This article was written by Zachary Shipman, a Financial Analyst at I Know First.

Dynavax Stock Analysis

“If approved, [Heplisav-B] could offer a better way to protect people from a chronic infection that can cause cirrhosis of the liver, cancer or death,” said Robert Janssen, MD, chief medical officer and vice president of clinical development for Dynavax.

Summary

Dynavax- Healthcare Development

Feasibility of Heplisav- B

There is room to take a risk and extract value

Conclusion & I Know First Forecast

(Source: Dynavax)

Dynavax- Healthcare Development

Dynavax Technologies was founded by Lawrence M. Lichtenstein, Dennis A. Carson and Eyal Raz on August 29, 1996 and is headquartered in Berkeley, CA. Dynavax Technologies Corp. is a clinical-stage biopharmaceutical company that uses toll-like receptor biology to discover and develop novel vaccines and therapeutics. The company’s development programs are organized under three areas: vaccine adjuvants, cancer immunotherapy, and autoimmune and inflammatory diseases.

Its product candidates are being investigated for use in multiple cancer indications, as a vaccine for the prevention of hepatitis B and as a disease modifying therapy for asthma. Its lead product candidate is HEPLISAV, a Phase III investigational adult hepatitis B vaccine. Hepatitis B surface antigen (rHBsAg or HBsAg) is manufactured by Dynavax GmbH, the company’s wholly-owned subsidiary in Düsseldorf, Germany. In Phase III trials, HEPLISAV-B demonstrated earlier protection with fewer doses than an approved hepatitis B vaccine and a similar adverse event profile. The company’s other products under pipeline are SD-101, DV1179 Autoimmune Disease and AZD1419 Asthma Therapy.

Regulation approval remains the main obstacle in the way of Dynavax returns. The company has worldwide commercial rights to HEPLISAV-B. 2017 will mark the 3rd time that DVAX has requested approval for HEPLISAV-B. The company’s original Biologics License Application (BLA) was submitted to the U.S. Food and Drug Administration (FDA) in April 2012. FDA issued a Complete Response Letter (CRL) to the company in February 2013 requesting an additional clinical trial to increase the safety database. In 2016, the company resubmitted the BLA for HEPLISAV-B to the FDA to add approximately 5,000 subjects to the HEPLISAV-B safety database. The total safety database for HEPLISAV-B now includes 10,038 participants.

The FDA issued a CRL to the company in November 2016 requesting information regarding various topics, including clarification of specific adverse events of special interest, a numerical imbalance in a small number of cardiac events in a single study, new analyses of the integrated safety data base across various time periods, and post-marketing commitments. Consequently, it is likely that Dynavax did not have enough time to complete the entirety of the FDA’s documentation request. The company resubmitted the BLA in February 2017 and the FDA has established August 10, 2017 as the Prescription Drug User Fee Act action date.

Feasibility of Heplisav- B

Hepatitis B is a viral disease of the liver that can become chronic and can lead to cirrhosis of the liver, hepatocellular carcinoma and death. In the US, the Centers for Disease Control and Prevention estimates that approximately 20,000 hepatitis B infections continue to occur annually, with the vast majority occurring in adults. There is no current cure for hepatitis B. Disease prevention through more effective vaccines is critical to reducing the spread of the disease. Dynavax believes that their version of a Hepatitis vaccine will help to reduce cases of the infection.

(Source: emedicinehealth)

Dynavax Technologies Corp said that its experimental hepatitis B vaccine was found to be safe and effective in a recent late-stage study. Effectiveness has never been the issue. For example, in their most recent Phase 3 study, both co-primary endpoints were met. HEPLISAV-B was found to be more effective than Engerix-B. Energix-B is a currently marketed and FDA approved GlaxoSmithKline Plc’s vaccine. Additionally, the response rate in type 2 diabetes patients who received HEPLISAV-B was 90 percent, compared with 65.1 percent for those given Engerix-B. HEPLISAV-B provided a statistically significant higher rate of protection with fewer doses than Engerix-B. A high degree of comparative effectiveness was seen within the sample of older individuals. In participants ages 40-70, HEPLISAV-B achieved a seroprotection rate of 95% compared to Energix-B’s rate of 79%.

During the first quarter of 2017, Dynavax reduced costs and allocated a large percentage of their resources towards their oncology business. The idea is to remain well-rounded as a company in case the FDA administers a negative decision. “This has enabled us to advance HEPLISAV-B to a regulatory decision and continue to generate clinical results from our immuno-oncology portfolio to deliver value in both areas of our business during 2017,” said Michael Ostrach, chief financial officer of Dynavax.

Heplisav-B has a FDA Adcom meeting on July 28th, and a PDUFA date of August 10th. Dynavax’s current market capitalization is $470 Million, Dynavax shares could multiply several fold on approval. It also suggests that the market is pricing in a marginal probability of approval. If the product is approved, Dynavax plans to satisfy initial demand from existing stockpiled inventory. They also plan to increase commercial activities based on market demand and investment priorities.

There is room to take a risk and extract value

There is always risk involved when following the unknown. However, DVAX represents an attractive investment for those seeking potential upside. Immediate results (August 10th, 2017) will be heavily impacted by the FDA ruling on Heplisav-B. From 2011 stock data, it was found that the mean change in a stock increased by 9.5% upon positive trials. The mean change in a stock decreased by 4.5% upon negative trial results. Regulatory downside rejection is somewhat mitigated by the value of their thriving SD-101 immuno-oncology candidate.

There is risk associated with any decision that is largely out of a company’s control. However, there have been many positive signs that point toward Dynavax finally getting the approval that they have been seeking for years. For example, during the last rejection the FDA did not ask for DVAX to perform further clinical trials. They also did not cite any manufacturing issues, or safety concerns with the product. Instead, the decision appeared to be almost entirely procedural. This is good news, and gives validation to the medical effectiveness of Heplisav-B. The potential payoff is high given the volatility of an executive approval process. Other company products can provide Dynavax a safe floor, while the Heplisav B vaccine offers ultimate upside.

(Source: personalcaretruth)

Katherine Wu, an analyst at William Blair, reiterates an Outperform rating on shares of DVAX with a fair value of $17. This implies just under 218% upside from where the shares last closed. She anticipates once the approval is under way, a commercial partnership could bring the firm 45% royalties on all the drug’s sales, with peak domestic sales to hit $650 million.

If FDA approval is expected by the market, it is likely that the stock will increase prior to the actual decision. DVAX has not increased at an expected rate given their stage III trial results. This seems to indicate that there is approval uncertainty baked into the current stock price. No matter the outcome, the FDA judgement of a drug is a significant corporate event that should be observed if you want to make informed investment decisions in biotech.

Conclusion & I Know First Forecast

Dynavax is in an intriguing position and investors need to take advantage of the opportunity. Their main product, Heplisav-B, has been tested and found to be more effective than its closest competitor. They have a finished product that is ready to sell to the public. However, a scheduled FDA approval process is the final road-block between Heplisav-B and the bio-pharmacy market. Past results seem to be skewing investor’s confidence in Dynavax. In 2016, Heplisav-B was denied by the FDA for the second time. While this was bad news for investors in the short-term, interestingly there were several positives that set DVAX up for future approval. The FDA did not request any more clinical trials or state that there was anything specifically wrong with the product. Instead, they were more concerned with proper documentation, and future information about the product.

(Source: Yahoo Finance) Pictured Above: Year to Date stock graph for DVAX

Now a year later, Dynavax has a lot to be optimistic about. From 2016-2017 they did not have to make any significant changes to their product. They just had to spend the waiting time getting their paperwork in order. There is a good chance that the company is being undervalued based on unfavorable past results.

I Know First Algorithm has previously predicted DVAX stock movement. For example, I Know First was bullish on DVAX over a 3 month period from March 28th, 2017 to June 28th, 2017. The DVAX signal was 91.66 with a predictability of 0.69. DVAX managed to bring returns of 67.77% in only 3 months.

This bullish forecast for DVAX was sent to I Know First subscribers on March 28th, 2017. To subscribe today click here.

I Know First Algorithm Heatmap Explanation

The sign of the signal tells in which direction the asset price is expected to go (positive = to go up = Long, negative = to drop = Short position), the signal strength is related to the magnitude of the expected return and is used for ranking purposes of the investment opportunities.

Predictability is the actual fitness function being optimized every day, and can be simplified explained as the correlation based quality measure of the signal. This is a unique indicator of the I Know First algorithm, allowing the user to separate and focus on the most predictable assets according to the algorithm. Ranging between -1 and 1, one should focus on predictability levels significantly above in order to fill confident about/trust the signal.