Dynavax Technologies Corp (DVAX)

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Dynavax Technologies: What Lies Ahead

Aug. 11, 2018 1:22 PM ET|17 comments | About: Dynavax Technologies Corporation (DVAX)
Bret Jensen

Today we revisit Dynavax Technologies after its recent Q2 results.

2018 looks like it will continue to be an inflection year with 2019 being a payoff year for the company and its shareholders.

We go through the details of that projection in the paragraphs below.

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A clear conscience is the sure sign of a bad memory.” ? Mark Twain

Dynavax Technologies (DVAX) posted second quarter results on Monday. There were pretty much inline to my expectations. However, several followers have asked for a post-Q2 follow up on this small cap concern which we provide in the paragraphs below.

Company Overview:

Dynavax Technologies is a 'Tier 3' biotech concern based in Berkeley California. The company is focused on leveraging the power of the body's innate and adaptive immune responses through toll-like receptor (NYSEMKT:TLR) stimulation for various indications. It currently has one approved biologic on the market 'heplisav-b' on the market. This compound is an improved hepatitis B vaccine that was approved by the FDA late in 2017. The stock currently has a market capitalization of just over $800 million and trades at around $13.50 a share.

(click link below for charts/images)

Source: Company Website

Second Quarter Highlights:

Heplisav-B sales only came in at $1.3 million for the quarter after doing $200,000 in revenue in Q1. More importantly, the company is making progress getting into coverage plans. Here is the company's statement about that in their press release as a percent of 'lives' heplisav-B is now covered for

'100% of Medicare-insured lives, 94% of commercially-insured lives, and 73% of lives under state Medicaid plans are covered'

Expectations Going Forward:

I saw some notes from William Blair earlier this week post the second quarter results from Dynavax. Blair's analyst is expecting roughly $15 million in Heplisav-B in FY2018 as the company is in the beginning of the sale channel for this vaccine. However, she expects the company to hit her break even projection of a $75 million to $80 million annual run rate by the end of 2019. She continues to expect heplisav-b to eventually have peak sales of $600 million. I have similar expectations.

Analyst Commentary & Balance Sheet:

The day after Q2 results, Cantor Fitzgerald raised their price target to $30 on DVAX from $27 previously. Here is the commentary behind that call

We are reiterating our Overweight rating and raising our 12- month PT to $30/share from $27/share, following 2Q18 financial results. Dynavax held a conference call to discuss financial and corporate updates. We believe there are a number of opportunities in the near future for Dynavax that could lead to upside for the company, including future HEPLISAV-B vaccine sales and a Phase 3 trial initiation on the horizon for SD-101 in advanced melanoma.”

Cantor's price target is now right at the median analyst bogey on this firm currently. The company ended the second quarter with cash and marketable securities of $216. million with another $75 million available from the February 2018 term loan agreement. R&D and SG&A costs totaled $32 million in the second quarter. The company seems to have no near or medium term funding needs at this time.

Verdict:

As I have commented on all year, 2018 is an inflection year for Dynavax and its shareholders as it begins the slow roll out of Heplisav-B and advances SD-101 in studies. 2019 is likely to be the payoff year for the company and its stakeholders.

Heplisav-B sales should start to show a significant upramp in 2019. In addition, a key Phase 3 SD-101 trial around low-grade, B cell lymphoma should initiate before the end of this year. The stock has been weak over the past month (as have most 'Tier 3' biotech stocks) after trading in the ~$15 to ~$21 range throughout 2018 before this recent weakness.

Accumulating shares here looks attractive given upcoming catalysts and I expect the stock to be trading in its previous 2018 range by the time Q3 results are reported.

Option Strategy:Image result for Stock Purchase

A alternative way to accumulate an initial stake or add to existing holdings in DVAX is via a Buy-Write order. Using the January $15 call strikes, fashion a Buy-Write order with a net debit in the $11.50 to $11.60 range (net stock price - option premium). This mitigates some downside risk and sets up a more than solid potential return for its just over five month hold period.

Wrong does not cease to be wrong because the majority share in it.” ? Leo Tolstoy, A Confession

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Disclosure: I am/we are long DVAX.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
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https://seekingalpha.com/article/4198025-dynavax-technologies-lies-ahead

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