerix-B.

As can be seen in Figure 1, DVAX's stock price went from low $20s to above $29. However, over the course of just one week after, it declined back to pre-data release levels. Additionally, the stock suffered the same fate as most mid-cap biotech companies in February, plummeting nearly 20% over the course of another week. Most ironically, not even 2 months from the positive Phase III data indicated above, the stock hit a 52-week low. How can we explain this rationally, or is this price completely unjustified?

Proceeding Press Releases and Events

The next major news from the company was that Dynavax and AstraZeneca (NYSE:AZN) amended...


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